* President Trump floats a new plan to reopen Strait of Hormuz

* ECB and BoE on hold with June rate hikes up for debate

* Wall Street ends higher, S&P 500 and Nasdaq hit more records

* Gold and silver drop further on crude-driven inflation concerns

FX: USD fell sharply below the 100-day and 200-day SMAs at 98.46/54. The big driver was yen strength with reports of currency intervention by Japanese authorities.  Crude oil also fell from four-year highs at $126 softening the greenback. A muted USD reaction was seen to GDP growth of 2.0%, below the expected 2.1%, in-line March PCE data and initial claims hitting their lowest level since 1969. Geopolitical developments continued to point to an impasse in US-Iran talks, with reports that Trump was being briefed on new plans for potential military action in Iran on Thursday.

EUR underperformed all of its peers except for the dollar. The ECB stood pat as expected on rates but acknowledged rising inflationary pressures and also more downward risks to growth. Stagflationary issues are increasing in the zone but a rate hike debate was active during the meeting and suggests a move is a step closer. That said, 2011 is being referenced as the bank hiked rates but that pushed the economy further into stagnation. The latest inflation data was largely in line with estimates. The April high at 1.1849 is a target for bulls with the 200-day SMA at 1.1675.

GBP was mid pack among its peers but still gained nearly 1% versus the dollar. The BoE kept rates on hold but appears to be inching towards a possible June rate hike. The bank presented three scenarios with its middle one seeing rates steady with virtually no second round effects on inflation and minimal wage growth. The key question is obviously how long the Strait of Hormuz remains closed, with currently upside risks to price pressures. Cable broke higher to 10-week highs with a Fib level above at   1.36662.

JPY surged as the major plunged, after the yen had initially hit its weakest level versus the dollar since July 2024. Finance Minister Katayama said, ‘we are nearing the time to take bold action on FX’ and we note the BoJ has a history of intervening around market holidays. See below for more.

US stocks: The S&P 500 added 1.02% to close at 7,209, the Nasdaq was 0.98% lower at 27,452 and the Dow Jones settled up by 1.62% at 49,652. These are record highs for the S&P 500 and Nasdaq with the biggest monthly surge in the former since November 2020. Communication Services led the gainers, with Industrials, Utilities and Healthcare all rising more than 2%. Meta dropped 8.5% on concerns over higher AI infrastructure spending and raised capex. Alphabet jumped 10% on stellar results with strong revenue and profit growth, as well as booming cloud demand and AI driving growth across the business. Microsoft slid 3.9% on concerns over record capex, modest cloud growth and next quarter revenue. Amazon was steady, adding 0.8% as AWS sales beat, with accelerating cloud momentum and upbeat Q2 sales guidance. Qualcomm soared 15.1% as metrics beat with strength in automotive and China offsetting weaker handset demand.

Asian stocks: Futures are mixed. APAC stocks traded softer on increasing geopolitical tensions and new potential US military action. The ASX 200 was muted with mining and consumer staples weighing on tech outperformance. The Nikkei 225 returned from holiday with losses as Fujitsu lagged on its earnings miss. The Hang Seng and Shanghai Composite were mixed as stronger than expected manufacturing PMIs failed to support the indices.

Gold halted three days of selling as the dollar and Treasury yields turned lower. Firmer energy prices are reinforcing expectations that central banks may keep policy restrictive for longer, pushing real yields higher and weighing on bullion. 

Chart of the Day – USD/JPY tumbles

It’s very obvious that there has been some kind of intervention in USD/JPY. We won’t know for sure just yet but as we said earlier, there is a histroy of intervention on makret holidays for more effectiveness. Less liquidity means more bang for your yen. Ths issue is that high energy prices, a relatively disappointing recent BoJ meeting and negative real interest rates still put USD/JPY in a tough position for a prolonged decline. For that to happen, unilateral intervention needs to involve another party, like the US Treasury which did in late January. Technically, as we always say, the longer prices track sideways the bigger the breakout. The major has tracked around 158-159 for several weeks and the move lower has taken it through the 50-day SMA at 158.51 and the 100-day at 157.24. The first long-term Fib level sits at 155.80.