The ongoing uncertainty surrounding a potential deal between the United States and Iran has exerted significant influence on both the silver market and the Japanese Yen, according to multiple sources. Silver (XAG/USD) faced selling pressure near $76.00 during the European trading session, trading lower at around $75.90, as investors reacted to the lack of clarity on whether a US-Iran agreement would be reached. Tehran has reportedly finalized the last draft of the peace proposal, but its insistence on preserving uranium stockpiles and maintaining control over the Strait of Hormuz has kept hopes for a deal announcement subdued [1][2].
Elevated oil prices, stemming from the closure of the Strait of Hormuz, have contributed to higher US inflation, prompting traders to price out the possibility of Federal Reserve interest rate cuts this year. According to the CME FedWatch tool, the odds of the Fed holding rates steady or delivering at least one hike are 50.8% and 48.1%, respectively [1]. The US Consumer Price Index (CPI) for April increased to 3.8% year-on-year, the highest in nearly three years, reinforcing expectations that the Fed will not cut rates in 2026 [2]. This environment has diminished the appeal of non-yielding assets like silver, which remains below its 20-day EMA at $77.79 and could slide to $70 if it fails to hold the May 19 low of $73.09 [1].
The USD/JPY pair traded slightly higher near 159.10, with the US Dollar Index up 0.1% to 99.30. The pair has been range-bound between 158.65 and 159.35 for three days, supported by a 20-day EMA at 158.44 and a 14-day RSI at 56, indicating moderate bullish momentum [2]. In Japan, April's National CPI ex Fresh Food came in at 1.4% year-on-year, below the consensus of 1.7% and the previous reading of 1.8% [2]. Despite this mildly softer inflation, the Yen remains weak, pressured by rising global interest rates, Japan’s high debt burden, and elevated energy prices linked to the Iran conflict [3].
Commerzbank’s Volkmar Baur notes that the downward surprise in Japan’s inflation was due to a one-off effect related to school fees, with little impact on underlying inflation. The Yen’s weakness is attributed to global rate hikes and fiscal concerns, as the government discusses a supplementary budget shortly after approving the annual budget [3]. Baur suggests that a resolution to the Iran conflict, lower oil prices, and a Bank of Japan rate hike expected in mid-June could provide relief for the Yen. However, as long as the conflict persists, high energy prices will continue to weigh on the Japanese economy and currency, as reflected in recent Purchasing Managers’ Index estimates [3].
According to [1], silver could rebound if it breaks above the 20-day EMA, while [2] indicates USD/JPY may retest the April 30 high of 160.73 if it breaks out of its current range. Analyst opinions from [3] highlight the importance of resolving the Iran conflict and potential BoJ policy changes for future market direction.
CONCLUSION
Uncertainty over the US-Iran deal and elevated energy prices have led to downside pressure on silver and continued weakness in the Japanese Yen. Market participants are closely watching geopolitical developments and central bank policy signals, with relief for the Yen and silver potentially hinging on a resolution to the Iran conflict and upcoming monetary policy decisions. The current environment suggests high market impact and persistent volatility for both assets.