A few hours before President Trump set a deadline for a peace deal with Iran, Iran said that safe Hormuz passage is possible. The ceasefire will last for two weeks.
Gold (GLD) jumped in response to the news. When tensions worsened between the two countries, the U.S. dollar (UUP) strengthened. Expect the currency to pull back as gold rises. China quietly extended its streak of buying gold to 17 straight months. The country is likely fortifying its gold to diversify its foreign exchange reserve. Its increased gold holding helps back the Yuan.
Middle East and Asian countries might prefer to trade using the yuan instead of the U.S. dollar.
Oil (OIH) immediately plunged after the ceasefire agreement news. WTI crude fell by 14% to trade below $97/bbl. Experts predicted that oil would have traded at over $200/bbl if the U.S./Iran tensions worsened.
The bond market responded positively to the news. Treasuries rose on hopes that the Fed might cut interest rates. A rate cut is unlikely, since the FedWatch tool indicated last week that the Fed might consider increasing rates by 25 bps.
The U.S. reported strong job growth in March while inflation remained high. After tariffs and higher oil prices add to March’s inflation, markets should expect rates to stay the same.
Your Takeaway
The falling oil prices help the economy. Banks like JPMorgan Chase (JPM) and Wells Fargo (WFC) will join today’s stock market rally.
