Market sentiment remains weak early Monday as weekend developments around Iran and the Strait of Hormuz signal that the key geopolitical risk affecting global energy supplies is far from over. At the same time, political concerns around the Federal Reserve (Fed) and caution ahead of monetary policy meetings of major central banks, along with China-related developments, keep traders alert. Still, mostly positive U.S. data released on Friday and expectations of a hawkish Fed continue to support the U.S. Dollar and limit demand for gold and other major currencies.
Trump said the U.S. remains in contact with Iran but doubts Tehran is ready for meaningful negotiations. Iranian officials rejected the claim, with Iran’s Foreign Minister telling CBS News there is little reason to hold talks after the U.S. attacked Iranian targets while negotiations were still ongoing.
Tensions escalated over the weekend after the U.S. struck Iranian military infrastructure on Kharg Island. Trump warned additional strikes could target the island’s oil export facilities if attacks on shipping in the Strait of Hormuz continue. Kharg Island handles about 90% of Iran’s crude exports, making it a critical energy facility. Tehran responded with threats of retaliation and warned it could target ports and facilities in the region it believes supported the strikes. The United Arab Emirates (UAE) rejected the accusations and reaffirmed its commitment to restraint.
International support for securing the Strait of Hormuz remains mixed. Japan’s Prime Minister Sanae Takaichi said Japan has no plans to send naval vessels to the Middle East, though it will join coordinated releases of strategic oil reserves under an International Energy Agency (IEA) initiative to stabilise markets. Australia also confirmed it will not deploy naval ships to the region. Reports also indicate that Trump is seeking to build a multinational naval coalition to help reopen shipping through the strait.
China’s latest economic data showed industrial output, retail sales, and fixed-asset investment beating expectations, although the property sector remained in contraction. The housing downturn continues to weigh on consumer confidence, with new home prices falling for the 33rd straight month and second-hand home prices declining for the 34th consecutive month.
Meanwhile, U.S. and Chinese officials held “candid and constructive” discussions in Paris aimed at stabilising trade relations ahead of a possible meeting between Donald Trump and Chinese President Xi Jinping in Beijing. Taiwan also reported a surge in Chinese military aircraft activity after an unusual lull.
Market concerns remain that Iran may not be ready to end the conflict even if Trump seeks a resolution, raising the risk of prolonged tensions or naval escorts in the Strait of Hormuz. Reports from The Wall Street Journal said the Pentagon has deployed a Marine Expeditionary Unit (MEU) to the Middle East, increasing fears of a potential ground escalation.
Economic data released Friday showed mixed results. The Core Personal Consumption Expenditures (Core PCE) Price Index, the Fed’s preferred inflation gauge, matched expectations at 2.7%, while the overall Personal Consumption Expenditures (PCE) Price Index came at 2.8% year-over-year (y/y) versus 2.9% expected. Durable Goods Orders were weaker than expected, while Job Openings and Labor Turnover Survey (JOLTS) job openings rose to 6.946 million versus 6.700 million expected. The University of Michigan (UoM) Consumer Sentiment Index preliminary reading for March came at 55.5, versus 55.0 expected, the weakest since December.
Growth data also showed weaker revisions. The second estimate for Gross Domestic Product (GDP) growth came at 0.7% versus the 1.4% preliminary reading, far below the earlier 3.0% initial expectation. The GDP Deflator rose to 3.8% compared with the 3.6% estimate and 3.7% preliminary reading.
In a separate development, a Federal Judge dismissed subpoenas issued to the Fed and its chair, Jerome Powell, related to renovation cost overruns. The ruling said there was strong evidence that the subpoenas were mainly intended to harass or pressure Powell. Republican Senator Thom Tillis also criticised the investigation and warned that appeals could delay the confirmation of Kevin Warsh as the next Fed Chair.
The European Union (EU) is also weighing a naval response as tensions in the Strait of Hormuz push oil prices higher. French President Emmanuel Macron held direct talks with Iranian President Masoud Pezeshkian regarding the situation.
USDJPY traded unevenly after Japan’s Finance Minister Satsuki Katayama warned that authorities are ready to take decisive steps if foreign-exchange volatility intensifies.
