Market sentiment is mixed as Donald Trump’s Project Freedom in the Strait of Hormuz triggered strong opposition from Iran and stalled US–Iran talks after Tehran’s 14-point proposal was rejected. Strong data and hawkish Federal Reserve (Fed) signals failed to support the Dollar, while higher supply from the Organization of the Petroleum Exporting Countries and allies (OPEC+) pressured oil despite Middle East tensions. That said, Asia-Pacific trading was quiet due to holidays in Japan and China.
Elsewhere, Trump said the US would guide neutral ships through Hormuz under Project Freedom, calling it humanitarian and warning against interference. The Wall Street Journal reported it as a coordination effort, but the United States Central Command (CENTCOM) confirmed military deployment from May 4 with ships, aircraft, and 15,000 personnel. Iran rejected the move, calling it a ceasefire violation. A tanker was also hit near Fujairah, United Arab Emirates (UAE), as per United Kingdom Maritime Trade Operations (UKMTO).
Inflation concerns increased as the Institute for Supply Management (ISM) prices paid jumped to 84.6, the highest since 2022. ISM Manufacturing came at 52.7 and S&P Global PMI at 54.5, both showing expansion. Fed officials, including Lorie Logan, signaled no easing soon, whereas Fed’s Neel Kashkari warned the Iran conflict may raise inflation and delay rate cuts.
Dollar Index (DXY) weakened, and oil fell for a third day. USDJPY stayed pressured on intervention talk. EURUSD and GBPUSD edged up, AUDUSD fell, NZDUSD rose slightly, and USDCAD rebounded. BTC hit a three-month high and Ethereum (ETH) extended gains, while APAC equities followed Wall Street higher.
EURUSD rebounds and ignores fresh trade tensions with the US, reversing Friday’s losses mainly due to a weaker Dollar. GBPUSD also recovers, supported by slightly hawkish signals from Bank of England (BOE) officials and the softer USD, even as overall market sentiment stays quiet.
USDJPY turns lower again after Friday’s recovery and Thursday’s sharp drop, despite Japan markets being closed for three days. The weakness is linked to growing speculation of Japan's intervention to support the Japanese Yen (JPY) and a hawkish Bank of Japan (BoJ) stance.
Donald Trump raised European Union (EU) auto tariffs to 25%, while European Central Bank (ECB) policymaker Madis Muller warned of rising inflation, both creating pressure for EURUSD, especially with hawkish Federal Reserve (Fed) signals.
At the same time, Bank of England (BOE) economist Huw Pill said holding rates is an active decision, helping sustain GBPUSD strength.
AUDUSD stays slightly weak ahead of Tuesday’s Reserve Bank of Australia (RBA) decision, ignoring the softer USD as mixed Australian data weighs. NZDUSD posts modest gains, supported by a hawkish Reserve Bank of New Zealand (RBNZ) bias and weaker USD. USDCAD fails to benefit from the softer USD due to lower oil prices, a key Canadian export, and mixed domestic factors.
Australia data showed building approvals and job ads declining, while inflation rose 0.6% m/m and held at 4.3% y/y. Commonwealth Bank of Australia (CBA) expects a possible third RBA rate hike but sees the decision as uncertain.
RBNZ member Prasanna Gai said the shock lifts neutral rates but does not require automatic tightening.
Canada’s S&P Global PMI came at 53.3, while Canada PM Mark Carney noted that many countries now regret trade deals with the US.
WTI crude oil stays under pressure after a two-day decline and fails to gain from rising Middle East tensions linked to Donald Trump’s Project Freedom in the Strait of Hormuz. Increased supply signals from Organization of the Petroleum Exporting Countries and allies (OPEC+) and the United Arab Emirates (UAE) leaving OPEC continue to weigh on prices despite supply concerns.
OPEC+ plans to raise output by 188,000 barrels per day (bpd), though the impact remains limited with Hormuz still closed. The UAE’s exit from OPEC after disputes points to higher supply, further challenging oil buyers even amid geopolitical risks.
Gold prices fall for a second straight day and fail to benefit from the softer USD and mixed sentiment, as concerns rise over weaker demand from India, one of the largest gold consumers. A hawkish Federal Reserve (Fed) stance also adds pressure on bullion.
Bitcoin (BTC) climbs to its highest level since late January, while Ethereum (ETH) extends gains for a fifth day, supported by the weaker USD, technical breakout, and institutional buying.
Asia-Pacific shares move higher following Wall Street’s lead. By Friday, US stocks marked a sixth consecutive weekly gain, the longest since October 2024, with the S&P 500 up 0.3%, the Nasdaq up 0.9%, and the Dow Jones Industrial Average (DJIA) up 0.3%, driven mainly by strong technology stocks while healthcare lagged.
Holidays in China, Japan, and the UK may limit Monday’s market activity, but final April Purchasing Managers Index (PMI) data from Germany and the Eurozone, along with March Factory Orders from the US, can keep traders engaged ahead of a busy week. Comments from European Central Bank (ECB) and Federal Reserve (Fed) officials, plus updates on the Iran peace deal, will guide intraday moves.
With current USD weakness and key US data ahead, major currencies and commodities may edge higher. USDJPY will stay in focus due to Japan intervention talks, while Crude Oil may test its recent decline. Gold could trim intraday losses, and Cryptocurrencies may extend gains, while equities may start the week on a positive note.
That said, the week ahead includes Nonfarm Payrolls (NFP), ISM Services PMI, Reserve Bank of Australia (RBA) decision, and Canadian jobs data, pointing to active trading sessions.
May the trading luck be with you!
