Risk sentiment turned mixed early Thursday due to uncertainty over the United States (U.S.) and Israel strikes on Iran. Late Wednesday, The New York Times (NYT) reported that officials from Tehran were ready for backchannel talks to end the war. However, local Iranian media denied that policymakers were willing to negotiate and rejected the earlier report, which added to market uncertainty. Additional uncertainty came from Donald Trump’s push to place his nominee as Federal Reserve (Fed) Chair and from a U.S. Supreme Court ruling directing the Trump administration to refund tariffs to U.S. companies.
Geopolitical risks remain elevated as headlines continue to emerge quickly. Despite the steady flow of developments, markets currently appear to look past the noise, suggesting investors believe the situation is still contained. The U.S. and Israel generally maintain the upper hand, although occasional retaliatory actions or flare-ups from Iran could keep uncertainty in the background. The NYT reported that Iranian operatives secretly offered to discuss terms to end the war, but Iran denied sending any negotiation messages to the U.S.
Attention is also on China as announcements continue from the National People’s Congress (NPC). So far, authorities have repeated commitments to boost consumption and hinted at tax adjustments, although these measures remain modest. The People’s Bank of China (PBOC) again reaffirmed its “moderately loose” monetary policy stance.
Chinese stocks rose more than 1% after the NPC revealed growth targets and policy priorities. Gains were mainly led by artificial intelligence (AI) and semiconductor companies, while consumer stocks lagged with gains of around 0.5%, suggesting that the pledge to strengthen consumer demand has not yet strongly impacted markets. Meanwhile, the state planner repeated that China will maintain a moderately loose monetary policy stance.
Reuters obtained a copy of China’s five-year economic plan, which calls for more proactive fiscal policy, higher research and development (R&D) spending, and economic growth at a reasonable rate. The plan sets a gross domestic product (GDP) growth target of 4.5% to 5% for 2026 and a Consumer Price Index (CPI) target of around 2%, while aiming to maintain stable growth during the next five years.
On the U.S. trade front, a judge from the Court of International Trade ordered the Trump administration to begin refunding tariffs that the Supreme Court struck down last month. The refunds could amount to about $130 billion, potentially acting as economic stimulus. Judge Richard Eaton instructed the administration to start the refund process immediately and provide updates by Friday.
Economic data from the U.S. showed mixed but generally supportive signals for growth. The Automatic Data Processing (ADP) employment report showed private payrolls rising by 63,000 in February, beating expectations of 50,000 and improving from a revised increase of 11,000 in January.
Wage growth remained steady but did not accelerate. Pay for workers staying in their jobs increased 4.5% year-over-year, unchanged from the previous month, while wage growth for workers switching jobs eased slightly to 6.3% from 6.4%. Overall, the report indicates that the labor market continues to improve gradually and supports expectations that the official Nonfarm Payrolls (NFP) report may also show solid job growth while wage pressures remain stable.
Business activity in the services sector strengthened. The Institute for Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) rose to 56.1 in February, well above the 53.5 estimate and higher than January’s 53.8. This marked the 20th consecutive month of expansion and the strongest level since July 2022. Growth was supported by strong business activity at 59.9 and new orders at 58.6. The employment index improved to 51.8, indicating modest hiring in the services sector.
The Federal Reserve also released its Beige Book, an anecdotal economic report ahead of the Federal Open Market Committee (FOMC) meeting scheduled for March 18. The Beige Book stated that economic activity increased at a slight to moderate pace in most regions. Seven of the twelve districts reported growth, while five districts reported flat or declining activity. Consumer spending increased slightly overall, although some regions reported weaker spending due to economic uncertainty, rising price sensitivity, and lower spending from lower-income households.
Additional economic indicators also showed mixed trends. The S&P Global Composite PMI was revised to 51.9 from the preliminary estimate of 52.3 and below the previous month’s 53.0. The S&P Global Services PMI was finalized at 51.7 compared with the preliminary estimate of 52.3 and January’s 52.7.
In the foreign exchange market, the U.S. Dollar Index (DXY) gained strength and reversed the previous day’s decline. This limited hopes of a corrective rebound in major currency pairs such as EURUSD and GBPUSD, both of which are facing heavy weekly losses. AUDUSD and NZDUSD posted modest declines after Wednesday’s rebound, while USDCAD recovered from a one-week low despite stronger crude oil prices, which have risen for five consecutive days. Gold and silver extended the previous day’s recovery, while cryptocurrencies retreated slightly from recent monthly highs after Wednesday’s strong gains. Meanwhile, Asia-Pacific stock markets posted mild gains, following the positive performance of Wall Street.
