Forex week in review 19/2026: peace-deal hopes beat a strong payrolls report

For the second week in a row, the dollar slipped, and this time it did so despite a US jobs report that beat forecasts comfortably. The reason was the same one that has driven currencies since the war began on 28 February: oil and the prospect of peace in the Gulf. On Wednesday, reports that the US and Iran were close to a short memorandum to end the war sent Brent down by more than 9% and took the dollar to its lows of the week. By Friday's close the Dollar Index was at 97.90, down 0.26%, according to RTTNews. EUR/USD rose 0.55% to 1.1786.

Underneath that net move was a lot of noise: a US naval escort operation that started and paused within two days, an exchange of fire in the Strait of Hormuz, an Australian rate hike and another sudden jump in the yen.

Where we were coming into the week

Last week four central banks held rates with a hawkish lean, Brent touched a four-year high of $126 on Thursday 30 April, and Japan was reported to have bought yen after USD/JPY reached 160.7. The pair closed the week at 157.06, the Dollar Index at 98.16 and EUR/USD at 1.1721. The US blockade of Iranian ports was still in force and the ceasefire had no expiry date, but there were no talks under way.

The week day by day

Monday 4 May: Project Freedom begins

On Sunday 3 May, President Trump announced Project Freedom, a US operation to escort stranded neutral ships out of the Strait of Hormuz. It launched on Monday. The day was violent: an oil tanker was hit by projectiles, Iran said it fired at a UAE tanker, the US said it sank seven small Iranian boats and denied that any missile had hit a US warship, and a South Korean-owned vessel was damaged by an explosion off the UAE. Two American-flagged merchant ships did make the transit under escort.

UK markets were closed for the bank holiday and Japan was still in Golden Week. Japan's finance minister, Satsuki Katayama, warned against speculative moves in the currency market. GBP/USD made its low for the week at 1.3511.

Tuesday 5 May: a pause and an RBA hike

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.35%. The vote was 8–1, compared with a 5–4 split at the March hike, and the board cited the risk that higher fuel costs would spread into broader prices, with risks "tilted to the upside". It was the RBA's third hike of 2026.

Later on Tuesday, President Trump announced a temporary pause in Project Freedom by "mutual agreement", citing progress in talks with Iran. Oil fell about 4% on the day. The dollar had its strongest moment of the week: the Dollar Index touched 98.58, EUR/USD dipped to 1.1676 and AUD/USD to 0.7135.

Wednesday 6 May: the memorandum headlines

Wednesday was the decisive day. Axios reported that the US and Iran were close to a one-page memorandum of understanding that would end the war and set a framework for more detailed nuclear talks. President Trump wrote that if Iran honoured the agreement the war would end and the Strait of Hormuz would open to all, while calling Iran's compliance "perhaps, a big assumption" and warning that if Iran did not agree, the bombing would resume at a higher intensity.

Oil fell hard. Brent was down $10.07, or 9.2%, at $99.80 by 10:42 GMT, below $100 for the first time since 22 April, and WTI was down 10.6% at $91.48, according to Reuters reporting carried by Pakistan Today. Both benchmarks had already lost about 4% the previous day.

The yen also had a dramatic morning. In holiday-thinned Asian trade, on the final day of Japan's long weekend, it jumped from around 157.8 to 155 per dollar within half an hour, according to Reuters reporting in The Star. It was at least the fourth sudden, unexplained jump in the yen in five sessions. The pair was back at about 156.4 shortly afterwards, which Reuters described as the market resisting any intervention. RTTNews put Wednesday's USD/JPY range at 157.95 to 155.04.

The dollar made its lows across the board. The Dollar Index touched 97.63, EUR/USD reached 1.1797, GBP/USD 1.3645 and AUD/USD 0.7279.

Thursday 7 May: an exchange of fire and local elections

Three US destroyers transited the strait on Thursday and came under missile, drone and small-boat attack, and US strikes hit Iranian sites at Bandar Abbas and Qeshm. The UAE said it intercepted two ballistic missiles and three drones. President Trump called the US strikes a "love tap" and insisted the ceasefire remained in effect, and US Central Command said it did not seek escalation.

In the UK, local elections were held on Thursday. Japan's top currency diplomat, Atsushi Mimura, said there was no need to comment on the suspected intervention during the holidays, adding that there are no rules limiting the number of interventions, according to Jiji Press reporting carried by Adnkronos.

Friday 8 May: payrolls beat, dollar unmoved

The US Bureau of Labor Statistics reported that non-farm payrolls rose 115,000 in April, well above the roughly 62,000 the market had expected, according to RTTNews (FactSet's median was 65,000). The unemployment rate was unchanged at 4.3%. Average hourly earnings rose 0.2% on the month and 3.6% on the year. February's figure was revised down to a fall of 156,000 and March's up to a gain of 185,000, so the two months combined were 16,000 lower than previously reported.

RTTNews reported that the data tempered expectations of a Fed rate hike, and that markets expected the Fed to keep rates unchanged for the rest of the year. The dollar finished the week lower. Gold rose 2.1% on the week, according to Reuters reporting carried by Dawn, which quoted a trader saying gold was "trading like a risk asset rather than a safe haven".

Pair by pair

EUR/USD: +0.55%

From 1.1721 to 1.1786, with a range of 1.1676 to 1.1797. The euro has been the clearest beneficiary of every step towards peace, because cheaper oil eases the euro area's import bill and its inflation problem at the same time. Wednesday's oil drop was the biggest single driver of the week. If you are newer to how pairs are quoted and why the euro is always the base currency in EUR/USD, see reading a forex quote.

