Market sentiment turned negative early Tuesday as news of no contact between the U.S. and Iran increased war fears. This added to warnings from the Bank for International Settlements (BIS) and rising inflation concerns in major economies. Earlier hope came from reports that Washington and Tehran were in contact, but that optimism faded. Mixed U.S. data, caution before the Federal Open Market Committee (FOMC) meeting on Wednesday, and multiple central bank decisions also pressured sentiment.
Iran’s Foreign Minister Abbas Araghchi said his last contact with U.S. envoy Steve Witkoff was before the latest U.S. strike, denying ongoing talks. This contradicts reports of recent text communication suggesting revived diplomacy during the conflict.
The BIS warned central banks not to react quickly to rising energy prices caused by the conflict. BIS economic adviser Hyun Song Shin said the surge in oil and gas prices may be a temporary supply shock, which policymakers should ignore unless it lasts longer.
U.S. President Donald Trump made several comments: discussions are ongoing about securing the Strait of Hormuz with support from other countries; he spoke with Emmanuel Macron and rated France’s efforts highly; he expressed mixed views about the United Kingdom’s involvement; Iran wants a deal but may not be ready; ship owners are avoiding the Strait; military actions are ongoing; uncertainty remains about Iran’s leadership and mines; and oil prices and inflation may fall after the conflict. He also said Iran may have only 8% of its missiles left and that Israel is targeting Hezbollah areas in Lebanon. Trump asked China to delay a meeting with Xi Jinping due to the war.
Markets improved slightly at the end of the week as Middle East tensions eased with no major escalation.
On Monday, Oil prices fell by $5.70 or 5.72% to $93.64, before recovering on Tuesday. Monday’s fall ignored U.S. strikes on Kharg Island, which avoided oil infrastructure damage. There were talks of a deal, but Trump said Iran may not be ready.
U.S. data was mixed. The Empire State Manufacturing Index for March dropped to -0.20 from 7.1 and below the 3.90 estimate, showing mixed details like stable orders and jobs but weaker shipments and longer delivery times. Capital spending plans reached multi-year highs. Industrial production rose 0.2% in February, with capacity utilization at 76.3%, supported by mining, while utilities declined. The National Association of Home Builders (NAHB) Housing Market Index rose to 38 in March, still below 50 for 22 months, with affordability issues due to high mortgage rates and construction costs.
In Canada, inflation slowed. The Consumer Price Index (CPI) rose 1.8% year-over-year in February, below the 1.9% forecast and January’s 2.3%. Core inflation measures fell to 2.3–2.4%, near the 2% target, but rising energy prices remain a risk.
The FOMC meets Tuesday and Wednesday, with a 99.1% chance of no rate change due to war uncertainty and inflation. Trump suggested an emergency rate cut.
That said, the Reserve Bank of Australia’s (RBA’s) 0.25% rate hike failed to impress the AUDUSD traders, while New Zealand’s Food Price Index rose 0.1% month-over-month in February, down from 2.5% earlier, and failed to fuel the NZDUSD.
Geopolitical tensions remained high. Trump postponed his China visit (March 31–April 2). Iran attacked a tanker in the Gulf of Oman, the first such strike east of the Strait in two weeks. According to the United Kingdom Maritime Trade Operations (UKMTO), a tanker near Fujairah in the United Arab Emirates was hit with minor damage and no injuries. The UAE briefly closed its airspace after a drone strike. Oil prices rose again due to risks to key energy routes.
Overall, weak sentiment pressured risk assets like equities, cryptocurrencies, and Antipodean currencies (AUD, NZD), while supporting gold, oil, and the USD. The U.S. Dollar Index (DXY) stayed near a 9.5-month high. AUDUSD failed to rise despite the RBA hike, USDCAD moved higher, and NZDUSD fell. Bitcoin (BTC) and Ethereum (ETH) ended their eight-day winning streak, and Asia-Pacific stocks declined despite earlier gains on Wall Street.
Global market fears and positioning ahead of this week’s monetary policy meetings by the European Central Bank (ECB), Bank of England (BoE), Bank of Japan (BOJ), and Federal Reserve (Fed) pushed major currency pairs to return to their earlier trends, reversing Monday’s correction.