Amid these developments, the U.S. Dollar Index (DXY) retreated from a 9.5-month high. Crude oil paused after a four-day rally but showed limited downside momentum. Gold dropped to a one-month low. USDJPY eased from its highest level since July 2024, EURUSD and GBPUSD posted corrective rebounds, AUDUSD and NZDUSD recovered, while USDCAD pulled back from a one-week high and ended a three-day rise.
EURUSD rebounds from its lowest level since August 2025, while GBPUSD also shows a corrective bounce from a 3.5-month low, ending its four-day losing streak. At the same time, USDJPY posts its first daily loss in five sessions as it retreats from the highest level since July 2024.
The pullback in the USD and market consolidation ahead of this week’s central bank monetary policy meetings of the European Central Bank (ECB), Bank of England (BOE), and Bank of Japan (BOJ), along with renewed talks of Japan's intervention to defend the JPY, will drive these corrective moves in major currency pairs early Monday.
AUDUSD stalls its two-day losing streak, while NZDUSD posts its first daily gain in five sessions. USDCAD retreats from a one-week high, snapping a three-day uptrend. The moves mainly reflect USD weakness, mostly upbeat China data, and the upcoming trade talks between Donald Trump and China’s President Xi Jinping.
AUDUSD and NZDUSD also recover modestly ahead of Tuesday’s monetary policy meeting of the Reserve Bank of Australia (RBA), where markets widely expect another rate hike. In New Zealand, electronic card retail spending increased in February from the previous month, while the services sector slipped back into contraction.
In Canada, the Canadian Dollar (CAD) could benefit from higher oil prices, but concerns about the domestic economy rose after weak labour market data. February employment dropped by 83.9K versus +10K expected, while the unemployment rate climbed to 6.7% compared with 6.6% expected and 6.5% prior.
Oil prices eased on Monday after earlier gap-up gains as markets assessed geopolitical tensions and diplomatic efforts to restore shipping through the Strait of Hormuz, a key route for global oil and gas flows. U.S. President Donald Trump said Washington is urging other countries to help safeguard the waterway and is in discussions with several nations about policing the strait. He also called on North Atlantic Treaty Organization (NATO) allies and major energy importers, including China, to support U.S.-led efforts to reopen the corridor.
Although the U.S. Dollar pulls back and markets remain nervous, gold struggles to stay positive despite rebounding from the 50-day Simple Moving Average (SMA), likely due to caution ahead of key central bank events this week.
At the same time, Bitcoin (BTC) and Ethereum (ETH) reach a six-week high and extend gains for the eighth consecutive day as markets consolidate previous yearly losses and prepare for major upcoming catalysts. Meanwhile, Asia-Pacific equities trade lower, following the weaker performance on Wall Street.
Housing-related pressure in the U.S. increased as the average rate for a 30-year fixed mortgage rose to 6.41%, up from just below 6% at the end of February. The 10-year Treasury yield also rose by 0.8 basis points during the session.
U.S. equity markets trade lower but recover from session lows. The Dow Jones Industrial Average moves around unchanged levels, the S&P 500 Index falls 21 points or -0.31%, and the NASDAQ Index declines 160 points or -0.72%.
Canada inflation and U.S. industrial production data headline Monday’s economic calendar, but the main focus remains on global efforts to ease the energy supply crunch and Iran’s response to the recent U.S. strike on Kharg Island.
Looking ahead, this week will be busy with monetary policy announcements from the Reserve Bank of Australia (RBA), Bank of Canada (BoC), Federal Reserve (Fed), Bank of England (BoE), Bank of Japan (BoJ), and European Central Bank (ECB), alongside risk events. UK and Australian jobs reports, political developments around the FOMC Chair, and Trump-Xi trade talks are also key.
With the U.S. Dollar’s sustained strength, supported by mostly positive U.S. data and inflation pressures, major currencies and the Antipodeans may struggle to extend recent corrective gains without risk-positive news, which appears limited. This may also weigh on equities, cryptocurrencies, and gold, while crude oil’s rally is likely to remain supported.
May the trading luck be with you!
