Same Ol’ Situation

April 24, 2026

Elias Haddad

The standoff over the Strait of Hormuz still has no clear endgame. Crude oil prices up. USD firm.

Eurozone growth outlook deteriorating. UK retail sales rebound more than expected. GBP outperforms.

Japan March CPI a touch higher. BOJ rate expectations unmoved.

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The US-Iran standoff over the Strait of Hormuz still has no clear endgame. Brent crude oil prices climbed for a fifth day, trading above $107 a barrel, the highest level since April 7 but below the March triple top of around $120 a barrel. Global bond yields keep grinding higher as firmer crude oil prices push up central bank rate expectations. USD is mixed near yesterday’s high.

The energy shock persists, but the worst is likely in the rearview. First, the US extended the ceasefire indefinitely. Second, the US “Open for All or Closed to All” approach to navigation for vessels transiting the Strait of Hormuz is more likely to accelerate a reopening of that crucial waterway because shared economic pain raises the incentives for all parties to reach a workable diplomatic off-ramp.

Bottom line: interest rate differentials between the US and other major economies should continue to keep the DXY (USD index) anchored within its nearly one-year 96.00-100.00 range. The final April print of the University of Michigan consumer sentiment index is due today.

EUROZONE

EUR/USD is trading near support at its 200-day moving average (1.1677). The Eurozone growth outlook is deteriorating as the energy shock is weighing on confidence. The IFO business expectations index fell to a 32-month low at 83.3 in April (consensus: 85.5) vs. 85.9 in March, signaling the Eurozone economy is stalling. Alarmingly, the Eurozone April composite PMI, released yesterday, implied a -0.1% quarterly rate of GDP decline over Q2, and a sharp increase in inflationary pressures.

The ECB’s response to the energy shock is conditional on the size and persistence. Small and temporary shock: look through. Large but temporary shock: measured response. Large and persistent shock: forceful tightening. The swaps curve is pricing in nearly 75bps of hikes to 2.75% in the next 12 months, lifting policy firmly above the ECB’s 1.75-2.25% neutral range estimate. Bottom line: EUR/USD will likely trade within a 1.1600 and 1.1800 range in the near term.

GBP is outperforming most major currencies. UK retail sales recovered more than anticipated in March. Total retail sales volumes rose 0.7% m/m (consensus: 0.0%) vs. -0.6% in February (revised down from -0.4% previously) driven by fuel sales. Total retail sales, excluding automotive fuel, rose 0.2% m/m (consensus: 0.0%) vs. -0.6% in February (revised down from -0.4% previously).

The Bank of England’s (BOE) April DMP business inflation expectation survey was mixed. 1-year inflation expectations surged 0.5pts to 4.0%, the highest since December 2023. Encouragingly, 3-year inflation expectations were unchanged at 2.8%, below the series average of 3.1%.

The UK swaps curve continue to more than fully price-in 50bps of rate hikes over the next twelve months. BOE rate hike bets are still too rich in our view given excess slack in the economy. The BOE estimates a negative output gap of -1% of GDP in 2026. Bottom line: GBP/USD will likely trade within a 1.3400 and 1.3700 range in the near term.

JAPAN

USD/JPY is trading in a tight range just under key resistance at 160.00. Japan March CPI came in slightly hotter than expected but does not shift the dial on Bank of Japan (BOJ) rate hike expectations. Headline CPI rose to 1.5% y/y (consensus: 1.4%) vs. 1.3% in February driven by petroleum-related items. Core CPI ex. fresh food printed at 1.8% y/y (consensus: 1.7%) vs. 1.6% in February, while core CPI ex. fresh food & energy CPI matched consensus at 2.4% y/y vs. 2.5% in February.

The Bank of Japan’s (BOJ) set of underlying CPI indicators for March will be released just ahead of Tuesday’s policy rate decision. The swaps curve price in near certainty that the BOJ holds rates steady at 0.75% next week. In our view, the market is underpricing the risk of a rate hike given Japan’s positive output gap (0.45% in Q3 2025) and solid results from the latest spring wage talks.

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