16th April 2026 - Risk On

A positive day in the markets for risk-on assets overall yesterday, which seems to be mainly driven by traders pricing in the end of the war in Iran.

Forex

Yesterday saw a continuation of the slide in the US Dollar and a move away from safe havens, backed by a sentiment shift towards the Iran war being nearly over. While comments on social media from Trump back this up, the main driver behind the shift seems to come from rumors of an agreement in principle to extend the ceasefire, which implies progress is being made in peace talks. The EUR/USD is back up to around the 1.1800 handle, a key area of resistance/support in the recent past. If we see continued talk of a ceasefire, I would expect this to then move up to test the psychological level of 1.2000. I can see the temptation to look to trade a reversal off the 1.1800 area on a technical level, but until there is more clarity on the ceasefire, technical analysis feels limited in its use at the moment. All it takes is one post from Trump or an announcement on peace talks, and the market will make any technical level pointless.

The Euro also strengthened against the Pound on the day to reverse a short-term fall in the EUR/GBP, thanks to talk from the ECB about raising rates more aggressively than the Bank of England. Fundamental data was pointing to a fall in the currency pair, and on a technical level, we had seen a bounce off a key level, but the comments from both central banks will need to be followed closely for any future moves.

The commodity currencies (AUD, CAD & NZD) saw positive days due to the news in the Middle East and falling oil prices, with AUD outperforming the others thanks to the RBA's more hawkish policy stance. The direction of travel is positive, but again the key driver is risk appetite, and any change in sentiment could see any gains wiped out pretty quickly.

The JPY and CHF would normally be negatively affected by moves away from safe havens. This played out with the Yen falling against almost all other currencies, but the Swiss Franc was dancing to its own tune. The CHF was positive against a number of currencies, possibly being the go-to place for those who are not yet fully on the risk-on train.

Indices

The S&P and Nasdaq closed at all-time highs after recovering all of their losses since the start of the war, an extraordinary move considering the war is not officially over and oil is still 30-40% above pre-war levels. The markets' next moves will depend on the outcome of the ceasefire talks. As with everything at the moment, negative news could cause just as extreme a move, while positive news seems already to be priced in.

I would wait to hear more concrete news in the Middle East before jumping into any trades in either direction. There is no technical justification to go long, and any short trades are at the mercy of Trump's social media.

Precious Metals

The combination of lower oil prices, optimism for peace, and a weaker dollar is complicating matters for gold. The reduction in safe-haven demand reduces demand for the precious metal, but the falling dollar offers support. If oil continues to fall and gives more encouragement for lower rates in the USA, we could see some gold support in the longer term, but at present, the future direction seems uncertain, and so it is a wait-and-see market for the time being. Silver remains in a similar situation, with both seemingly waiting for the outcome of the war and the settling of oil prices before moving definitively.

Today's Market Drivers

• GBP - First thing today we will see GDP numbers for the UK. A positive figure will reinforce the overall positive trend with GBP and could lead to some opportunities on pullbacks.

• USD - Unemployment claims & Philly Fed numbers are released today. The weekly unemployment numbers matter but are currently overshadowed by inflation expectations and news from the Middle East.

• All Markets - Any significant updates on the Iran war will move markets significantly. There is a risk that negative news will burst the market's bubble of optimism, but continued positive news will only fuel the fire for risk-on assets.

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