Market mood stays weak and uncertain as traders remain cautious before key decisions from the Swiss National Bank (SNB), Bank of England (BoE), and European Central Bank (ECB). The cautious tone is also driven by the Federal Reserve’s (Fed) hawkish pause and the ongoing Iran war, which continues to raise global uncertainty and inflation risks.
The Federal Reserve (Fed) kept interest rates unchanged at 3.50%–3.75%, in line with expectations, but its overall message stayed hawkish. The Summary of Economic Projections (SEP) showed only two rate cuts expected in 2026 and 2027, supporting the USD. Fed Chair Jerome Powell warned that higher energy prices may lift inflation in the near term and made it clear that rate cuts depend on clear progress in inflation.
The Fed’s dot plot kept rate expectations unchanged at 3.4% for 2026 and 3.1% for 2027. Inflation forecasts were revised higher, with Personal Consumption Expenditures (PCE) inflation and core PCE both rising to 2.7% from 2.4% and 2.5%, respectively, while Gross Domestic Product (GDP) growth was slightly increased to 2.4% from 2.3%, and the unemployment rate stayed at 4.4%. Powell highlighted that inflation has remained above target for nearly five years, tariffs may have lasting effects, and both goods and non-housing services inflation are still elevated. He added that short-term inflation expectations have increased while long-term expectations remain stable, and noted that rising oil prices can spread into broader and core inflation. On employment, he said risks to jobs are not higher than inflation.
The USD strengthened after the decision, gaining the most against the Swiss Franc (CHF), Australian Dollar (AUD), and New Zealand Dollar (NZD), each rising nearly 1%, while the Canadian Dollar (CAD) performed relatively better with only a 0.26% decline against the USD.
Geopolitical risks remain a key driver, as the Middle East conflict continues to threaten energy supply and global growth. Disruptions around the Strait of Hormuz, a key route for global oil shipments, have raised concerns about inflation, fiscal pressure, and market volatility. S&P Global Ratings also warned that such disruptions could weaken growth and increase instability across markets.
Tensions escalated further as Iran warned it could destroy energy infrastructure if attacks continue, while mixed signals from U.S. President Donald Trump—combining restraint with warnings of strong action—and reports of possible U.S. military deployment to secure the Strait of Hormuz added to uncertainty.
In Asia-Pacific, the Bank of Japan (BoJ) kept policy unchanged in an 8–1 vote, though one member supported a rate hike, showing a slightly hawkish shift. Japan also warned against speculative foreign exchange (FX) moves and kept intervention as an option.
Across currencies and commodities, the US Dollar Index (DXY) eased after ending a two-day decline, while gold rebounded from a six-week low with its first daily gain in seven days. EURUSD recovered from earlier losses and is heading for its first weekly gain in three weeks, while GBPUSD shows a similar pattern despite recent weakness. USDJPY climbed to its highest level since July 2024 before easing slightly. AUDUSD and NZDUSD posted mild gains after sharp prior losses, while USDCAD pulled back after two days of gains. Oil recorded its first daily decline in three sessions after earlier gains, gold extended its rebound, and cryptocurrencies remained directionless after two days of losses, while Asia-Pacific equities stayed under pressure in line with Wall Street.
EURUSD rises slightly early Thursday, recovering from its biggest daily fall in a week and ending a two-day winning streak after the Federal Open Market Committee (FOMC) signaled a hawkish pause. The rebound is also supported by expectations that the USD may consolidate its post-Fed gains, especially if the European Central Bank (ECB) maintains its expected hawkish stance and risk aversion eases.
However, the pair dropped sharply on Wednesday even though the Federal Reserve (Fed) kept interest rates unchanged as expected, mainly due to Fed Chair Jerome Powell’s hawkish comments, strong FOMC economic projections, and mixed European Union (EU) data.
Like EURUSD, GBPUSD also shows mild gains after a previous drop as traders await the United Kingdom (UK) employment data and the Bank of England (BoE) monetary policy decision. However, the chances of a strong rebound in the Cable remain low due to a weak United Kingdom (UK) economic outlook and low confidence in the Bank of England (BoE).
In Japan, the Bank of Japan (BoJ) kept benchmark interest rates unchanged as expected, which initially pushed USDJPY to its highest level since July 2024 before it pulled back. Comments from Bank of Japan (BoJ) Governor Kazuo Ueda and other policymakers suggest a firm stance to support the Japanese Yen (JPY), increasing expectations of further downside in USDJPY.