As a result, EURUSD dropped again after bouncing from its lowest level since August 2025, GBPUSD moved closer to its 2.5-month low seen on Friday, and USDJPY rose again, recovering from the previous day’s pullback after hitting its highest level since July 2024. Comments from Japanese officials did not help weaken USDJPY.
In Japan, BOJ Governor Kazuo Ueda said inflation is gradually moving toward the 2% target but needs support from wage growth. The BOJ is expected to keep its policy rate unchanged at 0.75%.
AUDUSD failed to continue the previous day’s recovery and showed slight losses near the mid-0.7000s, even after the Reserve Bank of Australia (RBA) delivered a 0.25% rate hike, its first since November 2023.
The RBA increased its cash rate by 25 basis points to 4.1% in a close 5–4 vote, highlighting division between controlling inflation and supporting economic growth. Inflation picked up in late 2025 and is expected to stay above the 2–3% target, mainly due to rising fuel prices. The Australian Dollar reacted with volatility but later weakened.
RBA Governor Michele Bullock said policy could be adjusted if needed. Earlier comments by Andrew Hauser changed market expectations from a possible rate cut to an 82% probability before the decision.
A stronger USD, weak New Zealand Food Price Index data, and overall risk aversion pushed NZDUSD lower, reversing its previous day’s rebound.
At the same time, USDCAD moved higher again, reversing its earlier decline, even though crude oil prices—Canada’s key export—recovered. The pair is mainly influenced by Canada’s inflation data and market positioning ahead of this week’s meetings of the Bank of Canada (BoC) and Federal Open Market Committee (FOMC).
On Monday, oil prices dropped by $5.70 or 5.72% to $93.64, before recovering on Tuesday. The fall came despite U.S. strikes on Kharg Island, which avoided damage to oil infrastructure. There were also talks of a deal, but Donald Trump said Iran may not be ready.
Concerns over U.S.–Iran talks and warnings from the Bank for International Settlements (BIS) also supported WTI crude oil prices.
At the same time, gold moved higher again despite a stronger USD, supported by its safe-haven demand and market positioning ahead of this week’s key data and events.
Bitcoin (BTC) and Ethereum (ETH) paused their eight-day uptrend as a stronger USD and market consolidation ahead of this week’s key events pressured prices.
U.S. bond yields declined, with the 2-year yield falling 5.9 basis points to 3.675% and the 10-year yield dropping 6.3 basis points to 4.221%.
Stock markets started the week on a positive note. In Europe, Germany’s DAX rose 0.51%, the United Kingdom’s FTSE 100 gained 0.55%, France’s CAC 40 added 0.31%, Spain’s IBEX 35 increased 0.18%, and Italy’s FTSE MIB edged up 0.07%. In the U.S., the S&P 500 and Russell 2000 both rose 1.0%, the Nasdaq gained 1.2%, and the Dow Jones increased 0.8%, supported by hopes of easing tensions in the Strait of Hormuz. Travel stocks like airlines and cruise lines gained, while fertilizer companies like CF Industries declined.
Dollar Tree was the top performer in the S&P 500, rising 6.4%. Meta gained 2.3% on reports of job cuts, while Nebius jumped 15% after a deal with Meta.
NVIDIA CEO Jensen Huang announced new Artificial Intelligence (AI) products, including the Groq 3 LPX chip, optical chips with TSMC, and future designs using High Bandwidth Memory (HBM). NVIDIA expects demand to reach $1 trillion by 2027, with hyperscalers contributing around 60%. The stock rose to $188.88 before closing at $183.22, below key moving averages.
The ZEW Sentiment Index (ZEW Sentiment Index) for the Eurozone and Germany will come before key U.S. data like ADP Employment Change, Pending Home Sales, and the Monthly Fed Budget, shaping Tuesday’s economic calendar. However, the main focus will remain on market positioning ahead of the Federal Open Market Committee (FOMC), updates on the Iran war, political developments around the FOMC Chair, and delayed talks between Donald Trump and Xi Jinping.
The USD stays firm despite mixed data, supported by risk-off sentiment and expectations of a hawkish Federal Reserve (Fed). This increases the chances of further weakness in major currencies and Antipodeans like AUDUSD.
Crude oil and gold may attract buying if the upcoming U.S. data remains weak. Cryptocurrencies appear to be losing momentum after an eight-day rally, while equities may recover some losses if overall market risk sentiment improves.
May the trading luck be with you!
