FX Daily: Global FX comes back from the brink in Daily Currencies Ratings 08/04/2026 USD: A welcome retreat Risk assets are rallying as combatants in Iran pull back from the brink. The most impactful news overnight has been Iran’s announcement that it will allow safe passage for traffic through the Strait of Hormuz during this ceasefire. Expect now a close monitoring of traffic flow through the Strait, where a significant pick-up in volume would weigh further on oil prices and reverse the stagflationary investment trends witnessed in markets over the last month. These trends had been dominated by the dramatic bearish flattening of yield curves, equity weakness and a stronger dollar. Don’t expect a complete reversal of March trends, however. A good example overnight is the Reserve Bank of New Zealand considering a pre-emptive rate hike in the face of an energy-driven spike in headline inflation. Here, the previously dovish RBNZ revised up its 2Q26 CPI forecast to 4.2% from 2.8%, stating that the outlook had ‘materially altered’ and signalling ‘decisive and timely’ increases in its policy rate should second-round inflation effects emerge. We suspect this tough talk will be a template for many central banks through the second quarter – perhaps one of the reasons why the short-end of the yield curve does not entirely retrace the March sell-off. In FX, March saw many currencies fall between 2-5% against the dollar. The New Zealand dollar has already retraced around 40% of its losses, and a 50% retracement looks a sensible and preliminary target for most currencies. That means high-beta commodity and emerging market currencies could witness a 2% recovery on the day (from recent lows), while the low-beta currencies could gain 0.5-1.0%. The US data calendar is relatively light today, with only the FOMC minutes released tonight. On the subject of the Federal Reserve, Philip Jefferson was the latest member to say that monetary policy is ‘well-positioned’ for the current environment. Markets have now started to price back in Fed rate cuts towards the end of this year (-14bp priced for December), although pricing could prove quite sticky around unchanged rates. DXY rallied just over 3% through March. It has gapped lower today, and a further sell-off to 98.50 looks possible. However, there remains too much uncertainty to expect a full unwind of the March rally, and it is therefore premature to call for a break under 98.00. Chris Turner CEE: Currencies are running back to pre-conflict levels Yesterday’s March inflation in the Czech Republic showed a lower-than-expected figure of 1.9%, similar to Poland, but the details show an unpleasant increase in prices. Service prices accelerated again to 4.7%, back to January levels, and in our estimates, core inflation likely increased from 2.7% to 2.8% year-on-year. The Czech National Bank still has enough room to wait for further developments, but yesterday’s figure was not the best news for the central bank. Today, Hungary will publish its March inflation data. Here, we expect an increase from 1.4% to 2.2% YoY. Despite the government acting quickly to cap fuel prices, the impact will still be significant. The increase in the minimum wage will probably continue to put pressure on service prices, and the significant weakening of the forint will also push up imported inflation. Markets, however, remain unimpressed by the data in the CEE region, and everything continues to be driven by geopolitical headlines. He