Dollar Up on Deal Optimism

The agreement reportedly contains 14 provisions, including a cessation of hostilities in Lebanon, the reopening of the Strait of Hormuz within 30 days, and a 60-day window to negotiate a final agreement with regard to nuclear issues. The details suggest that this is an Iranian proposal given that it contains some elements that the U.S. has disagreed with in the past. The proposal still requires final approval from authorities, but should that be provided then an agreement will potentially be signed at the G7 summit in France next week.

GBP

The British Pound is down against the Greenback this morning following a data release that showed the U.K. economy contracted for the first time in eight months in April, an early signal of the damage inflicted by the war in Iran. Gross Domestic Product (GDP) fell by 0.1%, and services fell by 0.2%. The U.K. had experienced stronger than anticipated growth in the first quarter of the year, but the stage is now set for a second quarter that will feel the full effect of inflated energy prices. The Bank of England is set to meet next Thursday, and today’s GDP figures support the idea that the BoE should stay on hold, but Traders are pricing in a gradual tightening cycle with one hike priced in before the end of the year.

JPY

The Japanese Yen is down against the Buck this morning as optimism surrounding a deal to end the war in Iran has reduced safe-haven demand for the currency. The Bank of Japan is set to meet early next week and is widely expected to hike interest rates to their highest level in 31 years in an effort to combat persistent Yen weakness and sharp inflation driven by higher energy prices resulting from the war. BoJ Governor Ueda remains hospitalized for the time being and will miss the meeting as a result. Deputy Governor Himino will preside over the meeting in his stead, and Deputy Governor Uchida will host the subsequent press conference. While the Japanese government does not anticipate that this will have any impact on the decisions made in the meeting, Traders are watching closely to see what signals could be revealed during the press conference.