Oil Swings with No Clear Trend (4-8 May)

A volatile start to the week, where currencies, energy, and policy signals are pulling markets in different directions.

The dollar slipped under pressure from a sharp yen rebound tied to suspected intervention, while the euro and pound found footing on shifting rate expectations and oil-driven inflation.

Commodities are holding their ground rather than breaking out. Gold remains anchored above $4,600, silver is trying to stabilize, and oil continues to swing with every update around the Strait of Hormuz and US–Iran exchanges.

The pullback looks more like a pause than a shift for rates. Yields eased slightly but stayed near multi-year highs, with strong US data and energy-linked price pressures keeping the broader direction intact. Central banks are standing still for now, but not without tension building underneath.

Currencies

Dollar Index: The dollar index fell below 98, its lowest since late February, after a sharp drop driven by a strong yen rally linked to suspected Japanese intervention. The move pointed to possible G7 alignment, adding pressure on the dollar. Despite solid US manufacturing data and rising price pressures, Fed officials flagged concerns over overly soft policy expectations.
Euro: The euro moved above $1.17, rebounding as the ECB kept rates unchanged but signaled potential tightening. Lagarde noted the decision was unanimous, though a hike was discussed, while officials, including Nagel and Müller, highlighted rising inflation risks and possible moves as early as June. Markets now price in multiple hikes in 2026, with higher oil prices adding support.
British Pound: The pound climbed near $1.36, its highest since mid-February, after the BoE held rates at 3.75% in an 8–1 vote, with one member backing a hike. Bailey described it as an “active hold,” pointing to uncertainty tied to energy-driven inflation. Rising oil prices supported the currency, alongside attention on the upcoming UK elections.
Japanese Yen: The yen rebounded sharply, rising as much as 3% to around 155.5 per dollar before stabilizing near 157. The move followed a “final warning” from Japanese officials, with markets linking it to intervention despite no formal confirmation. Earlier, the yen had weakened past 160, a level that triggered action in 2024, likely prompting authorities to step in again. It now holds near 157, with markets assessing the chance of further intervention, especially during low liquidity periods.

Commodities

Gold’s Steady Grip on $4,600

Gold closed the week slightly higher above $4,600 per ounce, supported by lower oil prices and a weaker dollar. Crude eased after reports of a revised Iranian peace proposal, while the dollar hovered near a two-month low, partly due to yen strength, lifting bullion demand. Trump’s proposal to escort vessels and signals of ongoing US–Iran exchanges kept cautious optimism in place.

Brent Slips, Supply Risk Stays

Brent held above $111, marking a second straight weekly gain as hopes for a US–Iran deal weakened. Supply risks remained high due to US naval restrictions, Iran’s stance, and tight global conditions, alongside strong US exports. “Project Freedom” and signs of renewed dialogue improved sentiment, though prices remain high. Resistance stands at 113.10, while support is seen at 110.20.

Silver Stabilizes, Strain Remains

Silver edged higher but remains under pressure, holding above $75 per ounce at the start of the week. Gains were supported by a weaker dollar, partly linked to yen moves, and improving sentiment around US–Iran diplomacy. Still, pressure persists. Ongoing conflict keeps energy prices high, reinforcing inflation concerns and expectations of prolonged tight policy.

Fixed Income

US 10-Year Treasury Yield

Yields eased to around 4.35–4.45% by Friday, pulling back from recent highs as oil prices declined and near-term inflation concerns softened. The move followed a correction in crude, though prices remain elevated due to ongoing Middle East tensions.

The broader trend still points higher. Strong US data (rising ISM prices, firm new orders, accelerating core PCE, and a resilient labor market) continues to support a hawkish Fed outlook. Yields remain sensitive to oil moves and incoming macro data.

UK 10-Year Gilt Yield

UK yields held near 5%, close to their highest since 2008, after the BoE kept rates at 3.75% in an 8–1 vote. Bailey described the stance as an “active hold,” pointing to uncertainty around energy-driven inflation.

Yields edged down to 4.95% in the latest session but remain higher on a monthly and yearly basis. Energy prices linked to Hormuz disruptions and political uncertainty before the UK elections continue to shape direction.

Japan 10-Year Government Bond Yield

Japan’s 10-year yield stayed above 2.5%, near its highest since 1997, as oil-driven inflation expectations strengthened. Continued US pressure on Iran reduced hopes for a quick resolution, keeping energy risks in focus.

The BoJ held rates at 0.75%, though support for tightening is growing, with 3 of 9 members backing a hike. Governor Ueda signaled gradual normalization, while yen weakness and recent intervention add pressure. Markets remain closed until May 6.

Economic Data

China Manufacturing PMI (Apr)

China’s manufacturing PMI came in at 50.3, slightly above expectations of 50.1 but just below the previous 50.4. The reading keeps activity in expansion territory, though the pace of growth eased slightly from March.

Eurozone CPI (YoY) (Apr)

Annual inflation in the Eurozone rose to 3.0%, in line with expectations and up from 2.6%. The increase points to a renewed rise in price pressures across the region.

BoE Interest Rate Decision (Apr)

The Bank of England kept its policy rate unchanged at 3.75%, matching expectations. The decision reflects a cautious stance as officials assess inflation trends and broader economic conditions.

ECB Interest Rate Decision (Apr)

The European Central Bank left its key rate at 2.15%, in line with forecasts and unchanged from the previous meeting, indicating a wait-and-see approach.

Fed Interest Rate Decision

The Federal Reserve held its policy rate at 3.75%, as expected. The decision signals a steady approach while assessing incoming economic data and inflation dynamics.

US Consumer Confidence (Apr)

Consumer confidence rose to 92.8, above expectations of 89.0 and slightly higher than the previous 92.2, pointing to continued resilience in household sentiment.

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