Early Tuesday, sentiment improves slightly, supporting risk assets, but USD rebounds as Iran shows no clear readiness to accept a U.S. peace deal, while caution ahead of key U.S. data and events limits momentum.
Geopolitical updates stay in focus with mixed Iran signals. Iranian Parliament Speaker Mohammad Bagher Ghalibaf rejects talks under the U.S. blockade, calling them pressure-driven, but later reports indicate Iran’s Supreme Leader has allowed negotiators to attend talks in Pakistan, though without official confirmation.
Diplomatic efforts build as U.S. Vice President JD Vance is expected in Islamabad, with hopes of a near-term deal, while White House Press Secretary Karoline Leavitt says an agreement is close, even as Donald Trump keeps alternative options.
Trump also invokes the Defense Production Act (DPA) to support energy supply, including oil, LNG (liquefied natural gas), coal, and grid capacity, and says Operation Midnight Hammer destroyed Iran’s nuclear sites, though clearing them will be lengthy.
Federal Reserve (Fed) chair nominee Kevin Warsh says the Fed’s independence depends on its own discipline, credibility, and policy clarity rather than political pressure.
In Asia, China remains resilient to the global energy shock, but weak demand weighs on growth, while also moving to upgrade its free trade deal with Switzerland. Japan’s Finance Minister signals readiness to act if needed, while Bank of Japan (BoJ) data shows stable but soft credit conditions, supporting expectations of unchanged rates.
In the UK, mixed labour data pressures GBPUSD, with ILO (International Labour Organization) unemployment at 4.9%, slower employment growth, mixed earnings, and a drop in payrolls.
Against this backdrop, the U.S. Dollar Index (DXY) edges higher after the previous day’s decline, pulling EURUSD and GBPUSD lower, while USDJPY rises modestly, confirming the prior Doji candlestick pattern. At the same time, AUDUSD and NZDUSD stay firm, while USDCAD moves sideways near a seven-week low, extending its recent losing streak. Crude oil struggles to build on its rebound from a six-week low, gold falls for a second straight day, and Bitcoin (BTC) and Ethereum (ETH) remain subdued after earlier gains, while Asia-Pacific equities inch higher despite modest losses on Wall Street.
USDJPY maintains its risk-barometer role, posting mild gains amid cautious optimism over a U.S.-Iran peace deal ahead of Wednesday’s talks in Islamabad. Support also comes from rising expectations that the Bank of Japan (BoJ) will keep rates unchanged and a corrective USD rebound amid mixed sentiment, while Monday’s Doji candlestick helps the pair stay slightly bid after Friday’s sharp drop.
That said, Japan’s Finance Minister says authorities are closely monitoring financial markets and are ready to act if needed. Further, the Bank of Japan (BoJ) Senior Loan Officer Survey shows a stable but subdued credit environment, highlighting a fragile recovery despite ongoing inflation. On the same line, the BoJ is also increasingly expected to hold interest rates steady at its April meeting as it evaluates the impact of the Middle East situation, according to Reuters.
A mild rise in Eurozone February construction output, combined with a softer UK jobs report and a firmer USD, weighs on EURUSD and GBPUSD. However, both pairs remain relatively resilient, supported by cautious optimism surrounding a potential U.S.-Iran peace deal and expectations that easing tensions around the Strait of Hormuz could help reduce pressure on the EU’s energy outlook.
In the UK, the February ILO (International Labour Organization) unemployment rate stands at 4.9% versus 5.2% expected and the prior 5.2%. Employment change comes in at 25k versus 35k expected and prior 84k. Average weekly earnings rise 3.8% versus 3.6% expected, with the prior revised to 4.1%, while earnings excluding bonuses increase 3.6% versus 3.5% expected. March payrolls decline by 11k versus prior 20k, revised to -6k.
A mildly positive market tone, supported by headlines from China and New Zealand, helps AUDUSD and NZDUSD maintain their gains. On the other hand, softer crude oil prices cap further downside in USDCAD after six consecutive sessions of selling pressure. Still, stronger Canadian inflation data earlier in the week, along with supportive macro factors, had already driven USDCAD to a six-week low, especially as crude oil—Canada’s key export—was trading on a firmer footing.
In New Zealand, Q1 CPI (Consumer Price Index) rises to 0.9% q/q and 3.1% y/y, remaining above the Reserve Bank of New Zealand (RBNZ) target band and reinforcing expectations of potential rate hikes, even as business confidence weakens. In Canada, headline CPI climbs to 2.4% y/y driven by energy, while core measures, including CPI-trim, CPI-median, and CPI-common, gradually move closer to the Bank of Canada (BoC) target. This is accompanied by improving business sentiment and a decline in recession expectations.
Expectations of progress toward a U.S.-Iran peace deal and the potential reopening of the Strait of Hormuz energy route, along with discussions on alternative supply corridors, prompt crude oil buyers to pause after a positive session. This cautious market tone, combined with a corrective USD rebound, then drags gold lower for a second consecutive day.
Meanwhile, the International Energy Agency (IEA) suggests a Basra-to-Ceyhan pipeline through Turkey as a strategic alternative to reduce dependence on the Strait of Hormuz and improve global energy security.
A mildly positive market tone fails to help Bitcoin (BTC) and Ethereum (ETH) extend their previous gains, even as Asia-Pacific equities edge higher despite a slightly weaker close on Wall Street.
In the U.S., stocks fall modestly on Monday, ending a 13-day winning streak in the Nasdaq Composite, though the pullback is limited, with the index down just 0.3% after a strong 15% rally since the end of March. The S&P 500 slips 0.2%, while the Dow Jones Industrial Average (DJIA) ends flat.
The Russell 2000 stands out as an outperformer, rising 0.5% to a fresh record high for a sixth straight day of gains, led by strength in energy, industrials, and real estate, while consumer cyclicals and communication services underperform.
German and Eurozone ZEW sentiment data will come before key U.S. releases, including ADP (Automatic Data Processing) employment change, retail sales, business inventories, and pending home sales. Attention will also be on testimony from incoming Federal Reserve (Fed) chair Kevin Warsh and a CNBC interview with U.S. President Donald Trump at 08:30 ET (12:30 GMT), shaping Tuesday’s economic calendar.
Markets remain focused on U.S.-Iran peace deal talks and how global sentiment reacts to improving headlines, even though no near-term reopening of the Strait of Hormuz is expected.
Cautious optimism could keep the USD (U.S. Dollar) under mild pressure. However, stronger U.S. data and Warsh’s expected support for Fed independence may reinforce a hawkish Federal Open Market Committee (FOMC) outlook and limit Greenback losses.
Overall, markets are likely to stay range-bound with a slightly positive bias. This holds unless talks in Islamabad break down and trigger risk aversion, which would support USD strength and weigh on other assets.
In this environment, EURUSD, GBPUSD, and USDJPY may continue sideways movement. AUDUSD and NZDUSD could extend gains. Gold and crude oil may see mild pullbacks. Cryptocurrencies and equities are likely to edge higher.
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