US dollar edges higher on Iran deal prospects

Today’s headlines

What’s happening: The US dollar edged higher this morning as investors assessed prospects of peace talks between the US and Iran.

What happened: US President Donald Trump said that the ceasefire ends on Wednesday evening and is unlikely to be extended if a deal is not reached by then.

Meanwhile, Iran has been asking for the release of its cargo vessel seized by the US Navy on Sunday.

Why it matters: Last week, US President Donald Trump had indicated progress toward an agreement with Iran, with Tehran announcing the opening of the Strait of Hormuz. Israel and Lebanon also agreed to a 10-day ceasefire.

However, tensions mounted after both the US and Iran accused each other of violating the ceasefire agreement by attacking vessels.

Iran said it would not participate in a second round of negotiations as the US blockade violated the ceasefire agreement, while Trump indicated that the blockade would remain in place until a deal is finalised.

In a statement this morning, Iran’s Foreign Ministry called for US forces to immediately release the seized cargo vessel, its crew and their families.

US Vice President JD Vance is expected to lead the delegation in Pakistan for the second round of talks. Despite Iran’s threats to retaliate if its vessel is not released, Trump has projected confidence in Tehran coming to the table.

Meanwhile, a second round of talks between Israel and Lebanon is scheduled for Thursday.

Although crude prices fell slightly, easing inflationary concerns, the Federal Reserve is expected to keep its benchmark interest rate unchanged at its meeting this month.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged higher by 0.1% to 98.12 this morning.

The EUR/USD forex pair fell around 0.1% to 1.1782, while the GBP/USD pair declined 0.1% to 1.3525. The USD/JPY forex pair rose more than 0.1% to 158.99.

What to watch: Investors will keep an eye on the developments related to US-Iran war.

Data on ADP Employment Change (1615 UAE Time), retail sales (1630 UAE Time) and Business Inventories (1800 UAE Time) will be released today. Retail sales in the US, which rose by 0.6% in February following a 0.1% decline in January, are expected to surge by 1.4% in March. US business inventories, which declined by 0.1% in January, are expected to rise by 0.3% in February.

The markets today

European stocks in focus today ahead of the ZEW economic sentiment index

Context: Equity markets in Europe closed lower on Monday as investors assessed developments in the Middle East war.

Details: Tensions escalated over the weekend after both the US and Iran accused each other of violating the ceasefire by attacking vessels. Trump said that US military had seized an Iranian-flagged vessel looking to breach its blockade. Iran said it would not participate in any peace talks until the US releases its vessel, the cargo and the crew.

Meanwhile, data released on Monday showed Eurozone’s construction output fell by 1.9% year-over-year in February after a 4.1% decline in the previous month. This marked the second straight month of contraction.

Germany, France and Spain reported a decline in their construction output, while Italy reported growth of 1.4%.

The STOXX Europe 600 Index declined 0.82% to close at 621.46 on Monday, while London’s FTSE 100 fell 0.55% to 10,609.08. Germany’s DAX 40 fell 1.15% to 24,417.80, while France’s CAC 40 dipped 1.12% to settle at 8,331.05.

What to watch: Investors will continue monitoring developments around the peace talks between the US and Iran.

Data on Eurozone’s ZEW economic sentiment index (1300 UAE Time) and Germany’s ZEW economic sentiment index (1300 UAE Time) will be released today. The ZEW indicator of economic sentiment for the Eurozone, which tumbled by 47.9 points to -8.5 in March, is expected to rise slightly to -3.6 in April. Germany’s ZEW indicator of economic sentiment, which fell sharply by 58.8 points to -0.5 in March, is expected to decline further to -5 in April.

Other Markets: US trading indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.01%, 0.24% and 0.31%, respectively.

The news shaping the markets

Russia launched attacks on various regions across Ukraine, including the capital city of Kyiv. The news sent the USD/RUB pair lower in forex trading this morning.

New Zealand’s annual inflation came in unchanged from the previous quarter at 3.1% in the first quarter, lending support to the NZD/USD forex pair.

Argentina’s trade surplus widened to $2,523 million in March from $623 million in the year-ago period, which sent the USD/ARS pair lower in forex trading this morning.

Fitch Ratings revised the Philippines’ credit outlook from ‘stable’ to ‘negative’, lending support to the USD/PHP forex pair.

India’s infrastructure output declined by 0.4% in March compared to 2.8% growth in the previous month. However, the USD/INR pair fell in forex trading this morning.

What else to watch today

Spain’s balance of trade (1200 UAE Time), Germany’s ZEW current conditions (1300 UAE Time) as well as US Redbook index (1655 UAE Time), pending home sales (1800 UAE Time), retail inventories (1800 UAE Time) and NY Fed bill purchases 1 to 4 months (1820 UAE Time).