Official White House Photo by Joyce N. Boghosian.
Donald Trump pulls back again and abandons plans to escort shipping through the Strait of Hormuz.
The dollar is softer across the spectrum following reports Wednesday the U.S. and Iran are close to agreeing a one-page memorandum of understanding that will end the war and set a framework for more detailed nuclear negotiations.
The U.S. expects Iranian responses on several key points in the next 48 hours.
Nothing has been agreed yet, "but the sources said this was the closest the parties had been to an agreement since the war began," says Axios.
U.S. President Donald Trump earlier announced the end to "Project Freedom", the military operation to guide ships safely through the Strait of Hormuz.
The move was requested by Iranian negotiators in order for them to come back to the negotiating table and secure a lasting framework that would hopefully see the Strait fully reopened to maritime traffic.
In a social media post, Turmp confirmed "Great Progress" towards "a Complete and Final Agreement with Representatives of Iran," was underway.
The playbook is familiar: the President ups the pressure and markets get nervous, but before long, he eases the pressure to avoid any meaningful selloff.
“Words from President Trump around an agreement with Iran were viewed with some optimism," says Lindsay James, investment strategist at Quilter. "Equity investors continue to look through near-term risks and focus on the positives; a strong earnings season that has lifted expectations for profit growth this year in most regions and signs that the all-important US economy continues to deliver."
Brent crude oil prices drop in midweek trade, stocks rise and the dollar retreats.
The dollar is a safe-haven currency that would typically fall when sentiment improves, but perhaps more relevant is that lower oil prices ease inflationary pressures and raise expectations that the Federal Reserve will lower interest rates again later this year.
With the Bank of England likely to raise rates, interest rate divergence naturally helps pound-dollar higher.
The exchange rate rises to 1.36 in midweek trade, which is the upper band of the April-May range. It's been unable to hold a daily close above here since February, illustrating the opportunity and inertia the level presents dollar buyers.
A break through 1.36 would represent a new phase of the post-Iran war recovery and a run towards 1.37 becomes likely in the short term ahead of a retest of 2026 highs at 1.3850.