* Iran proposes allowing ships to exit Oman side of Hormuz

* US and Iran reportedly weigh extending ceasefire by two weeks

* S&P 500 hits record high as investors move past Iran conflict concerns

* Brent crude choppy as Trump says Iran war ‘close to over’

FX: USD unsurprisingly steadied after seven straight down days, having broken down below its 200-day SMA at 98.51 on Monday. Markets have grown increasingly confident that the Middle East crisis is moving toward a resolution, with the US and Iran arranging a second round of talks, and Tehran seemingly willing to halt shipments to avoid testing the US naval blockade. This is a very positive outlook on what is still a fragile situation. That said, every day without conflict and escalation is a good one in the market’s eyes. Treasury yields fell on Monday also due to a much softer than expected March PPI print. That has seen markets now price in around 10bps of rate cuts by year end.

EUR paused its ascent after the strong win streak higher. ECB President Lagarde noted the economy currently sits between the bank’s baseline and adverse scenarios, so modestly dovish. That said, other officials have been more hawkish recently and discussed rate hikes. There’s just over two 25bps priced in for 2026 but little now for the end of April meeting. The February high around 1.19 is a bull target, with the major Fib level of this year’s high to low move at 1.1826.

GBP paused after seven straight days of gains. BoE officials have continued to sound comparatively less hawkish than their ECB counterparts. Yesterday, both Governor Bailey and MPC member Greene stressed the need for patience before assessing policy implications and to take into consideration second-round effects. In cable, there seems to be limited resistance between current levels and the mid-February tops around 1.37, with support below 1.3450 where the long-term SMAs reside. There’s around 35bps of hikes currently priced in, from 45bps at the start of the week.

JPY underperformed as the major continued to trade around a prior cycle high at 158.87. The sentiment driven recovery has not benefitted the yen in recent weeks. BoJ headline risk may increase in the run up to the meeting on April 28. There’s currently around 7bps of hikes priced in from 14bps at the end of last week.

US stocks: The S&P 500 added 0.8% to close at 7,023, the Nasdaq was 1.4% higher at 26,205 and the Dow Jones settled down by 0.15% at 48,464. The broad-based benchmark S&P 500 index posted record highs on earnings and ceasefire optimism. Only four sectors were green with Tech leading the gains, while Materials and Industrials were the biggest laggards. The tech-laden Nasdaq touched its highest level since October 29. As we said yesterday, investors have been under-risked and do not want to miss out on the rebound. The wall of worry of AI disruption, inflation concerns and the fog of war is now slowly fading. The VIX, Wall Street’s fear gauge fell to its lowest level since February 26. Banking stocks like Morgan Stanley and Bank of America gained as earnings beat. Broadcom jumped 4.2% after Meta extended its custom chips deal with the firm. Software stocks like Salesforce and Snowflake continued to bounce as the AI disruption theme was seen as overdone.

Europe’s most valuable company, ASML reported sales that beat estimates while also raising its revenue guidance. The CEO highlighted that demand for chips is outpacing supply and that order intake continues to be very strong. Despite the strong report, shares fell over 4% on softer Q2 sales guidance.

Asian stocks: Futures are green. APAC stocks followed Wall Street’s lead on continued hopes for more peace talks. The ASX 200 edged higher with losses in energy offset by tech and gold miner strength. The Nikkei 225 rallied above 58,000 with softer oil boosting sentiment. The Hang Seng and Shanghai Composite were in the green with Hong Kong boosted by tech.

Gold made a fresh one-month high before paring gains. The rebound off the 200-day SMA has been strong and has stalled just below the 50-day SMA at 4,899.

Day Ahead – Australia Jobs, UK GDP

Consensus sees the volatile headline Australia jobs print at 20k. Economists cite the clear tendency over the past year for negative reads to follow runs of positive data. Another positive print in March would be the first time since the third quarter in 2024, that employment has risen for three months in a row. The jobless rate might edge up one-tenth to 4.4% on the back of a softer jobs print and an unchanged participation rate. This could point to slightly softer labour market momentum heading into the Middle East conflict period.

 February’s UK GDP data will provide a useful benchmark for how the economy was faring before the Middle East energy shock. Survey data for February was strong, with the print expected at 0.3% from flat. For the BoE, the data will provide a starting point to assess how severe an economic downturn there might be in the period ahead. But price developments and inflation along with second round effects will ultimately be the deciding factor for the MPC.

Chart of the Day – AUD to fresh highs

There seems to be a sense of urgency among RBA officials who have repeatedly expressed concern about losing control of inflation expectations and have openly pointed to the need for more rate hikes. Markets are pricing around 15bps for the May meeting, but that could turn more hawkish if CPI data released at the end of the month continues higher to the 4.5% area. That should mean AUD/USD retains solid upside potential, aside from war re‑escalation risks. The aussie is benefitting from both stronger export prices and improved risk sentiment, and this can continue. The March top is at 0.7187, just above the January 2023 highs at 0.7157. A major long-term Fib level of the 2021 high to 2025 low sits at 0.7203.