Iran's Deal: Unacceptable to Trump, Unmissable on the Chart

Stalled peace talks and a resilient US dollar pressure the Pound. GBP slips below 1.36. Euro and other majors follow amid resilient U.S. data and global risk aversion. From Starmer’s struggle to the ECB’s caution, volatility reigns. Oil tops $105.

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GBP: Cable Sinks on Geopolitical Deadlock

GBPUSD 1.3614 | EURGBP 0.8654

The British pound dropped to $1.3590 this morning as the dollar dominated Asian trading, before steadying around 1.3610. Sterling failed to hold its ground while Brent Crude futures leapt 4.5% to $105.87 a barrel. President Trump on Sunday called Iran's peace proposal "totally unacceptable," leaving the Strait of Hormuz effectively shut and sending oil prices sharply higher, dampening any hopes for an imminent resolution to the eleven-week conflict.

Geopolitical friction creates a classic flight to liquidity. The dollar thrives as a safe haven when the Strait of Hormuz remains under threat. While the Bank of England hints that persistent inflation warrants higher rates, the immediate US-Iran stalemate overshadows domestic hawkishness. Later today, Starmer delivers a speech positioning closer European relations as his government's defining mission, a move designed to shore up domestic support amid growing calls for his resignation. While that might provide a political floor for the currency, the Greenback’s yield advantage currently dictates the rhythm.

From a technical standpoint, the setup for the GBP/USD pair leans bullish and warrants caution before assuming a sustained move lower.

Investors will be watching Thursday’s UK Q1 GDP, industrial production, and trade balance for more cues on sterling’s near-term direction. Tensions in the Middle East currently cap gains for the pound; any relief in the Gulf may trigger sharp retracements.

Key Technical levels for the GBP/USD pair: Resistance sits at 1.3600, 1.3655 and Support sits at 1.3550

Key Technical levels for the EUR/GBP pair: Resistance sits at 0.8680 and Support sits at 0.8620

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EUR: Energy Headwinds Chill the Euro

EURUSD 1.1784

The EUR/USD pair slips 0.28% to 1.1754, then trading around 1.1780 in the early European session. Elevated oil prices hit Europe particularly hard with the Eurozone being a major net importer of energy, and geopolitical risk in the Gulf feeds directly into the growth outlook.

ECB Vice President Luis de Guindos recent speech adds a dovish note. He suggests the central bank needs to tread carefully when deciding on a widely expected rate move next month, citing a deteriorating growth picture that suggests data over the coming weeks might not make for comfortable reading, and that the bank needs greater clarity on how the conflict feeds through to activity before acting. This prudence stems from the visible impact of high energy costs on industrial output. While the Fed remains split, the ECB’s focus on downside risks to growth limits the Euro’s ability to capitalise on any dollar exhaustion. The EUR/USD pair holds losses around 1.1750 with upside capped by risk aversion and slower European growth, and no obvious near-term catalyst to reverse the move.

Investors will be watching the release of Germany’s CPI and HICP figures tomorrow, followed by Eurozone employment, Q1 GDP, and industrial production midweek. These data points could provide clarity on ECB intentions and the euro’s stability.

Key Technical levels for the EUR/USD pair: Resistance sits at 1.1800 and Support sits at 1.1720

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USD: Jobs Data and Iran Impasse Fuel a Second Day of Gains

DXY 98.09

The dollar advances for a second consecutive session, with two forces at work. First, Friday's NonFarm Payrolls print showed an addition of 115,000 jobs in April, nearly twice the expected pace and reinforcing the view that the Federal Reserve (Fed) might hold rates unchanged for an extended period. Second, the Iran standoff: Iran’s proposal called for a ceasefire on all fronts, sanctions relief, reparations, and recognition of its control over the Strait of Hormuz, while Trump rejected all of it. While Peace progress stalled and hit a brick wall in Washington, the AI rally did not. The dollar continues to act as the ultimate store of liquidity for markets when the world catches fire and seeks a safe-haven refuge.

The Fed's recent meeting already exposed the deepest internal split in decades. Three officials dissented against any signal of future cuts. Factors that had weighed on the dollar, such as trade de-escalation hopes and Fed pivot bets, have lost traction with each piece of resilient US data.

Trump flies to Beijing, China, on Wednesday for face-to-face talks with President Xi Jinping, their first meeting in more than six months. Trade, Taiwan, AI, nuclear weapons, and a critical minerals deal are all on the table. The Gulf ceasefire will feature prominently.

US CPI and the April monthly budget statement land tomorrow. Wednesday brings US PPI data, with retail sales to follow later in the week. Investors will be watching these closely for more cues on dollar direction.

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Global Flows: From the Yen to the Antipodeans

AUDUSD 0.7229 | NZDUSD 0.5948| USDJPY 157.10 | GBPJPY 213.46

The USD/JPY pair edged up 0.3% to 157.10. The yen is weakening under dual pressure: With Japan being a major energy importer, rising oil prices weigh on the single currency and simultaneously, a structural policy gap between the BoJ and the Fed adds more pressure to it. Japanese authorities are angling for a hawkish Bank of Japan (BoJ) pivot, alongside US Treasury Secretary Scott Bessent's endorsement, to give yen intervention greater credibility and slow the currency's slide. The path for that pivot runs through a central bank already behind the curve. GBP/JPY sits at 213.46, capped by yen pressure on the cross.

The Aussie dollar softens to $0.7229, and the New Zealand dollar eases to $0.5948. Australia's federal budget drops tomorrow, a potential near-term catalyst. China's April producer prices jumped to a 45-month-high, while consumer inflation also accelerated on the back of elevated global energy costs, keeping the pressure on Asian importers. Asian equity sessions lifted on gains in AI-related stocks in Seoul and mainland China, though broader risk appetite stays cautious.

Gold slipped 0.5% to $4,690 an ounce, consolidating as geopolitical risk and inflation concerns have not driven the sustained safe-haven bid one might expect.

The divergence between Asian central bank efforts and US economic resilience creates significant friction. These movements influence market behaviour across the G10.

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Current Rate Table:

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Market Lookahead

Tue, 12 May

• Germany Harmonized Index of Consumer Prices (Apr)
• Germany & Eurozone ZEW Survey - Current Situation & Economic Sentiment
• Australia's Budget Release
• US Consumer Price Index (Apr)
• US Monthly Budget Statement (Apr)

Wed, 13 May

• Eurozone Employment Change data
• Eurozone Gross Domestic Product Q1
• Eurozone Industrial Production s.a. (Mar)
• US Producer Price Index (Apr)

Thu, 14 May

• UK’s Gross Domestic Product Q1
• UK Industrial Production s.a. (Mar)
• US Retail Sales

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