Trading sentiment remains mostly dull early Friday before an active weekend, as tentative signs of de-escalation in the U.S.-Iran tensions are offset by looming risks to key global shipping routes.
Iranian officials reiterated the need for a full Israeli withdrawal from southern Lebanon, while unverified reports suggested Tehran could begin “initial steps” toward blocking the Bab al-Mandab Strait from midday tomorrow, with Houthis in Yemen potentially attempting the blockade if needed. If confirmed, this would be a major escalation risk for global trade and energy flows, though markets remain cautious due to a lack of verification.
Meanwhile, the International Energy Agency (IEA) warned that Europe may have around six weeks of jet fuel, while the Group of Seven (G7) highlighted economic risks from the war and signaled possible action on inflation and supply chains.
Elsewhere, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) said that a broad rise in global inflation, beyond the recent oil price surge, is emerging as a key macroeconomic theme. The Economic Cycle Research Institute (ECRI), an independent forecasting organization based in New York City, specializes in analyzing and predicting business cycles and is known for identifying turning points in growth, inflation, and employment.
On the positive side, sentiment was supported by optimistic remarks from U.S. President Donald Trump, who said the conflict could end “pretty soon” and pointed to progress in Lebanon, including ceasefire developments and possible U.S.-Iran engagement over the weekend.
Recent U.S. data showed mixed but generally strong signals, with initial jobless claims at 207K versus 215K expected, the April Philadelphia Federal Reserve (Philly Fed) business index at +26.7 versus +10.0 expected, and March industrial production at -0.5% versus +0.1% expected.
Federal Reserve (Fed) officials provided cautious guidance, with Fed’s Miran expecting three rate cuts this year instead of four before the war, while Fed’s Williams said it is not appropriate to give specific forward guidance yet and noted early signs of supply chain disruptions.
In broader markets, the U.S. Dollar Index (DXY) remains weak after failing to sustain a rebound from a six-week low. EURUSD moves up and down after reversing from a seven-week high, GBPUSD falls for a third straight day, and USDJPY rises for a third consecutive session. AUDUSD recovers after pulling back from its highest level since 2022, NZDUSD continues to decline, and USDCAD falls for a fifth straight day to a three-week low. Gold remains directionless after two days of losses following a one-month high, crude oil stays under pressure after reversing a rebound from a one-month low, Bitcoin (BTC) pauses its two-day rise, and Ethereum (ETH) declines for a second straight day, while Asia-Pacific stocks show slight gains in line with U.S. equity benchmarks.
Gold prices remain sideways and lack a clear direction after a two-day decline following a pullback from a one-month high. Still, bullion is set for a three-week uptrend as global financial market uncertainty and a softer USD pushes traders toward the traditional safe-haven, although momentum remains limited due to caution ahead of possible U.S.-Iran peace talks over the weekend. Gains in the precious metal are also supported by increased central bank buying, even as stronger equities challenge bullish sentiment.
Although the Euro (EUR) and the Pound (GBP) are set for weekly gains against the USD, EURUSD remains directionless after reversing from a seven-week high, while GBPUSD falls for a third straight day due to a corrective rebound in the USD. Meanwhile, USDJPY extends a three-day winning streak, ignoring a hawkish Bank of Japan (BoJ) stance and softer USD as markets consolidate.
European Central Bank (ECB) policymaker Kazaks said market expectations of two rate hikes this year are reasonable. Similarly, Bank of Japan (BoJ) Governor Kazuo Ueda noted that rising oil prices are slowing Japan’s growth while increasing inflation, calling it a supply shock, and added that policy remains highly accommodative with low real interest rates and will stay data-dependent without giving clear near-term rate guidance.
The market’s cautious mood, along with a corrective rebound in the USD and mixed signals from China, is pressuring Antipodean currencies (AUD, NZD, and CAD), even though they remain on track for weekly gains against the USD. At the same time, political uncertainty in New Zealand and softer crude oil prices are adding to the recent consolidation in AUDUSD, NZDUSD, and USDCAD.
In China, People’s Bank of China (PBOC) Governor Pan Gongsheng expressed confidence in long-term growth and said policy will remain appropriately loose, supported by National Development and Reform Commission (NDRC) plans to boost consumption, high-growth sectors like Artificial Intelligence (AI) and the digital economy, and energy security.
In New Zealand, uncertainty increased as Prime Minister Christopher Luxon dismissed reports of a leadership challenge, while weaker polling and election risks may become more important over time.
WTI crude oil is heading for a second straight weekly decline due to rising hopes of a U.S.-Iran peace deal in weekend talks, especially after Israel agreed to a ceasefire in Lebanon. However, risks of a possible trade route blockade by Tehran at the Bab al-Mandab Strait, along with Iran’s firm demands, are limiting market optimism and keeping momentum in check.
Bitcoin (BTC) and Ethereum (ETH) are both set for a third consecutive weekly gain despite intraday losses caused by a corrective rebound in the USD. Hopes for an early easing of Iran tensions and a softer USD have supported cryptocurrency demand.
Elsewhere, Asia-Pacific equities underperformed as traders cut exposure ahead of the weekend despite positive cues from Wall Street, reflecting caution due to geopolitical uncertainty. Still, the region posted mild gains in line with strong U.S. equity performance. The Nasdaq extended its rally to a twelfth straight session, supported by developments from Anthropic and comments from Donald Trump, although earlier negative remarks from Pete Hegseth briefly pressured sentiment. Intel, Cisco, and Texas Instruments were strong performers, while Netflix dropped 8% after hours due to weak guidance.
Mid-tier data from Canada and the Eurozone, along with speeches from European Central Bank (ECB), Bank of England (BoE), and Federal Reserve (Fed) officials, will drive momentum trading on Friday. However, the main focus will be on the U.S.-Iran peace deal talks expected over the weekend and developments around unconfirmed reports of Tehran’s readiness to block the Bab al-Mandab Strait.
Given recent U.S. data and mixed sentiment supporting the USD (U.S. Dollar), any further drop in risk appetite could strengthen the Greenback’s recovery. In that case, EURUSD may trim some of its weekly gains, while Gold, Bitcoin (BTC), and Ethereum (ETH) could move lower.
Meanwhile, Crude Oil may rebound if progress in the U.S.-Iran peace deal stalls, while mixed signals from Federal Open Market Committee (FOMC) officials could support other assets and put fresh downward pressure on the USD (U.S. Dollar).
May the trading luck be with you!
