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Global Markets Weigh Fed Hawkishness Against Iran Deal Progress

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Global Markets Weigh Fed Hawkishness Against Iran Deal Progress
The US Federal Reserve’s first meeting under Chair Kevin Warsh held rates steady at 3.50–3.75% but struck a decisively hawkish tone, with nine FOMC members now projecting at least one further hike by year-end. Forward guidance was eliminated, with markets directed to focus on incoming data rather than pre-committed signals. The shift drove US Treasury yields higher. The 2-year up 5bps to 4.23% and the 10-year up 6bps to 4.51% and pushed EUR/USD from around 1.16 to below 1.15. The Bank of Japan also raised its policy rate 25bps to 1.00%, its highest since 1995, yet the yen remained under pressure with USD/JPY trading above 161.50 and briefly breaching 161.90, keeping markets on intervention watch.
Progress in US-Iran negotiations provided a partial offset, with VP Vance citing “very good progress” and a deconfliction mechanism taking shape around the 60-day truce and gradual reopening of the Strait of Hormuz. Brent crude fell a further 3.3% to US$77.95/bbl, near its lowest level since the onset of the conflict. In Australia, housing sentiment is deteriorating on two fronts: RBA rate hikes in March and May are already cooling prices in Sydney and Melbourne, while Federal budget tax changes removing negative gearing for new investors on existing dwellings are expected to drive a 20% decline in turnover and leave national prices flat over calendar 2026. UK PM Keir Starmer’s resignation added a layer of political uncertainty, though sterling found modest support on the news with Andy Burnham emerging as the frontrunner to succeed him.

General Market

Wall Street

  • Dow Jones: +0.29% to 51,718
  • S&P 500: -0.37% to 7,472
  • Nasdaq: -0.10% to 30,303
Asia-Pacific
  • ASX 200: -0.01% to 8,811
  • Nikkei: -0.99% to 72,266
  • Shanghai Composite: +1.78% to 4,800
Europe
  • FTSE: -0.05% to 10,422
  • DAX: +0.62% to 25,139
  • CAC: -0.68% to 8,398

Headlines to Watch

United States

  • Housing data → test of consumer and construction sector resilience
  • Current Account Balance → signal on external demand and capital flows
  • Fed rate path remains sensitive to incoming inflation and growth data

Europe

  • German Ifo Business Climate → key gauge of Eurozone growth momentum
  • Consumer Confidence → insight into household spending prospects
  • ECB policy expectations remain tied to growth and inflation trends

Asia-Pacific

  • Tokyo CPI → critical for BoJ normalization expectations
  • Australia CPI Indicator → major driver of RBA rate outlook
  • New Zealand Trade Balance → export demand and growth signal

Global / Geopolitics

  • US-China trade developments remain a market risk factor
  • Middle East tensions continue to influence energy markets
  • Sovereign bond yield movements remain a key driver of FX and risk sentiment
  • Central bank policy divergence continues to shape global capital flows and currency markets
Currency Pair Mid-market Rate
AUD/USD 0.6988
AUD/NZD 1.2254
AUD/JPY 112.94
AUD/CNY 4.7371
AUD/EUR 0.6116
AUD/GBP 0.5277
AUD/HKD 5.4792

 

 

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