Financial markets stay slow early Tuesday due to mixed risk news and month-end positioning, with a light calendar and cautious mood before Friday’s U.S. employment report.
Geopolitical tensions rise in the Middle East. Iran attacks a fully loaded Kuwaiti oil tanker in Dubai, as per the Kuwait Petroleum Corporation, damaging it and causing fire. Saudi Arabia intercepts eight Iranian ballistic missiles aimed at Riyadh near military areas. Explosions are also reported in Isfahan after strikes linked to Israel and/or the U.S. At the same time, the UAE, Kuwait, and Bahrain are pushing for a U.S. ground invasion of Iran, showing risk of wider escalation.
Despite rising tensions, crude oil shows sharp up and down moves. Prices first rise due to the tanker attack but later fall after U.S. President Donald Trump signals ending the conflict without reopening the Strait of Hormuz, reducing supply fears, although ongoing U.S. troop buildup suggests possible misdirection.
Markets are also driven by Donald Trump’s early Monday comments on Truth Social. He says the U.S. is in serious talks with a new and more reasonable Iranian regime to end military action, with progress made and a deal likely. At the same time, he warns that if no deal is reached and the Strait of Hormuz is not kept open, the U.S. may target Iran’s power plants, oil facilities, Kharg Island, and water infrastructure. Markets first rise on negotiation hopes, but later cut gains due to these threats. This shows “carrot and stick” diplomacy, with the ceasefire ending on April 6.
Federal Reserve (Fed) Chair Jerome Powell gives a cautious and steady view. He says policy is in a good position to wait and watch. He repeats the Fed’s goal of 2% inflation while balancing employment. He says tariffs may increase inflation by 0.5% to 1.0% temporarily, and the Fed remains focused on keeping inflation expectations stable. He highlights uncertainty and the need for caution.
On outlook, Jerome Powell shows balanced optimism, noting productivity gains from Artificial Intelligence (AI) and a positive medium- to long-term outlook, though new workers may face challenges. He says there are no major financial risks or contagion from private credit. Overall, the Fed remains patient and data-dependent.
Federal Reserve (Fed) official John Williams supports a “higher for longer” policy, saying current policy is well placed despite uncertainty. He warns that tariffs and Middle East tensions may raise inflation in the short term, mainly through energy prices, and may slow growth. He expects inflation to be near 2.75% this year and back to 2% by 2027, with growth near 2.5%, supporting a wait-and-see approach and delayed rate cuts.
The U.S. economic data show mixed results. Dallas Fed manufacturing index is +0.2 vs -0.2 prior.
China shows stronger data. March Purchasing Managers’ Index (PMI) improves, with manufacturing at 50.4 vs 50 expected and non-manufacturing at 50.1 vs 49.9 expected, showing expansion and a 12-month high in factory activity.
The U.S. Dollar Index (DXY) falls from a 10-month high, ending a five-day winning streak. EURUSD rebounds from a weekly low, USDJPY extends a pullback from July 2024 highs, and GBPUSD records its first daily gain in six days after hitting its lowest since November 2025. AUDUSD and NZDUSD stay weak, while USDCAD remains strong near a 16-week high for the seventh straight day. Gold holds gains, crude oil breaks a four-day rally from a three-week high, and Bitcoin (BTC) and Ethereum (ETH) extend recovery with limited strength, while Asia-Pacific equities fall after mixed Wall Street results.
The U.S. Dollar (USD) weakens, along with slightly positive updates from the Eurozone and Japan, supporting a corrective rise in EURUSD and allowing USDJPY to extend its previous pullback from a multi-month high.
In Germany, retail sales fell -0.6% versus +0.2% expected, with prior at -0.9%, while Consumer Price Index (CPI) came at +2.7% year-on-year, matching expectations.
European Central Bank (ECB) official Yannis Stournaras says the ECB will respond to second-round inflation effects from oil shocks. He warns that a prolonged Middle East conflict risks the ECB’s baseline outlook and may lead to stagflation. ECB projects inflation at 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, while growth is reduced to 0.9% in 2026, though these forecasts may already be outdated due to higher energy prices. Overall, the ECB maintains a hawkish stance.
