Donald Trump went all in, bringing his threats to the maximum. According to him, an entire civilization could have died, which was perceived as a signal of a nuclear strike. Iran responded by agreeing to a two-week ceasefire. If he had not done so, the gambit would have been the last for the US president. The world would finally see that the king was naked. However, the good thing is that it ends well. For the owner of the White House and for EURUSD.
The market takes everything into account. It was difficult to understand why the US dollar was not strengthening against the background of growing oil by leaps and bounds. Brent quotes in the markets with immediate delivery soared above $140 per barrel. More than at the beginning of the armed conflict in Ukraine in 2022. However, the EURUSD is frozen in the range of 1.15-1.155. Somehow, this did not fit in with the status of greenback as a safe haven asset. Moreover, the yield of treasuries followed black gold, which increased the attractiveness of American assets and, in theory, should have led to an increase in the USD index.
In fact, the traders were on pins and needles. They were waiting for signals of de-escalation of the conflict in the Middle East, and finally they did. Donald Trump’s announcement of a two—week truce has triggered a wave of buy-or-lose FOMO. It is sure to take a ride on the American stock market, but for now, bitcoin, precious metals and EURUSD have become the main beneficiaries.
And the last ones will be the first. These assets were sold off during the war. Oil, on the contrary, grew. It is not surprising that the news about the negotiations between Washington and Tehran on April 10 turned everything upside down. Brent collapsed by 16%, which reduced the risks of accelerating inflation in the United States. The Fed will no longer need to keep the federal funds rate at a high level. The futures market has increased the chances of a single act of monetary expansion in 2026 from zero to 60%. Before the bombing of Iran, derivatives signaled a 50bp reduction in borrowing costs.
The lower the rates, the worse it is for the US dollar. Which is being massively sold off amid fading demand for safe haven assets. The euro, on the contrary, is bought as the currency of optimists.
FOMO is certainly capable of driving the EURUSD far north, but a truce does not mean that the conflict in the Middle East is over. While Donald Trump is talking about big money, Iran insists on controlling the Strait of Hormuz, and Israel continues bombing Lebanon– the haven of Hezbollah.
