CAPITALDIGEST MARKET REVIEW, 27/04/2026

FOREX DOLLAR STEADY AS TRADERS EYE US-IRAN TALKS, CENTRAL BANKS

The U.S. dollar was steady on Monday as wavering hopes of a deal to end the Middle East war left investors on ‌edge ahead of a slate of central bank meetings later this week. The Japanese yen was pinned just beneath the crucial 160 level ahead of the Bank of Japan’s policy decision later in the week. Sentiment got a lift overnight after Axios reported, citing sources, that Iran gave the U.S. a new proposal through Pakistani mediators on reopening the waterway and ending ​the war, with nuclear negotiations postponed for a later stage. Some analysts have argued that a potential nuclear deal remains the main sticking ​point, as any agreement that leaves Iran’s nuclear programme largely unchanged could be politically damaging for the U.S. President at ⁠home. “Given the experience about two weeks ago, when similar hopes (of reopening of the Strait of Hormuz) had already surfaced but were dashed again within ​24 hours, market euphoria is likely to be much more muted this time,” said Thu Lan Nguyen, head of forex commodity research at Commerzbank. The Strait of ​Hormuz normally carries a fifth of global oil and gas shipments. The dollar benefited in March from safe-haven flows as the war erupted but shed most of those gains on hopes of a peace deal this month. It has steadied in recent days after U.S.–Iran talks stalled. “There is another aspect of the negotiations that matters: Iran is pressing ​for economic sanctions to be lifted,” Commerzbank’s Nguyen added. Brent crude futures were up 2.6% at $108 a barrel. The dollar index , which measures the U.S. currency against ​six major peers, was at 98.41, down 0.1% on day. The Federal Reserve is widely expected to hold rates steady this week. “The Fed may be inclined to warn of ‌the need ⁠for rates to stay unchanged for longer,” said Chris Turner, head of forex research at ING, arguing that could be mild positive for the dollar.

STERLING EDGES UP BUT HEADS FOR WEEKLY LOSS AS IRAN TENSIONS OVERSHADOW UK DATA

The British pound rose slightly against the dollar on Friday but was headed for a weekly loss, as traders kept an eye on stalled peace negotiations between the U.S. and Iran while some strong UK retail data barely moved the needle.Sterling was 0.1% higher versus the dollar at $1.348, as broader currency markets traded largely range-bound. Against the euro, the pound fell 0.1% to 86.69.  UK retail sales for March rose more than expected, official data showed. British motorists worried about fuel price increases rushed to the pumps immediately after the start of the Iran war, pushing up total sales volumes for the country’s retail sector. “There had been concerns that the uncertainty over the impact of the situation in the Middle East on household finances might dampen consumers’ appetite to spend, but even the figures for March were fairly robust,” Investec economists wrote in a note. However the data comes hot on the heels of a survey that on Thursday showed British consumer morale slid this month to its lowest since October 2023 as households ramped up their expectations for price rises. The war in the Middle East has caused a global energy price spike, fanning concern around inflation and growth. Traders are betting on at least one 25-basis-point rate increase from the Bank of England this year, a marked reversal from before the war when they had been eyeing two. The BoE will deliver its next policy decision on Thursday, with markets placing an 83% bet that the central bank will hold rates at 3.75%. The pound shed 1.9% in March as the Middle East conflict weighed on markets with the closure of the Strait of Hormuz – critical for the flow of energy – dealing a blow to the outlook for the British economy. It has now recouped the losses in April and is on track for its biggest monthly rise since August. Elsewhere, the BoE expects stock markets around the world to fall because current share prices do not fully reflect the many risks facing the global economy, Deputy Governor Sarah Breeden said in an interview with the BBC on Friday.

DOLLAR SLIPS AS DOJ DROPS POWELL PROBE, CLEARING PATH FOR WARSH

The dollar fell on Friday, pressured by the Justice Department’s decision to close its investigation into Federal Reserve Chair Jerome Powell and by growing optimism that talks to end the U.S.-Israeli war with Iran could be on the horizon. U.S. Attorney Jeanine Pirro said she had instead asked the Fed’s internal watchdog, the Office of Inspector General, to examine cost overruns in renovations of the central bank’s Washington headquarters. The closure of the DOJ investigation clears a significant hurdle for the confirmation of Kevin Warsh, President Donald Trump’s pick to lead the central bank. “The market’s reading this as a little bit dovish,” said Noah Buffam, director in FICC strategy at CIBC Capital Markets in Toronto. Warsh prefers trimmed mean and median inflation measures, which are below the core inflation readings that Powell has focused on, Buffam said. That “could lead to him trying to get through more cuts than Powell would have.” Fed funds futures traders are now pricing in 38% odds of an interest rate cut by year-end, up from 23% earlier on Friday. The dollar index , which measures the greenback against a basket of currencies including the euro, fell 0.28% to 98.55, with the euro up 0.27% at $1.1714. The dollar index is heading for a weekly 0.32% gain, with the euro on track for a 0.41% weekly loss. The Japanese yen strengthened 0.19% against the greenback to 159.4 per dollar. Sterling rose 0.42% to $1.3523. The dollar also fell after Iran’s Foreign Minister Abbas Araqchi was expected in the Pakistani capital Islamabad on Friday to discuss proposals for restarting peace talks with the United States, but Pakistani sources said he was not due to meet U.S. negotiators there. Trump plans to send special envoy Steve Witkoff and Jared Kushner to Islamabad soon for talks with Araqchi, a U.S. official told Reuters, although it was not clear when that meeting would take place. The U.S. currency has been pulled in competing directions throughout the conflict — buoyed at times by optimism that a near-term deal could end the fighting, then weighed down by fears that a prolonged war will trigger lasting energy disruptions. With the outcome still uncertain, many traders remain reluctant to take on large positions, keeping the market largely range-bound. “Right now you really can’t have anything on the table because you don’t know where this is going,” said Lou Brien, strategist at DRW Trading in Chicago. “Unless there’s some big news like they just all declare peace and go home, I think the next real move on the markets is going to be a reaction to real things, such as shortages of crude oil affecting economic performance in Europe or Asia,” he said.