In Japan, Tokyo inflation slows across headline, core, and core-core measures, showing weaker price pressure. Japan’s Finance Minister (Fin Min) says markets are being closely monitored. Japan's retail sales and industrial output are weaker than expected.
GBPUSD records its first daily gain in six days while bouncing from the lowest level since late November, but the Cable pair does not fully support the weak United Kingdom (UK) data.
In the UK, shop price inflation rises due to the Iran war's impact on supply chains. UK Nationwide house prices increase +0.9% versus -0.1% expected, with prior at +0.3%. UK Gross Domestic Product (GDP) comes at +0.1% quarter-on-quarter, matching preliminary data, and +1.0% year-on-year versus +1.0% preliminary, with prior at +1.2%.
Unlike major currencies, the Dollars of Australia, New Zealand, and Canada continue previous losses due to cautious market sentiment. The Australian Dollar (AUD), New Zealand Dollar (NZD), and Canadian Dollar (CAD), shown via AUDUSD, NZDUSD, and USDCAD, ignore strong China Purchasing Managers’ Index (PMI) data and instead react to a pullback in crude oil, which is a key export for Canada. AUDUSD falls for the eighth straight day, NZDUSD extends a six-day decline, and USDCAD stays strong near a 16-week high for the seventh consecutive day.
Meanwhile, central bank updates show the Reserve Bank of Australia (RBA) maintaining a hawkish tone in its minutes. Members are divided on timing but agree that further tightening may be needed due to rising inflation risks.
Australia and New Zealand Banking Group (ANZ) survey reports record-high inflation expectations and low confidence. RBA also announces payment system reforms, including banning card surcharges and reducing interchange fees, expected to save about A$2.5 billion annually.
In New Zealand (NZ), business confidence and activity decline, while inflation remains elevated.
The U.S. Dollar’s (USD) retreat, combined with mixed market sentiment, helps Gold and cryptocurrencies hold early‑week gains as safe‑haven demand rises amid ongoing tensions and risk‑off trading conditions. Even so, these assets are still likely to end the month lower because hawkish central bank expectations and the Iran war create selling pressure that challenges buyers and dampens optimism around further gains.
Stocks rise first while crude oil falls from around 103 to 99.43, then both reverse as oil rises again and stocks fall. Early Tuesday, WTI crude oil dropped for the first time in five days, retreating from a three-week high, while Asia-Pacific shares showed modest losses.
Global equity markets face heavy selling, according to Goldman Sachs. The banker’s report states the largest net selling since April 2025 and six straight weeks of outflows, mainly from short selling at a 5.6 to 1 ratio, showing bearish sentiment. S&P 500 remains weak despite Donald Trump’s efforts, and if no deal is reached before the April 6 ceasefire, recession risks may rise.
Major U.S. stock indices close mostly lower except the Dow Jones Industrial Average (Dow), which rises 49.50 points or 0.11% to 45216.14. The S&P 500 falls -25.13 points or -0.39% to 6343.72, NASDAQ falls -153.72 points or -0.73% to 20794.64, and the Russell 2000 falls -35.68 points or -1.46% to 2414.00.
Looking ahead, attention is on a U.S. military briefing on Operation Epic Fury at 8 am Eastern Time. Eurozone inflation for March will be released before U.S. Consumer Confidence, Chicago Purchasing Managers’ Index (PMI), and Job Openings and Labor Turnover Survey (JOLTS), guiding intraday trading, though central bank signals and Iran updates remain the main focus.
With month-end consolidation and a light calendar, USD may see small daily losses despite monthly gains, potentially supporting a bounce in major currencies like EURUSD and GBPUSD, more so if Eurozone data is positive and U.S. catalysts are downbeat. Gold, cryptocurrencies, and equities may rise modestly, while crude oil could give back some gains.
May the trading luck be with you!
