FX Daily: Powell’s last act might carry a hawkish tint in Daily Currencies Ratings 29/04/2026 USD: Some hawkish risks from Powell’s last FOMC The dollar has recovered some ground over the past 24 hours. While growing nervousness about the lack of progress on a US-Iran deal clearly played a role, it looks to us that it was mostly some jitters in US equities due to AI concerns that allowed the USD to rebound. As discussed yesterday, in many USD pairs, global equities are currently having the highest beta in our short-term models. Ultimately, that USD recovery proved rather short-lived, and we suspect month-end flows played a role. Today, we’ll be waiting for any follow-up from Tehran after President Trump claimed that Iran is in a “state of collapse” and wants to reopen the Strait of Hormuz as soon as possible. At the same time, the Wall Street Journal reported that Trump has instructed officials to prepare for an extended blockade of the Strait. Another big event yesterday was the announcement that the UAE is leaving OPEC and OPEC+. Here is our commodities team’s comment on this topic. Domestically, the big event is the Federal Reserve’s rate announcement at 19 BST/20 CET. Here is our preview. Higher fuel and airline prices are pushing CPI back toward 4%, but the Fed has so far indicated it views this as a transitory supply shock rather than a demand-driven inflation spiral. Unlike the pandemic, supply disruptions are narrower and household real incomes are already under pressure, reducing the second-round effect risk. There is a good chance the Fed will signal it’s still too early to conclude the inflation-growth trade-off and related monetary policy implications. However, the latest signs from the Middle East are not encouraging. While Powell’s signals may be taken with some caution, given that this should be his last press conference, the risks are that he errs on the hawkish side. The positive dollar reaction in a hawkish surprise could be exacerbated by a hit to US equities, which will incidentally face a key test today with earnings releases from Alphabet, Microsoft, Amazon and Meta. Francesco Pesole EUR: Some CPI prints today Markets remain inclined to buy the dips in EUR/USD below 1.170, which has emerged as the key benchmark level for sentiment on the Gulf among FX investors. Today, if we see a combination of a hawkish Fed, poor risk sentiment and lack of progress towards the reopening of Hormuz, a decisive break lower should be on the cards. Tomorrow’s ECB meeting should, in our view, largely meet market expectations (see our cheat sheet here) and the euro should default to being driven by risk sentiment and oil quite quickly. On the data side, some flash CPI prints are due today. Spain is expected to see another tick higher to 3.5% in headline inflation but core unchanged at 2.9%. Germany’s headline rate should top 2.9%. Given pricing is already hawkish, the bar is rather high for these figures to trigger further underperformance in the front-end EUR curve. Francesco Pesole AUD: CPI jump endorses another hike The Australian dollar is underperforming this morning after March inflation came in slightly below consensus. Headline CPI jumped to 4.6% vs the expected 4.8% in March, but resulted in a consensus 1.4% QoQ print for 1Q. The trimmed mean was 0.8% QoQ, a touch below the consensus 0.9%. In our view, the pullback in AUD looks mostly a function of stretched positioning rather than a real rethink of RBA expectations. Markets ar