What happened in April

It was another month of brinkmanship between the United States and Iran, and at the end of April the Strait of Hormuz was still closed to most traffic. Markets turned elsewhere for motivation with stock indices hitting all-time highs despite the risk of an energy crisis, and the last week of the month was loaded with important central bank meetings and tech company earnings.

Figure 1: US gasoline & diesel prices

Source: Bloomberg. All prices in US dollars. The oil price is per barrel, and the gasoline and diesel prices are per gallon.

By the end of the month, oil prices were up over 80% on the year (in dollars). With less tax wedge than in Europe, and less government intervention, the impact of the oil price was more severe for US drivers, with prices at the pump up over 50% on the year for gasoline and diesel. This partly explained the fall in US consumer sentiment in April to the lowest level ever recorded. Retail sales, excluding fuel, did continue to grow though. The advance GDP1 report for the first quarter of 2026 showed 2% overall growth for the US economy, with modest consumption growth and another big boost from investment in AI (artificial intelligence). We also received the March readings for unemployment, which fell slightly, and consumer inflation, which jumped from 2.4% to 3.3%, a little less than expected.

Figure 2: US consumer sentiment at all time low

Source: University of Michigan, Bloomberg.

At the end of April, we also received the Quarter 1 GDP report for the Eurozone, which showed growth slowing down as consumer and business confidence fell. Unemployment remained steady at 6.2%, while inflation rose to 3% on the energy crisis. Inflation in the United Kingdom rose to 3.3%, but there was also positive news as unemployment surprisingly dropped below 5%.

All eyes at the end of the month were on the central banks, with the four largest interest rate setters all meeting in the last three days. Markets weren’t really expecting immediate rate hikes to counter the rising inflation, but they wanted to see how policymakers intended to balance the risks to inflation and growth. President Lagarde of the European Central Bank (ECB) indicated that they were ready to hike at their June meeting, whereas Governor Bailey and the Bank of England (BOE) were more balanced and less committal. Jerome Powell chaired his last meeting of the US Federal Reserve (Fed) before Kevin Warsh is set to take over, and there was an unusual level of dissent as three regional heads objected to maintaining the previous bias towards rate cuts. There was also dissent at the Bank of Japan (BOJ) where they raised their inflation forecasts but chose not to raise rates either.

Figure 3: Interest rate pricing vs before the Iran war

Source: Bloomberg. Each dot represents a central bank meeting.

Although central banks decided not to raise rates this time, bond yields continued to rise in April. This was partly a reflection of the interest rate outlook and partly a concern that managing an energy crisis would put further stress on already stretched government balances. The yield rise was small enough not to drag global bond indices down though, and they posted small gains on the month. In currencies, the US dollar, which had acted as a safe haven in March, gave back most of its gains in April as equity markets recovered. There was more action in Japan, where the BOJ showed that there were limits to how much ‘speculative activity’ in their currency they would tolerate. After declining to raise interest rates, they chose to spend over ¥5tn to support their currency when it fell beyond 160 yen per dollar2.

Figure 4: Intervention in the Japanese yen