- Expectations of peace in the Middle East are causing a sell-off in the US dollar.
- Gold is the main beneficiary of the resolution of the conflict.
And the last will be the first. The bulls have launched a counterattack following Donald Trump's announcement that the conflict in the Middle East would be resolved in two to three weeks. The US president called on the Gulf States to recover their oil by forcibly opening the Strait of Hormuz.
The White House's willingness to withdraw from the region fits well with the TACO (Trump always changes his mind) strategy that investors have adopted since April 2025, when initial strict tariffs were followed by reductions and delays, causing a rally in stock indices and weakening the dollar.
History repeats itself, so a rally of over 1.3% in EURUSD seems logical as investors bet on a decline and improving global risk appetite. In this scenario, the global economy will suffer less than if the conflict were prolonged, and signs of a slowdown in US GDP should soften the Federal Reserve's stance in the coming months.
The outlook for Europe is also changing. In March, the eurozone CPI jumped from 1.9% to 2.5% due to higher food and energy prices, but hopes have risen in the past day that the acceleration in consumer prices may be temporary. Without a tightening of monetary policy, the monetary bloc's economy will manage to avoid a recession and begin to gradually recover, while the fall in oil and gas prices will improve expectations for the trade balance. This is good news for the euro.
The decline in the dollar and US Treasury yields allowed the bears to mount a counterattack. The Japanese Ministry of Finance was ready to act on all fronts, including the currency and commodity markets. The verbal interventions have cooled speculators who had built up net short positions in the yen to a two-month high.
could be the main beneficiary of the imminent end of the armed conflict in the Middle East. The precious metal is on the verge of surpassing $4,700 an ounce amid a speculative reaction to Donald Trump's comments. Previously, both central banks actively sold it to ensure the liquidity needed to support their economies and investors to meet margin requirements on stocks and bonds.
However, investors and traders should remain cautious as the US administration has on more than one occasion played the role of “good cop” in falling markets and “bad cop” when markets are closed.
He FxPro Analyst team
