The risk environment is unclear early Friday as rising hopes of a U.S.-Iran peace deal clash with fresh doubts about the Israel-Lebanon ceasefire. Strong Purchasing Managers’ Index (PMI) data worldwide, especially from the U.S., along with policymakers’ concerns about inflation and supply shortages, also pressure sentiment. At the same time, U.S. President Donald Trump warned the UK about tariffs, adding to market moves after heavy data the previous day and a light calendar on Friday.
Trump said Americans should prepare for higher gasoline prices in the near term, highlighting inflation risks. Higher energy costs could increase transport, logistics, and consumer prices, complicating the Federal Reserve (Fed) rate path and reducing household real incomes. Trump remained optimistic about the Iran war, even as the situation on the ground remains unresolved.
On Middle East diplomacy, Trump said on Truth Social that the Israel-Lebanon ceasefire has been extended by three weeks after an Oval Office meeting with senior officials. He added that Israeli and Lebanese leaders may meet at the White House and that Iran must stop funding Hezbollah. However, Israel’s United Nations (UN) Ambassador Danny Danon told CNN the extension is “not 100%,” warning that Hezbollah continues rocket attacks and Lebanon’s government cannot fully control the group. This contrast suggests ongoing uncertainty, and the weekend may remain tense.
Regarding the conflict, uncertainty continues. Trump says he is waiting for Iran’s response on negotiations, while Iran insists talks will not happen until its blockade is lifted. There are also conflicting signals about unity within Iran’s leadership, raising doubts about the real situation.
Market volatility increased after reports that Iran’s parliamentary chief had left negotiations, along with brief news about Iran activating air defenses and a possible Israeli strike, later clarified as a systems test. Markets partially recovered afterward.
Economic data showed generally positive corporate commentary, with strong manufacturing data from S&P Global PMI. U.S. initial jobless claims came in at 214K versus 210K expected, with the prior revised to 207K. The four-week moving average was 210.75K compared to 210.0K previously. The April S&P Global services PMI rose to 51.3 versus 50.3 expected, with the prior at 49.8, while manufacturing PMI increased to 54.0 versus 52.5 expected, the highest since May 2022 and the strongest level in nearly four years.
Market indecision, combined with a hawkish Federal Reserve (Fed) stance and generally strong U.S. data, supported a four-day rise in the U.S. Dollar Index (DXY), though momentum is limited. The stronger USD pressured EURUSD for a fourth day. GBPUSD stayed weak after three days of losses, while USDJPY paused gains due to strong UK and Japan data. AUDUSD and NZDUSD showed no clear direction. USDCAD rose for a fourth day, supported by a slight pullback in oil prices.
Gold prices extended losses to a two-week low, heading for the first weekly decline in four weeks. Bitcoin (BTC) and Ethereum (ETH) also posted intraday losses, while Asia-Pacific equities moved lower, following weak Wall Street trends.
EURUSD drops for the fourth straight day to a two-week low despite strong European Union (EU)/Germany Purchasing Managers’ Index (PMI) data, pressured by broad U.S. Dollar (USD) strength, Eurozone supply concerns, and European Central Bank (ECB) resistance to rate hikes.
GBPUSD remains weak near the weekly low after a three-day losing streak, despite strong UK data. UK March Retail Sales rose 0.7% month-on-month (m/m) versus 0.1% expected, with the prior -0.4% revised to -0.6%. The pair is also weighed down by Donald Trump’s tariff warning to the UK over the Digital Services Tax on U.S. technology companies such as Apple Inc. (Apple), Google LLC (Google), and Meta Platforms Inc. (Meta).
USDJPY struggles near a two-week high after a four-day rally, as strong Japan inflation data and intervention fears limit gains amid a hawkish Bank of Japan (BOJ) stance. Japan’s Consumer Price Index (CPI) showed core inflation at 1.8% year-on-year, below the 2% target, while the Services Producer Price Index (PPI) rose to 3.1%, indicating firm price pressures. Rising energy costs keep expectations of a June BOJ rate hike. Japan’s Finance Minister Katayama warned of “decisive action” against speculative yen moves, coordinating with the U.S.
Weak sentiment and a stronger U.S. Dollar (USD) weigh on AUDUSD and NZDUSD, while supporting USDCAD. AUDUSD and NZDUSD fall for a second straight day, while USDCAD extends a four-day rise, driven by mixed crude oil prices, a key Canadian export. Canada’s March Producer Price Index (PPI) rises 2.4% month-on-month (m/m) versus 1.9% expected, with the prior at 0.4%.
Elsewhere, Antoine Martin, Vice Chairman of the Swiss National Bank (SNB), says the bank is more willing to intervene in the foreign exchange (FX) market, limiting upside in USDCHF.
The U.S.-Iran peace deal tensions, despite a three-week Israel-Lebanon ceasefire, weigh on crude oil after a four-day winning streak. However, supply shortage fears keep bullish sentiment intact.
Cryptocurrencies slip slightly after several days of gains last week, but remain on track for a positive weekly close.
Asia-Pacific markets fall after Thursday’s Wall Street decline, driven by risk-off sentiment linked to possible weekend escalation in Israel. Japan’s Nikkei 225 Index rises, supported by technology stocks. U.S. equity futures are mixed, while Nasdaq futures gain after Intel Corporation (INTC) reports strong earnings and upgrades guidance. Avis Budget Group drops sharply after a short squeeze reversal.
Uncertainty over a U.S.-Iran peace deal remains, but a hawkish Federal Reserve (Fed) bias and strong U.S. data support the U.S. Dollar (USD), which pressures gold by reducing its safe-haven appeal. As a result, gold records its first weekly loss in four weeks. Along with USD strength, month-end consolidation also weighs on gold, even though investment demand remains steady.
Canada Retail Sales (monthly retail data from Canada) and German IFO Sentiment (Germany business climate index) will join U.S. Michigan Consumer Sentiment and Inflation Expectations in guiding traders, but these mid-tier releases may have limited impact unless outcomes are extreme. Continued U.S. Dollar (USD) strength could pressure major currencies, commodities, cryptocurrencies, and equities.
Markets remain focused on headlines about a potential U.S.-Iran peace deal after the Israel-Lebanon ceasefire extension. Positive signals from Washington (U.S. capital) and Tehran (Iran's capital) could lift risk sentiment, support risk assets, and challenge USD strength.
However, with peace prospects still uncertain, caution may cap USD gains and help gold stabilize near its 100-day exponential moving average (EMA). Crude oil may resume its uptrend after a recent pullback, while bond yields could edge higher unless major geopolitical positives emerge.
Separately, Donald Trump is scheduled to speak at a cryptocurrency conference at Mar-a-Lago in Palm Beach at 16:00 Greenwich Mean Time (GMT). Attendance is limited to the top 297 holders of the $TRUMP meme coin, and markets will watch for any new digital asset policy signals, keeping cryptocurrency traders cautiously optimistic for a mild upside.
May the trading luck be with you!