The Australian Dollar (AUD), New Zealand Dollar (NZD), and Canadian Dollar (CAD), together called Antipodeans, show modest gains early Thursday after a sharp drop following the Federal Open Market Committee (FOMC) decision. AUDUSD and NZDUSD recover despite mixed domestic data, supported by a pullback in the USD and easing risk aversion. USDCAD also slips, supported earlier by the Bank of Canada (BoC) holding rates steady and stronger crude oil prices, though oil has started to ease today.
Australia’s February labour report showed strong headline job growth but weaker underlying details, with fewer full-time jobs and a higher unemployment rate of 4.3% versus 4.1% expected and prior, mainly due to higher participation. The Reserve Bank of Australia (RBA) is still expected to maintain its tightening stance after recent rate hikes, especially with inflation risks linked to the Middle East conflict, and it has warned that the situation could trigger a global shock, including sharp asset repricing and renewed inflation pressure.
New Zealand’s economic growth came in weaker, pointing to softer domestic demand.
The Bank of Canada (BoC) kept interest rates unchanged at 2.25% as expected, but highlighted risks on both sides of its mandate. The BoC Governor noted that uncertainty remains high and risks have evolved since the January Monetary Policy Report (MPR), adding that the situation is an economic shock whose impact depends on how long it lasts. He said inflation is expected to rise in the near term, though the risk of higher energy prices spreading quickly to other goods and services appears limited. He also emphasized that the BoC will take rate decisions one meeting at a time and remains ready to respond as needed.
Oil prices stayed highly volatile, jumping after attacks on major energy facilities and then easing slightly on softer signals. Prices still closed about 3.0% higher before a mild pullback, while the Energy Information Administration (EIA) reported crude oil inventories rose by 6.156 million barrels versus 0.383 million expected. Tensions increased after strikes on key oil and gas sites and retaliatory attacks on major liquefied natural gas (LNG) infrastructure, including Qatar’s Ras Laffan hub, which supplies around 20% of global LNG, raising concerns over broader supply disruptions.
Gold prices fell to a six-week low, marking the seventh straight daily decline, pressured by a stronger USD and a technical breakdown below the 50-day Simple Moving Average (SMA) and a multi-day support line. Additional pressure came from uncertainty around U.S.-China trade talks and concerns involving India and China, two of the world’s largest gold consumers, amid the energy crisis and their limited alignment with the U.S.
A cautious market mood, a stronger USD, and weak confidence in digital assets pushed Bitcoin (BTC) and Ethereum (ETH) lower for the third straight day.
At the same time, equity markets reflected a risk-off tone, with Asia-Pacific stocks declining after losses on Wall Street, including a fall of over 2.5% in Japan’s Nikkei. Rising bond yields pressured United States (US) stocks, where the Dow Jones Industrial Average (Dow) and Russell 2000 Index dropped 1.6% each, the Nasdaq Composite Index (Nasdaq) fell 1.46%, and the Standard & Poor’s 500 Index (S&P 500) lost 1.36%. The Nasdaq closed below its 200-day moving average (MA) at 22,152.42, while the S&P 500 closed just above its 200-day moving average (MA) at 6,624.70.
Thursday turns active with monetary policy decisions from the Swiss National Bank (SNB), Bank of England (BoE), and European Central Bank (ECB), along with United Kingdom (UK) employment data, United States (US) Jobless Claims, and other second-tier housing and activity indicators. Developments related to U.S. President Donald Trump’s actions on Iran and global reactions, as well as strikes from Tehran, may also keep markets busy.
With a hawkish Federal Open Market Committee (FOMC) stance and no change in Iran-related conditions, stronger US data, combined with worsening sentiment, could support further gains in the USD. Additional support for the USD may come if central banks in Europe and the United Kingdom (UK) maintain a relatively dovish or unchanged approach.
This environment could add downward pressure on EURUSD and GBPUSD, while also weighing on other major currencies and Antipodeans. Gold, however, has bounced from key support near $4,800, so any unexpected USD weakness could help it recover some of its recent losses. Crude oil and equities may see mild upside, while cryptocurrencies could continue their recent pullback.
May the trading luck be with you!
