A moment later a thread appeared about a 14‑point, supposedly one‑sided preliminary peace plan that Americans want to "impose" on Iranians and do so relatively quickly.
Best to do it in a week – otherwise attacks on Iran will resume. Iranians were supposed to reply on Thursday – nothing came up. Instead we got leaks that peace is impossible without reparations, the uranium return issue cannot be negotiated at the moment, and Iran intends to continue controlling the Strait of Hormuz – "peacefully", but for a fee. On Thursday a special agency was to be established to handle customs for carriers. Overnight from Thursday to Friday there was a fire exchange on both sides – allegedly Iranians were to fire at US destroyers trying to pass through the Strait, which was met with a US attack on Iranian ports.
In the background the United Arab Emirates are shelling. Iran denies it
In the background we have shelling from the United Arab Emirates. Iran denies it, so who is shooting? Chaos is growing, but interestingly Donald Trump still maintains that the ceasefire has not been broken – Iran claims otherwise. According to the US president, the events of the night are a "lovely touch" and he still believes negotiations with Iran can continue.
Although it’s best to act quickly, otherwise he could escalade the situation. According to Pakistani sources, Iranian authorities are to respond today to the US 14‑point proposal and decide on negotiations that could theoretically start next week in Islamabad. Israel approaches all of this quite critically, insisting on a return to forceful solutions. Nevertheless, it’s clear that Americans do not want or cannot do this.
Is Trump now waiting for a move by Xi Jinping that could convince Iranians to make some concessions?
The US‑China summit is next week (May 14‑15). If so, the price could be high – beyond "economic concessions" from the USA, China could seek to cement its influence in the Persian Gulf by becoming the so‑called custodian of Iranian uranium. This narrative explains why markets are relatively calm in response to today’s reports from the Persian Gulf.
Although Asian stock indices performed worse, we saw strong gains this week, cryptocurrencies fell yesterday but the decline slowed (reports suggest the legislative process around the Clarity Act could be accelerated in the coming days). The rest of the market looks good.
Wall Street contracts are rising, oil is cheaper, the dollar is slightly retreating. What could overturn this picture? Israel’s decision to launch a solo attack on Iran (without the USA), which Tehran could interpret as a signal of a return to regular war in the region (attacking US forces that would be forced to respond).
How possible is it? Israel has been increasingly vocal about its critical views on the last "soft" approach by Americans and may be concerned that Trump will somehow negotiate with Xi on Iran. Such an attack on Iran (this weekend) would also give the US administration legitimacy in Congress for clear military actions in the USA (if Iran attacked US forces), and there could be a problem with the current stance (opposition to Trump’s actions in Iran is also emerging among Republicans).
Markets seem to pay less attention to geopolitics, which is becoming chaotic and less predictable, and in some way "design" their own reality.
Key factors include, for example, the performance of tech companies whose shares are clearly rising on the wave of the advancing AI revolution (and in a sense rightly so), or the observation of central bank actions, which are currently watching the situation, but inside those circles nervousness likely reaches a peak – with the word nervousness becoming synonymous with uncertainty.
Yesterday the Norwegians decided on a rate hike (but thanks to expensive oil their economy will not suffer too much and they can afford it), and the head of the German Bundesbank mentioned the need for such a move in the euro zone already in June. Unexpectedly, on a rate cut (though with a clear split – even a so‑called close call) the Mexican Banxico decided, but it did not hurt the peso’s performance.
The US dollar today loses against most currencies, and the strongest remain the Scandinavian crowns. The pound’s good performance is a surprise, although the Labour Party suffered a huge defeat in yesterday’s local elections and voices are emerging about the need for a serious reconstruction of Prime Minister Starmer’s government.
Today’s calendar will mainly focus on US labour market data (14:30), but also Canada (at the same time). Later – 16:00 – we will learn the consumer sentiment index.
EURUSD – does the dollar underestimate risk?
Markets seem not to react excessively to night events in the Strait of Hormuz. The dollar loses because markets seem to believe in de‑escalation – much will depend on whether and how Iran responds to the US proposal for negotiations on a peace agreement. Theoretically talks should start in a few days if the USA expects an agreement within a week.
If Iran does not respond in the next hours, the visible weakening of the dollar should be curbed. Key will also be Israel’s moves this weekend towards Iran, and how much China will engage in the peace process in the Middle East.
For now markets stubbornly want to see de‑escalation, considering the recent "skirmishes" between the US and Iran in the Gulf as noise that will not change the adopted direction.
Technically key resistances are around 1.18 and further 1.1850. Supports are around 1.1720 and further 1.1665‑75.
Daily EURUSD chart