GBP/USD: +0.43%

From 1.3576 to 1.3634, with a range of 1.3511 to 1.3645. Sterling followed the dollar story. The UK held local elections on Thursday; the market's reaction to the results is a story for next week.

AUD/USD: +0.57%

From 0.7206 to 0.7247, with a high of 0.7279. A rate hike plus improving global risk appetite is about as supportive a combination as the Aussie gets. Note, though, that the pair gave back more than 30 pips from its Wednesday high by Friday's close, a reminder that "rate hike" and "currency rises" are not the same thing once the hike is expected.

USD/JPY: −0.25%

From 157.06 to 156.67. Wednesday's range of nearly three yen, from 157.95 to 155.04, dwarfed the net weekly change. Japan's authorities had shown on 30 April that they would act near 160, and the market spent this week testing their resolve at lower levels. The gap between US and Japanese interest rates, which supports the pair, did not change.

Gold: +2.1%

Spot gold was at $4,709.89 at 15:51 GMT on Friday, up 0.5% on the day and 2.1% on the week, according to Dawn's Reuters report. Falling oil reduced inflation worries and expectations of higher interest rates, which helps a non-yielding asset.

Why a strong jobs report did not lift the dollar

This is the puzzle of the week, and it is a good one for understanding how markets read data.

On the face of it, 115,000 jobs against a forecast of about 62,000 is a big beat. Normally that would push up expected interest rates and the dollar. Three things got in the way.

First, the bar was low. A forecast of around 62,000 is weak by historical standards, and the revisions knocked 16,000 off the previous two months. The three-month picture was still soft.

Second, wages were tame. Average hourly earnings rose only 0.2% on the month. Central banks worry about wage growth because it feeds into services inflation. A strong headline with soft pay is less inflationary than it looks, which fits RTTNews's report that the data tempered expectations of a Fed hike.

Third, the bigger story was elsewhere. Oil had fallen about 13% over Tuesday and Wednesday on peace-deal hopes. For a currency market that has traded the war for ten weeks, that mattered more than one payrolls print.

The broader lesson is that a single data release is read in the context of everything else. Our guide to how economic data moves forex explains why the components, revisions and surrounding news all shape the reaction, and our economic calendar guide shows where to find the consensus figure that defines a "beat".

The RBA as an outlier

The Reserve Bank of Australia raised rates for the third time this year while the Fed, ECB, Bank of England and Bank of Japan all held last week. When one central bank is tightening and others are on hold, the interest-rate differential moves in favour of its currency. That supports the currency directly and makes it more attractive for carry trades, where investors borrow in a low-yielding currency and hold a higher-yielding one.

For CFD traders this shows up in swap rates. Holding a long AUD position overnight against a lower-yielding currency earns positive swap; holding it short costs money. Our guide to swap and overnight financing explains how this works and why swaps change after a rate decision.

Trading a week of reversals

Several moves this week partly reversed within hours: Monday's escalation and Tuesday's pause, the yen's 157.8 to 155 jump and its return to 156.4, AUD/USD's Wednesday high and Friday's lower close. In conditions like these, the quality of your process matters more than the quality of your predictions.

• Define risk before entry. Use the risk-reward ratio to decide whether a trade is worth taking given the distance to your stop and your target.
• Record what happened and why. A trading journal that notes the news backdrop for each trade helps you see whether headline weeks suit your approach at all.
• Respect leverage. As an illustrative example, a USD/JPY position of one standard lot moves roughly 640 dollars for every one-yen change at current levels. Wednesday's three-yen range would have meant about 1,900 dollars of swing on that one position. Under ESMA rules retail leverage on major pairs is capped at 30:1, and most retail CFD accounts still lose money, with brokers' disclosures commonly showing between about 61% and 89%.

What this week teaches

• Context beats the headline number. A payrolls beat with soft wages and downward revisions, during an oil sell-off, did not lift the dollar.
• Peace hopes are priced quickly. A single news report knocked about 9% off Brent in a morning, and the currencies of energy importers moved straight away.
• Intervention risk lingers. After an intervention that sources described to Reuters, every sudden yen jump is treated as a possible second one.
• Outlier central banks support their currencies. The RBA's hike helped the Aussie, though the move faded once it was absorbed.
• Ranges matter more than closes. USD/JPY moved almost three yen in a day and finished the week only 0.25% lower.

Scheduled next week (11–15 May)

A heavy week of US inflation data. Events only, with no view on what they will show.

• Monday 11 May: China CPI for April; US existing home sales.
• Tuesday 12 May: US CPI for April; German ZEW survey; Japan household spending.
• Wednesday 13 May: US PPI for April; euro area first-quarter GDP (second estimate) and employment; speeches from ECB President Lagarde and several Fed officials.
• Thursday 14 May: UK first-quarter GDP and March monthly GDP; US retail sales for April; US import prices and jobless claims; Ascension Day holiday in parts of Europe.
• Friday 15 May: Japan PPI; US industrial production. Jerome Powell's term as Fed chair is due to end.
• Throughout: US–Iran diplomacy over the proposed memorandum, and the status of the Strait of Hormuz.

Sources

• RTTNews: Dollar slipped further last week despite strong jobs data (week ended 8 May)
• US Bureau of Labor Statistics: Employment Situation, April 2026
• Investinglive: RBA lifts cash rate to 4.35% in 8–1 vote
• Pakistan Today (Reuters): Oil extends slide as Trump indicates possible Iran peace deal
• The Star (Reuters): Yen jumps abruptly as intervention speculation swirls
• Wikipedia: Operation Project Freedom
• Dawn (Reuters): Gold firms and heads for weekly gain on US-Iran deal hopes
• Adnkronos (Jiji): No need to comment on suspected intervention, Japan official says
• Newsquawk weekly economic calendar, 11–15 May 2026