STERLING DIPS AS U.S.-IRAN PEACE TALKS FALTER

The pound slipped on Monday after tensions between the U.S. and Iran rose sharply over the weekend, raising the prospect that a two-week ceasefire might collapse and ​pushing investors towards the safe-haven U.S. dollar. Market participants were also keeping an ‌eye on UK assets as British Prime Minister Sir Keir Starmer prepared to address parliament as he faces calls to resign after it emerged former U.S. ambassador Peter Mandelson had failed a vetting process. The ​pound was last down 0.1% at $1.3503 as the dollar rose. The euro ​was 0.1% higher against the pound at 87.10 pence. The U.S. currency rose ⁠as stocks fell and oil prices climbed after Iran said it would not participate ​in a second round of negotiations. Tensions were running high after the U.S. said it ​had seized an Iranian cargo ship that tried to run its blockade of the Strait of Hormuz. “Fresh worries are percolating about the fragility of the Iran ceasefire, sending oil prices higher and keeping investors ​on edge,” said Susannah Streeter, chief investment strategist at Wealth Club. The pound was not ​too far off Friday’s two-month high of $1.3599, however, reflecting market optimism that the worst of the ‌Iran conflict ⁠is over. Sterling has climbed 2% this month, after falling 1.9% in April, as hopes of a ceasefire deal have caused investors to sell the dollar. Yet the pound could fall if Starmer is ousted due to the latest scandal over Mandelson’s appointment as U.S. ​ambassador, which was ignited ​over the latter’s ⁠close ties to convicted paedophile Jeffrey Epstein. On Thursday, The Guardian reported that Mandelson had failed a security vetting process, heaping further pressure ​on Starmer. “This will be a tough session for PM Starmer and ​one which ⁠will extend into tomorrow, when the top civil servant involved in the approval process also appears at a parliamentary hearing,” said Chris Turner, global head of markets at ING. “GBP/USD could ⁠well ​hand back a big chunk of recent gains this ​week.” Some investors say Starmer’s replacement could lead Labour policies further to the left, increasing government borrowing.

US DOLLAR CLIMBS AS UNCERTAINTY GROWS OVER IRAN CEASEFIRE

The U.S. dollar reached a one-week high on Tuesday as concerns grew ‌that a ceasefire in the U.S.-Israeli war with Iran will take longer to reach and lead to prolonged disruptions in the Strait of Hormuz. Iran said on Tuesday it had yet to decide whether to attend the peace talks after U.S. forces boarded a huge Iranian oil tanker at sea with just ​a day left before the ceasefire runs out in the war in the Gulf. “Investors are bracing for a more ​prolonged disruption in the Strait of Hormuz as US-Iran negotiations show signs of grinding to a ⁠standstill,” said Karl Schamotta, chief market strategist at Corpay in Toronto. “The two sides remain far apart on key terms, and ​a ceasefire deadline expires tomorrow,” he said. Markets have been swayed in recent days by contradictory headlines over whether or not U.S. ​Vice President JD Vance has departed for Pakistan for the talks.Vance has not yet departed Washington for talks on Iran and is participating in additional policy meetings, a White House official said on Tuesday. “We felt like maybe the Kumbaya moment was going to come, and it was going ​to be announced and then you open the Strait,” said Juan Perez, director of trading at Monex USA in Washington. “That ​hasn’t happened and that’s what markets really want.”nThe dollar has fallen this month on growing optimism of a ceasefire in the war, after ‌gaining ⁠last month on safe haven demand due to the conflict. The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, was last up 0.36% at 98.43, with the euro down 0.44% at $1.1736. The Japanese yen weakened 0.37% against the greenback to 159.39 per dollar. Sterling weakened 0.29% to $1.3493. Federal Reserve chief nominee Kevin Warsh, meanwhile, called for “regime ​change” at the U.S. central ​bank, including a new approach ⁠for controlling inflation and a communications overhaul that may discourage his colleagues from saying too much about the direction of monetary policy. Warsh made the comments in testimony before the U.S. Senate. The dollar was also supported earlier on Tuesday after U.S. retail sales increased more than expected ​in March as ⁠the war with Iran boosted gasoline prices and led to a record surge in receipts at service stations, while tax refunds underpinned spending elsewhere. “The data in the U.S. is telling a consistent story of a decent acceleration,” said Adam Button, chief currency analyst at ⁠investingLive. “That’s been ​obscured by the war and it should be a U.S. dollar tailwind because ​I find it hard to believe that we will go back to pricing in two cuts this year.”