The Ceasefire trade is on, but clouds remain – North American Session Market Wrap for April 8

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The US-Iran ceasefire is officially on the table, and Market bulls have returned with fierce conviction, but despite all the progress from the past 24 hours, the path is going to be quite rocky.

Wall Street exploded in a massive relief rally since yesterday's late session, completely reversing the recent geopolitical panic that had gripped risk assets.

Global equities aggressively erased close to 50% of their war-induced drawdowns in a single session, with the Nasdaq surging about 2.70% to lead the charge.

This sudden de-escalation also triggered the abrupt unwinding of the dominant petrodollar trade. As Crude Oil tumbled , the US Dollar was hammered across the board, especially more pressured by its recent double top as the safe-haven and inflation-hedge premiums evaporated simultaneously.

And when the Dollar tumbles, animal spirits come out – Virtually all global assets close in the green today.

Energy markets however took the most violent hit, with WTI crude initially plummeting 20% toward the $92 handle.

However, the commodity is already creeping higher as traders scour the headlines for clarity on the actual terms of this temporary two-week truce (which is for now still quite foggy).

The ink on this fragile ceasefire is barely dry, and severe cracks are already showing.

Despite persistent optimism from the US President, the Iranian side has maintained a sour tone as some of their demands apparently have been violated (demands which haven't been made available to the public).

Adding a massive layer of uncertainty to the newly minted bullish sentiment, Iran is expressing their mistrusts due to an intruding drone in Iranian airspace and disputes over nuclear enrichment rights. He warned that negotiating under these conditions is inherently unreasonable.

While the broader market is currently riding the high of a fading war premium, this immediate diplomatic friction suggests the ceasefire is resting on incredibly thin ice, so traders will have to remain cautious for times ahead!

Read More:

• The Petrodollar trade is over, Dollar tumbles – EUR/USD, AUD/USD & Dollar Index (DXY) overview
• Bulls are back in vengeance after the US-Iran Ceasefire – Dow Jones and US Stock Market Outlook
• Wall Street in ecstasy! It's almost like nothing happened – North American Mid-Week Market Update
• Ceasefire Crash: Oil tumbles 15% as US-Iran deal unwinds global 'fear trade'

Despite the fragile truce, Stock Market bulls haven't shown the slightest concern, going on an absolute wreckage to pick up the sectors which have struggled the most, including Producer Manufacturing and Tech – Retail Sales is also a strong performer.

On the other side of the performance space however, Energy Stocks and Communications took large hits, seeing relative disinterest due to the fact that both sectors held so well throughout the entire conflict.

Today marks the return of animal spirits across all Markets, with the highest beta (riskiest) assets shining bright (including Ethereum and European Stocks), at the cost of the US Dollar and WTI Oil.

When Inflation fears ease, this is a typical picture – Keep a close eye on the negotiations on the US and Iran side as it could quickly rock recent optimism.

If the deal persists and progresses, expect these flows to continue.

The US and Canadian Dollars, the two largest winners of Middle East and Crude Oil turmoil are now giving back their hard earned premium, which is profiting particularly to Antipodeans (heavily affected by Oil droughts), and following by other Risk-on currencies such as the Euro and GBP.

The Swissie and Japanese Yen are some laggards, as the risk-on mood did not corroborate with their outperformance.

The next 24 hours should be somewhat calmer, with eyes turning back to the macro board.

The overnight session will see a few releases for Germany, but all eyes will be on tomorrow's Core PCE release as it should now reflect the first damages of the war-led inflation hits.

With the truce still fragile, keep a close eye on the negotiations and US-Iran communications.

Safe Trades and a Successful Week!

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