Suspicious Minds

April 09, 2026

Elias Haddad

Ceasefire market bounce gives way to compliance doubts.

Peak shipping security fear supports the favorable turn in risk sentiment.

February PCE won’t shift the dial on Fed rate expectations.

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Markets gave back some of yesterday’s ceasefire bounce as doubts emerged over compliance with the US-Iran agreement. Iranian Parliament Speaker Mohammad-Bagher Ghalibaf said that three clauses of the ceasefire proposal have been clearly violated even before the negotiations began.

Brent crude oil prices are up 8% after dropping to near a one month low at $90.40 a barrel yesterday. The equity and bond market rally stalled, while the DXY (USD index) rebounded following a test of its 200-day moving average yesterday.

Regardless, for financial markets, the key issue is whether peak shipping security fear is now behind us. President Donald Trump’s openness to Iran’s 10-point proposal, including recognition of its sovereignty over the crucial Strait of Hormuz, as “a workable basis on which to negotiate” suggests the worst of the shipping risk panic may be in the rear-view mirror. Markets likely sniffed this out on March 30, when risk sentiment appeared to bottom, with the April 8 ceasefire rally likely confirming the turn. Coincidently, April 8 also marks the date of last year’s peak in tariff risk aversion.

Bottom line: interest rate differentials between the US and other major economies still anchors the DXY index within a 96.00-100.00 range. Structurally, we maintain our long-held bearish USD view because of fading confidence in US trade and security policy, worsening US fiscal credibility, and the ongoing politicization of the Fed.

Today, the February PCE will capture the pre-shock US inflation and consumer spending backdrop (1:30pm London, 8:30am New York). As such, the data is unlikely to shift the dial on Fed funds rate expectations, which currently implies nearly even odds of a 25bps cut over the next twelve months.

Headline PCE is seen at 2.8% y/y for a second straight month, core PCE is expected to dip 0.1pts to 3.0% y/y, and real personal spending is forecast to rise by 0.2% m/m vs. 0.1% in January. For reference, at its March 17-18 meeting, the FOMC’s median 2026 projection for both headline and core PCE stood at 2.7%.

The FOMC March 17-18 meeting minutes underscored the two-sided policy risks from a protracted conflict in the Middle East. “Most” participants raised the concern that a lengthy war could warrant additional rate cuts to support the labor market, while “many” would favor rate increases to help bring inflation down to the 2% target. Provided the energy shock continues to fade, we expect the Fed to deliver one 25bps cut by year-end, in line with the FOMC’s projection.

POLAND

National Bank of Poland (NBP) policy decision is today. NBP is widely expected to keep the policy rate unchanged at 3.75% after cutting rates by 25bps at the last March 4 meeting. Watch out to see if Governor Adam Glapinski leans into or against rate hike expectations. The swaps curve price-in 50bps of hikes in the next twelve months.

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