The U.S. Dollar’s pullback, despite strong U.S. economic data, along with slightly positive European Union (EU) statistics, helped the EURUSD pair stage a corrective rebound from its lowest level since late November 2025. However, the major currency pair moves lower early Thursday as markets stay cautious ahead of key catalysts, including Eurozone Retail Sales, the European Central Bank (ECB) Monetary Policy Meeting Minutes, a speech by ECB President Christine Lagarde, and the U.S. Initial Jobless Claims data.
Meanwhile, economic data from the Eurozone showed modest improvement. The Eurozone Producer Price Index (PPI) rose 0.7% month-over-month in January, beating market expectations of 0.2%. The Eurozone final Services Purchasing Managers’ Index (PMI) for February came in at 51.9, slightly above the preliminary estimate of 51.8.
Despite the earlier rebound, EURUSD remains on track for its biggest weekly loss since April 2025.
The unchanged United Kingdom (UK) Services Purchasing Managers’ Index (PMI) and strong U.S. economic data reversed the GBPUSD pair’s corrective rebound from the December 2025 low. The GBPUSD pair, also known as Cable, remains under pressure due to political uncertainty in the UK, global geopolitical risks, a comparatively hawkish Federal Reserve (Fed), and the market’s lack of confidence in the Bank of England (BoE) optimism.
At the same time, USDJPY gains to reverse the previous day’s decline, mainly supported by a broadly stronger U.S. Dollar and the absence of clear signals about Japan’s possible intervention to support the Japanese Yen (JPY). This move occurs despite hawkish comments from Bank of Japan (BOJ) Governor Kazuo Ueda.
In the UK, the final Services PMI remained unchanged at 53.9. Meanwhile, BOJ Governor Kazuo Ueda stated that stronger wage growth is necessary to sustainably achieve the central bank’s inflation target.
AUDUSD and NZDUSD, as risk-sensitive pairs, reversed the previous day’s gains despite optimistic signals from China’s National People’s Congress (NPC). Softer Canadian data and a stronger U.S. Dollar helped USDCAD rebound from a one-week low, even as crude oil, Canada’s key export, rose for the fifth day.
Canada’s Q4 labor productivity fell 0.1%, in line with expectations, while Q3 growth was revised up to 1.1%. Energy markets stayed volatile as crude initially eased on slower Iranian attack expectations but rebounded with the Strait of Hormuz effectively closed and mixed U.S. signals on reopening. U.S. crude inventories rose 3.475 million barrels, above the 2.305 million estimate.
Even after Wednesday’s corrective move, gold and silver remain on the bulls’ radar, bouncing off technical support and sustaining their early Thursday recovery. Traders’ shift toward traditional safe-haven assets amid geopolitical and economic uncertainty continues to support precious metals in 2026, building on their strong gains from 2025, despite strong U.S. data challenging the dovish Federal Reserve (Fed) bias.
Cryptocurrencies also gained from improved risk sentiment, with Bitcoin surging nearly $5,000, or 7.16%, to around $73,230 after trading between $67,405 and $74,075. However, digital assets retreated early Thursday amid mixed market sentiment.
Equity markets generally advanced, with major U.S. indices posting gains for the second time in three days. The NASDAQ Composite Index rose 1.29%, the S&P 500 Index gained 0.78%, and the Dow Jones Industrial Average increased 0.49%. For the week so far, the S&P 500 is down 0.14%, the NASDAQ is up 0.61%, and the Dow Jones Industrial Average is down 0.49%.
U.S. Treasury yields moved higher after the previous day’s decline, supported by stronger-than-expected ADP employment data and robust ISM services figures ahead of Friday’s jobs report.
Eurozone Retail Sales, ECB Monetary Policy Meeting Accounts, and President Christine Lagarde’s speech will draw traders’ attention ahead of U.S. Jobless Claims and other mid-tier employment data.
With markets showing limited conviction to extend recent risk aversion, any negative surprises from the data or positive news on the Iran conflict could pressure the U.S. Dollar (USD). A weaker Greenback may lift EURUSD, especially if Eurozone catalysts provide additional support.
Other major currencies and Antipodeans are likely to consolidate recent moves, while gold and crude oil may hold their latest gains. Cryptocurrencies could continue rising if the USD softens, and equities may edge higher if market fears ease.
May the trading luck be with you!
