Daily Market Update
April 01, 2026EUR/USD ranged from the high 1.15’s to low 1.16’s overnight. The Fed delivered exactly what was expected, keeping rates unchanged at 3.50% to 3.75%. But if you look past the headline, the tone still leans slightly hawkish.
The broader backdrop has not really shifted: growth is holding up, the labour market remains relatively firm, and inflation is still described as somewhat elevated, all against a backdrop of heightened geopolitical uncertainty.
The real signal came from the projections, as inflation for 2026 was revised higher, and the longer run rate ticked up as well, pointing to more persistent price pressures.
The rate path still suggests gradual easing, but the internal split is telling; some officials see no cuts in 2026, and one even sees rates moving higher into 2027.
The message is fairly straightforward: the Fed is comfortable where it is, and there is no urgency to ease.
Powell reinforced that view in his press conference: the economy continues to expand on solid consumption and productivity, while the labour market is only cooling gradually.
At the same time, progress on inflation appears to have stalled somewhat, with energy and tariffs adding noise to the outlook.
Policy is seen as close to neutral or slightly restrictive, as there is no appetite to tighten further, but equally no rush to cut. For now, it is a classic wait-and-see, data-dependent Fed.
Positioning in the Euro (EUR) has shifted quite meaningfully in recent weeks.
What stands out is the nature of the move after open interest declined, suggesting positions are being closed rather than flipped into shorts. This is not a bearish turn, it is more a story of fading conviction.
As a result, the market now sits in a much more neutral positioning environment. That reduces the risk of a crowded long squeeze, but it also removes an important layer of support for the Euro.
Reports suggest that diplomatic efforts are underway to introduce a one-month ceasefire mechanism to allow the US and Iran to negotiate on a plan to end the war.
This follows US President Donald Trump’s decision to delay planned strikes on Iran’s energy infrastructure by five days, fueling hopes for a de-escalation of tensions in the Middle East.
The hopes of the Mideast war ceasefire have improved as Iranian President Masoud Pezeshkian told European Union (EU) Council President António Costa on Tuesday that his country is ready to end the war with the US.
However, he clarified that Tehran will end conflicts only if the United States (US) guarantees no repetitive aggression.
Meanwhile, a further correction in the US Dollar (USD) due to diminished demand for safe-haven assets in the wake of ceasefire hopes has also weighed on the USD/JPY pair.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% lower to near 99.50.
On the macro front, investors await the US ADP Employment Change and the ISM Manufacturing PMI data for March, which will be published during the North American session.
Source FX Street
