Credit Agricole FX Overview: Investors Remain Risk-Seeking While Waiting for a US-Iran Deal - FJElite

The Risk Index remains deep in risk-seeking territory despite a modest increase over the past week. Investors entered the weekend concerned about renewed US-Iran escalation, but Trump called off large-scale attacks and, alongside Treasury Secretary Scott Bessent, returned to talking up the possibility of a deal to reopen the Strait of Hormuz. Bessent said an agreement could come within days, while Trump said talks were progressing but continued to threaten military action if Iran does not agree. Middle East developments are therefore likely to remain the main near-term driver of sentiment.

Mixed US technology earnings have not materially damaged risk appetite, while lower equity volatility, softer US data, lower oil prices and falling Treasury yields have provided support. The largest source of increased risk has been higher FX volatility following joint US-Japan intervention to support the yen, alongside wider emerging-market sovereign spreads and higher gold prices. Investors will now focus on US ISM services and payrolls data for further evidence that growth is slowing.