* Iran hardliners said to ramp up calls for a nuclear bomb

* Pentagon prepares for massive “final blow” of Iran war

* Dollar firmly bid as EUR and JPY extend losses

* S&P 500 falls as oil jumps, Trump warns Iran negotiations to “get serious”

FX: USD rose for a third straight day, which happened two weeks ago when the index made fresh cycle highs and hit levels last seen in May 2025. As we wrote yesterday, futures positioning has shifted hugely very recently, with traders running the largest net dollar long in aggregate since early December. Strong resistance resides at recent and November highs around 100.34/54. Again, we’ve had a plethora of news flow, but the mood was more downbeat with no progress on a ceasefire causing oil prices to rise 4%+. In turn, that pushed up Treasury yields with the 2-year close to the recent top just above 4%. There’s now 16bps of Fed rate hikes priced in by year-end. Many observers think high yields trigger a “TACO” response, over and above equity market weakness.

EUR fell again as oil prices rose. Money markets had notably scaled back expectations for an April ECB hike, which was priced at a peak 22bps on Monday. They slid to 14bps before moving modestly higher yesterday. The cycle low from mid-March sits at 1.1410. While ECB President Christine Lagarde recently said the central bank wouldn’t be paralysed by hesitation, we did get mild dissent from dovish member Villeroy, who stressed it’s too early to discuss the timing of hikes. The 200-day SMA resides at 1.1675, along with a major Fib retracement level.

GBP marginally outperformed though still finished lower on the day. The 200-day SMA sits at 1.3429 and looks to be solid resistance. Cable looks like it could be back in the descending channel of lower lows and lower highs from the late January top at 1.3868. The OECD downgraded its growth outlook for the UK economy this year to 0.7% from 1.2% but lifted its inflation forecast materially to 4.0% from 2.5%. We heard from various BoE officials who saw less risk of second round inflation effects (Breeden), and a high bar to hiking rates (Taylor).

JPY softened as the major headed higher into the strong resistance zone around 159.50/160. As we said previously, that was probably the line in the sand for FX interventions before the Iran conflict, but there is an obvious disincentive to intervene in a volatile market.

US stocks: The S&P 500 lost 1.74% to close at 6,477, the Nasdaq was 2.38% lower at 23,589 and the Dow Jones settled lower by 1.01% at 45,960. The Nasdaq and S&P 500 made fresh cycle lows last seen in September, and both closed on their lows for the day, a bearish sign. Only Energy and Utilities were in the green, with Communication Services, Technology and Industrials the biggest losing sectors, all down by more than 2%. Meta declined by 8% after it was found negligent by a LA jury for operating a product that harmed children and teens and failing to warn about those dangers. Memory stocks continued to get hit following the recent announcement from Google that its TurboQuant algorithm can cut the amount of memory required to run large language models by at least a factor of six. Nvidia dropped over 4% and Micron fell 8% and fell into a bear market with a 23% drop from the recent record high just over a week ago.

Asian stocks: Futures are in the red. APAC stocks were muted with mixed messages from the US and Iran and more military strikes. The ASX 200 settled modestly lower with tech and miners front running declines, but downside cushioned by gains in energy, defensives and financials. The Nikkei 225 slid as the rebound in oil stoked inflationary and growth concerns, given Japan’s large dependency on Middle East oil. The Hang Seng and Shanghai Composite were lower amid earnings and developed debt concerns.  

Gold fell over 2.7% and closed on the October 2025 high. Treasury yields rose along with the dollar, hitting non-yielding precious metals.

Chart of the Day – USD getting near recent highs

The dollar has risen over 1.5% since the onset of the Iran war. We’ve seen a flight to safety with rising geopolitical risk seeing investors move money into the world’s reserve currency. Oil and inflation fears have also certainly helped the buck too. The US is now a net energy exporter, while rising oil prices increase inflation risk, making it harder for the Fed to cut rates. ‘Higher for longer’ have certainly boosted USD. Ultimately the US still offers relatively high interest rates versus other economies, attracting global capital. Prices have consolidated recently but could be heading to the November highs which is solid resistance at 100.39.