* Israel to negotiate with Lebanon after US pressure, Hormuz Strait still closed

* US inflation in focus as energy shock clouds price growth outlook

* Crude rises, gold too though USD eases on continued improved risk mood

* Stocks gain with S&P 500 on a 7-day win streak   

FX: USD closed lower but remain above the long-term SMAs around 98.49/63. The day was again heavy on headlines sparking reactions, with the main takeaway being that talks are set between the countries soon; however, both sides are at odds over whether Israel-Lebanon firing can continue amid the talks. Headline trading still dominates. Evidence that traffic through the Strait of Hormuz is picking up could add pressure on the dollar, though markets will get more nervous the closer we get to the end of the two-week ceasefire. The Fed’s favoured inflation gauge, core PCE, printed in line. We note Wednesday’s FOMC Minutes highlighted two-sided risks around job losses if that outweighs inflation risks. There are now roughly 8bps of Fed easing priced in for 2026.

EUR enjoyed a fourth straight days of gains, which hasn’t been seen since the end of January. Prices closed above the 50,100 and 200-day SMAs around 1.1671-86. The midpoint of this year’s low to high sits at 1.1746. Money markets continue to price in more than two 25bps rate hikes by the ECB. This is historically the minimum number of moves by policymakers, or nothing at all. Yield spreads remain supportive of euro strength, and measures of sentiment point to a drop in demand for protection against EUR downside.

GBP traded just above the 200-day SMA at 1.3412 but couldn’t break the 50-day SMA at 1.3434. Broader market sentiment continues to dominate and currently weigh to some degree, while Bank of England dovish repricing could come through more smoothly if energy prices keep declining.

JPY was the laggard as the only major closing lower on the day. Prices traded around the January 2025 top at 158.87, which is just below recent highs. Domestic economic releases have been limited to second tier soft consumer confidence and strong machine tool orders data.

US stocks: The S&P 500 added 0.62% to close at 6,825, the Nasdaq was 0.72% higher at 25,082 and the Dow Jones settled up by 0.58% at 48,186. All three indices closed above their 50, 100 and 200-day SMAs, the first time since late February and early March. The broad-based benchmark S&P 500 index posted its seventh straight day of gains, last seen in October. All sectors apart from Energy and Health were positive, with Consumer Discretionary, Industrials and Communication Services leading the gains. Palantir fell 7.3% after famed investor Michael Burry raised valuation concerns and warned of rising competition from Anthropic. Intel jumped 4.7% as it tied up with Google to expand its partnership to advance the use of AI chips. CoreWeave and Meta announced a $21bn expanded AI infrastructure agreement, boosting both stocks by 3.5% and 2.6% respectively.  

Asian stocks: Futures are mixed. APAC stocks drifted down as ceasefire euphoria waned.  The ASX 200 saw resilience in energy, defensives and financials offsetting losses in the tech sector. The Nikkei 225 retraced Wednesday’s stellar performance, with the index sliding beneath 56,000. The Hang Seng and Shanghai Composite was subdued on concerns around the fragility of the US-Iran ceasefire, and with weakness in Chinese tech and property stocks.

Gold held above $4,700as investors weighed hopes for a diplomatic resolution against sporadic fighting that threatened the ceasefire. The 100-day SMA sits at $4,656. Bullion has been supported by lower oil prices, easing inflation risks and reduced interest rate expectations and bond yields.

Day Ahead – US CPI, Canada jobs

March US headline CPI is forecast to rise 1% m/m and 3.4% y/y from 0.3% and 2.4%, respectively. The core, which strips out volatile energy prices, will print modestly higher than prior at 0.3% and 2.7%. Rising producer and factory input prices may impact core data in the months ahead. Yesterday’s February PCE was broadly in line, though still elevated ahead of the anticipated March energy-driven inflation pickup.

The March Canada employment figures come after a bleak previous report which showed nearly 84k jobs lost. Trade and tariff issues, along with the Middle East conflict pose ongoing risks to the creaking labour market. 

Chart of the Day – Oil plunge pauses

Oil prices rebounded on Thursday after suffering their sharpest daily drop since April 2020. Prices rebounded as fighting in the Middle East continued, and the ceasefire outlook deteriorated, keeping uncertainty around the Strait of Hormuz firmly in focus. Oil tanker traffic is still halted, heightening supply risks. With a full reopening of the Strait unlikely in the near term, crude prices are expected to remain supported, as disruptions linked to reduced output and refinery shutdowns will take time to unwind. After posting highs just below $120 and hovering above $110, prices dropped to support at the Fib retracement (38.2%) of the December to March move at $96.51. The minor Fib sits at $105.49 with the 50% point at $89.26.