Tuesday brought no relief from recent market volatility, as geopolitical tensions and global developments continued to weigh heavily on sentiment. Headlines surrounding the Israel-Iran war and updates from the G7 summit drove much of the market’s movement. Iran signaled openness to ceasefire talks, while Israel reportedly hinted at targeting Tehran’s leadership to end the conflict. The U.S. warned of intervention if Iran targets any U.S.-linked parties.
Former President Trump stirred further tension by planning an early exit from the G7 and opposing its ceasefire-focused communique. He also reiterated that Iran must not acquire nuclear weapons and urged U.S. citizens to leave Iran. China echoed similar warnings for its citizens in Israel. Meanwhile, Putin adopted a diplomatic role, engaging both sides. Despite some softening from Iran, the conflict persists, with new reports of three ships on fire near the Strait of Hormuz further stoking fears.
In trade developments, the U.S. and U.K. signaled readiness to finalize a trade deal in the coming days, while the U.S. and Canada aim to strike an agreement within 30 days. However, Japan’s PM Ishiba confirmed no deal was reached with Trump.
On the data front, the U.S. Empire State Manufacturing Index fell to a three-month low, pressuring the U.S. Dollar despite its haven appeal. The U.S. Dollar Index (DXY) struggled to hold gains, Gold edged lower, and Oil prices rebounded. Antipodean currencies gave up earlier gains fueled by ceasefire hopes, China stimulus, and U.S.-China trade optimism. Cryptocurrencies edged higher, while equities remained flat after a weak open, and U.S. and Japanese bond yields ticked up.
EURUSD and GBPUSD remain indecisive after a positive weekly start, even as the U.S. Dollar strengthens. Trade deal optimism at the G7 provides support, despite rising geopolitical tensions. Market sentiment suggests Iran may be recognizing defeat, and potential U.S. involvement in the conflict could hasten the end of its nuclear ambitions, offering relief to major currencies.
However, EU-U.S. trade talks remain stalled, while a U.S.-U.K. deal appears close to being finalized. Still, cautious tones from ECB and BoE officials, along with uncertainty ahead of this week’s FOMC, BoE meetings, and Eurozone inflation data, weigh on Euro and Pound bulls.
USDJPY retreats after briefly hitting a one-week high, posting mild losses at the time of writing. The decline follows the Bank of Japan’s widely expected decision to leave rates unchanged and stick to its bond tapering plan. Tokyo's cautious optimism about the economy, despite global challenges, also supported the Yen. Meanwhile, the JPY’s safe-haven appeal keeps pressure on the pair amid mixed market sentiment.
AUDUSD and NZDUSD post mild gains, extending Monday’s rebound, while USDCAD remains under pressure after a three-day slide pushed it to its lowest level since October 2024. Hopes for a swift end to the Israel-Iran war, stronger oil prices, and optimism over a potential US-Canada trade deal are weighing further on the Loonie pair.
WTI crude oil rebounds from Monday’s pullback, supported by fresh reports of ship fires near the Strait of Hormuz and OPEC’s monthly report, which reaffirmed demand forecasts and a readiness to boost supply if needed. However, a stronger U.S. Dollar and caution ahead of U.S. Retail Sales and private oil inventory data limit further gains.
Meanwhile, Gold retreats after failing to break a two-month-old triangle resistance. A stronger Dollar, geopolitical uncertainty, mixed signals from China, and a lack of fresh demand-supply cues weigh on bullion ahead of key events this week.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) post modest gains, holding onto their week-start uptrend. Renewed optimism from returning ETF inflows and fresh Bitcoin purchases by MicroStrategy support crypto buyers, despite overall market caution due to ongoing geopolitical tensions.
After a busy start to the week, markets brace for more volatility from upcoming U.S. Retail Sales, weekly inventory data, and G7 updates. Developments between Israel and Iran will also be key drivers ahead of Wednesday’s FOMC meeting.
A potential Israel-Iran ceasefire may ease risk aversion, possibly pulling crude oil lower and weighing on Antipodean currencies. Meanwhile, Gold and major currencies could stay supported, and the U.S. Dollar may weaken if retail sales disappoint and sentiment improves. Overall, expect heightened market momentum—trade with caution.
May the trading luck be with you!
