Global markets stayed cautious early Thursday after brief relief from U.S. President Donald Trump announcing an Iran ceasefire. Fresh challenges before the April 10 talks, which now seem unlikely, along with hawkish signals from the Federal Open Market Committee (FOMC) Minutes and focus on upcoming data like U.S. Core Personal Consumption Expenditures (Core PCE) Price Index, U.S. Jobless Claims, and final U.S. Quarter 4 (Q4) Gross Domestic Product (GDP), kept traders on edge.
Doubts about the ceasefire remain high as tensions continue. Israel is still fighting Hezbollah in Lebanon, while Iran has accused both Israel and the US of breaking the deal and warned that further talks are “unreasonable.” Lebanon has become a major hotspot, with Parliament Speaker Mohammad Bagher Ghalibaf saying 3 parts of the proposed 10-point plan are already broken, weakening trust in the ceasefire.
The Strait of Hormuz remains mostly closed, with only four ships passing since the ceasefire and none carrying oil or gas. No confirmed movement has occurred after the Islamic Revolutionary Guard Corps (IRGC) shut the route due to violations. This keeps energy supply concerns high. The IRGC has suggested alternative routes to avoid sea mines, offering limited help but not reducing overall uncertainty or insurance risks.
Trump has taken a strict stance, saying US military forces will stay fully deployed with ships, aircraft, and weapons until the deal is fully enforced, warning of stronger action if terms are broken.
After Trump first warned of severe conflict but then announced a two-week ceasefire, markets reacted positively on Wednesday. Risk sentiment improved, allowing stocks to rise, oil prices to fall, bond yields to drop, and the USD to weaken as fears of immediate escalation reduced.
However, a lasting ceasefire remains difficult. The US has a 15-point plan, Iran has a 10-point plan, and Israel continues aggressive actions beyond these frameworks. This lack of alignment keeps uncertainty high. The reopening of the Strait of Hormuz was short-lived, as renewed strikes and missile activity quickly disrupted shipping again, showing how fragile the situation is.
Meanwhile, hopes are also high that U.S. Vice President (VP) JD Vance plans talks in Pakistan for a longer-term solution.
Elsewhere, a key highlight from the FOMC Minutes was discussions about possible rate hikes. Some members suggested adding language supporting hikes if inflation stays high. This is a shift from January, when risks were seen as balanced. However, the discussion still considers both rate cuts and hikes, not immediate tightening, though the direction is becoming clearer.
The ceasefire slightly increased expectations of Federal Reserve (Fed) rate cuts later this year, but analysis by the Wall Street Journal’s (WSJ) Nick Timiraos suggests near-term rate cuts may still be less likely.
The U.S. Dollar Index (DXY) rebounded from a one-month low, ending a three-day losing streak. This caused pullbacks in EURUSD and GBPUSD, while USDJPY rose from a three-week low. AUDUSD slipped from recent highs, NZDUSD stayed strong, and USDCAD stopped falling. Oil stabilized after its biggest drop since November 2021, gold stayed weak after a recent high, cryptocurrencies remained slightly lower, and Asia-Pacific stocks declined despite strong Wall Street gains.
EURUSD and GBPUSD paused their rally early Thursday after strong gains driven by positive sentiment and a weaker U.S. Dollar (USD). The Euro (EUR) and the British Pound (GBP) are now consolidating due to renewed concerns over the Iran ceasefire (CF), a rebound in the USD, and weaker-than-expected mid-level economic data from Germany, the Eurozone (EZ), and the UK released on Wednesday.
The U.S. Dollar (USD) remains strong, overshadowing concerns about a Bank of Japan (BoJ) rate hike, despite support from former BoJ official Masaaki Kaizuka and rising inflation risks in Japan due to the energy crisis. This comes as Japan plans to release oil from its Strategic Petroleum Reserve (SPR), possibly covering about 20 days of supply as early as May.
As a result, USDJPY records its first daily gain in four sessions, rebounding from a three-week low even with weak risk sentiment. Additional support comes from hawkish Federal Open Market Committee (FOMC) Minutes and expectations of firm U.S. inflation data due later today, which continue to push the Yen pair higher.
AUDUSD reflects its risk-barometer nature by pulling back from a multi-day high. Meanwhile, NZDUSD remains firm for the third consecutive day, supported by hawkish remarks from Reserve Bank of New Zealand (RBNZ) Governor Anna Breman.
Anna Breman added that the economy remains dependent on Middle East developments. The Reserve Bank of New Zealand (RBNZ) kept the cash rate at 2.25%, noting that earlier rate cuts are still supporting growth, which could strengthen further if global risks ease.
At the same time, USDCAD rebounds from a multi-day low, snapping a three-day losing streak, even as crude oil, Canada’s key export, recovers slightly from a three-week low.
On Wednesday, West Texas Intermediate (WTI) crude oil saw its biggest daily drop since November 2021 after U.S. President Donald Trump announced a two-week Iran ceasefire (CF), which reduced immediate supply concerns and pushed prices sharply lower.
The decline was further pressured by a larger-than-expected rise in weekly U.S. oil inventories, adding to bearish sentiment.
At the same time, gold prices recorded their first daily loss in three sessions, pulling back from a three-week high as weaker market sentiment combined with a rebound in the U.S. Dollar (USD), reducing demand for the safe-haven metal.
Like other major assets, Bitcoin (BTC) and Ethereum (ETH) also post modest losses, extending the previous day’s weakness due to market fears and a stronger U.S. Dollar (USD).
Elsewhere, although U.S. equity markets closed strongly on Wednesday, Asia-Pacific stocks turned negative on Thursday. In the US, the Dow Jones rose 2.85%, the S&P 500 gained 2.51%, and the Nasdaq climbed 2.80%. In the bond market, U.S. yields declined, with the 10-year yield falling to 4.301% and the 2-year yield to 3.786%.
Looking ahead, U.S. data, including the Core Personal Consumption Expenditures (Core PCE) Price Index, Jobless Claims, and Gross Domestic Product (GDP), will dominate Thursday’s economic calendar, keeping traders busy.
With fading optimism over Middle East peace and growing pressures on energy and global supply chains, the U.S. Dollar (USD) is likely to continue its recent recovery, supported by hawkish Federal Open Market Committee (FOMC) Minutes and potentially strong Federal Reserve (Fed) inflation signals.
USD strength may weigh on major currency pairs like EURUSD and support USDJPY. Crude oil might rebound, while gold, equities, and cryptocurrencies could see intraday losses.
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