Global financial markets responded positively on Monday to news that the United States and Iran have reached a framework agreement to end the war and reopen the Strait of Hormuz, with the deal expected to be signed on Friday in Switzerland according to US President Donald Trump and Iranian officials [3][4][5]. The announcement triggered a broad risk rally, with S&P 500 futures rising by nearly 1.3% in European trading and US stock index futures up between 1% and 2% [3][4]. Oil prices dropped sharply, with West Texas Intermediate (WTI) crude falling to its lowest level in three months, providing relief to oil-importing economies and contributing to the US Dollar's weakness [2][3][4][5].
Currency markets reflected these developments, as the US Dollar depreciated against major peers, notably losing about 0.3% on the day and opening with a bearish gap near 99.50 on the USD Index [4]. The Swiss Franc (CHF) and Euro (EUR) were among the strongest performers, with CHF gaining 0.46% against the USD and EUR rising 0.35% versus the USD [1][2][3][4]. The British Pound (GBP) also advanced, hitting a 10-day high at 1.3460, supported by the weaker US Dollar and improved risk sentiment, though it remained within its recent trading range [5].
The Euro outperformed its major peers, gaining 0.26% against the Japanese Yen (JPY) to trade near 185.85, and also strengthening against the GBP and CHF [2][3]. The EUR/GBP pair approached one-week highs around 0.8645, with technical indicators suggesting a modest recovery bias but not yet signaling aggressive upside momentum [2]. The USD/CHF pair slipped below 0.7950, depreciating nearly 0.5% to trade around 0.7930, as the CHF was the strongest major currency on the day [1].
The peace deal's impact on oil prices is expected to ease inflationary pressures in the Eurozone, but European Central Bank (ECB) officials, including Martins Kazaks and Joachim Nagel, warned that inflation risks remain elevated and further monetary tightening may be necessary [2][3]. The ECB recently raised key interest rates by 25 basis points, and officials indicated that it will take months for oil supply to normalize, suggesting persistent inflation concerns [3].
Looking ahead, market participants are focused on upcoming central bank decisions. The US Federal Reserve is widely expected to keep its benchmark interest rate unchanged on Wednesday, with attention on its economic projections and the new chairman's press conference [5]. The Bank of England is also anticipated to hold rates steady on Thursday, with the vote split and meeting minutes likely to influence the Pound's near-term direction [2][5].
CONCLUSION
Markets have rallied on optimism surrounding the US-Iran peace deal, which has driven down oil prices and weakened the US Dollar while boosting risk assets and major currencies like the Euro, Swiss Franc, and British Pound. Despite the positive sentiment, central banks remain cautious due to ongoing inflation risks, and upcoming policy decisions from the Fed and Bank of England are expected to shape market direction in the near term.