Wall Street closes at a record for the first time since end of January
Investing.com -- Sterling held firm near $1.3432 on Wednesday, adding to the previous session’s 1.26% advance, as Iran’s announcement of a two-week ceasefire and safe passage through the Strait of Hormuz triggered a broad dollar retreat.
The pair traded within a $1.3284-$1.3446 range by 05:35 ET (09:35 GMT), building on Tuesday’s surge from an open of $1.3240. The 52-week range runs $1.2721-$1.3869.
The ceasefire news sparked a risk-on rally across asset classes, lifting equities, steepening yield curves and weighing on the dollar index (DXY), which had gained just over 3% through March.
ING strategist Chris Turner said a further DXY sell-off toward 98.50 was possible, though a break below 98 was premature given uncertainty over whether the truce holds.
Markets have begun pricing Federal Reserve rate cuts toward year-end, with around 14 basis points of easing now priced for December.
Fed Vice Chair Philip Jefferson on Tuesday said monetary policy remained "well-positioned." Minutes from the March 18 FOMC meeting are due later Wednesday.
The euro was little changed at $1.1683, essentially flat after Tuesday’s 1.3% surge from $1.1542, trading a $1.1594-$1.1709 intraday range.
ING sees 1.1730/1750 as the best case for the pair this week, short of the pre-conflict level of 1.1800. Eurozone PPI and retail sales data for February are due Wednesday but are unlikely to move markets.
In Central and Eastern Europe, the forint led regional gains, with EUR/HUF approaching 375, the level seen before the conflict began.
EUR/PLN and EUR/CZK have recovered roughly half their conflict-era losses; as lower-beta currencies, ING expects a slower return to pre-conflict levels of 4.220 and 24.250.
In Asia, the People’s Bank of China set a lower USD/CNY fix, pushing the onshore rate below 6.83, signalling support for renminbi strength.
China-linked currencies including the Australian dollar, South African rand and Brazilian real are expected to benefit, while the Korean won, supported by a record $23 billion monthly current account surplus, could push USD/KRW back toward 1450/60 should energy prices remain subdued.