Market sentiment stays sour early Tuesday as rising challenges to the U.S.-Iran ceasefire combine with strong U.S. data and caution ahead of key releases, including the U.S. ISM Manufacturing PMI (Institute for Supply Management Manufacturing Purchasing Managers’ Index), JOLTS Job Openings (Job Openings and Labor Turnover Survey), and Friday’s monthly employment report. At the same time, holidays in Japan, China, and South Korea limit participation, keeping currency markets subdued with major pairs in narrow ranges due to lower liquidity.
Geopolitical news pulls in both directions. U.S. officials say Washington is closer to resuming major combat with Iran, even as Iran signals a more diplomatic tone.
Iranian Foreign Minister Abbas Araqchi says there is no military solution, highlights progress in Pakistan-brokered talks, and warns the U.S. and UAE (United Arab Emirates) against escalation, while President Trump also echoes some optimism on negotiations.
Still, tensions rise after U.S. Navy destroyers USS Truxtun and USS Mason pass through the Strait of Hormuz under sustained Iranian fire involving boats, missiles, and drones, marking a major escalation and increasing risks for global oil supply routes.
Reports also say Iran fired on U.S. vessels and struck UAE targets, while earlier confusion included warning shots and disputed claims about attacks and destroyed boats.
Iran also targeted an oil route bypassing Hormuz, pushing WTI (West Texas Intermediate) oil to $107.48 before easing, even as retaliation risks remain.
Elsewhere, U.S. tariff refunds worth $166 billion will begin from May 12 via CBP (Customs and Border Protection) after a Supreme Court ruling.
U.S. March factory orders jump 1.5% versus 0.5% expected, with strong core capital expenditure (capex, capital expenditure) growth, especially excluding aircraft. New York Fed (Federal Reserve Bank of New York) President Williams says the Fed (Federal Reserve) is well-positioned but warns that higher energy prices could worsen inflation, while lowering GDP (Gross Domestic Product) forecasts and raising inflation expectations. Notably, Bank of Canada (BoC) Governor Tiff Macklem says Fed independence should remain intact after Jerome Powell steps down on May 15, favoring the hawkish Fed bias and fueling the USD.
That said, the International Monetary Fund (IMF) chief Kristalina Georgieva warns that if the Middle East war continues to 2027 with oil at $125, the global economy could face a much worse outcome.
In currency markets, the U.S. Dollar Index (DXY) rises for a third day, pressuring major currencies and commodities. EURUSD and GBPUSD extend three-day declines, while USDJPY struggles after recent gains. AUDUSD remains under pressure despite the RBA hike due to weak sentiment and a stronger USD, with NZDUSD following. USDCAD edges higher alongside softer oil and weaker Asia-Pacific equities. Meanwhile, Bitcoin (BTC) hits a 13-week high, and Ethereum (ETH) rises for a sixth straight day.
EURUSD falls for a third straight day as weak European Central Bank (ECB) forecasts combine with a stronger USD. GBPUSD also extends its three-day losing streak as the firmer USD and sour market sentiment weigh on the pair (GBPUSD, cable). Meanwhile, USDJPY struggles after a two-day winning streak as Japan holidays, mixed signals around the hawkish Bank of Japan (BoJ) stance, and concerns about Japan’s intervention to support the JPY (Japanese Yen) impact the pair.
At the same time, European Central Bank (ECB) forecasts show inflation expectations raised to 2.7% for 2026, while GDP (Gross Domestic Product) growth is lowered to 1.0% for 2026 and 1.3% for 2027 due to higher energy prices.
AUDUSD falls for a second straight day, ignoring the expected Reserve Bank of Australia (RBA) 0.25% rate hike that reversed the early 2025 easing cycle, as sour market sentiment and a stronger USD also weigh on the pair.
Early Tuesday, the Reserve Bank of Australia (RBA) raised the cash rate by 25 bps (basis points) to 4.35%, as expected, marking a reversal of the early 2025 easing cycle. After the decision, RBA Governor Michele Bullock highlights the need to control inflation and warns that rates may rise further if inflation expectations increase.
Before the decision, Australian data shows strong household spending in March and the Services PMI (Purchasing Managers’ Index) improving to 50.7 in April, although rising Middle East fuel costs push up price pressures.
NZDUSD follows its Australian counterpart (AUDUSD) and extends the previous decline due to a stronger USD (United States Dollar) and sour market sentiment. Meanwhile, USDCAD moves slightly higher but lacks strong momentum as crude oil prices, Canada’s key export, fluctuate after the previous day’s gains.
Gold price stays mildly supported but shows limited recovery after a two-day losing streak, as a stronger USD (United States Dollar), sour market sentiment, and month-start positioning weigh on momentum. Meanwhile, crude oil prices ease slightly in Asia after earlier gains, even as U.S. Treasury Secretary Scott Bessent warns of a global 8–10 million-barrel oil supply deficit. At the same time, ongoing geopolitical tensions continue to limit the downside in crude oil despite the latest pullback.
Cryptocurrencies such as Bitcoin (BTC, Bitcoin) and Ethereum (ETH, Ethereum) hold up despite market pessimism and a stronger USD, with Bitcoin hitting a 13-week high and Ethereum rising for a sixth consecutive day. The recent strength is supported by month-start flows and technical breakouts.
Meanwhile, Asia-Pacific equity markets follow Wall Street lower, though losses are contained due to reduced participation. Technology stocks provide support, led by gains in Microsoft (Microsoft), Oracle (Oracle), and Micron (Micron Technology). Communication services lag with declines in Google (Alphabet) and Meta (Meta Platforms), while consumer stocks like Amazon (Amazon) advance and energy stocks such as Chevron (Chevron) post modest gains.
Swiss Inflation and Canada trade data will join European Central Bank (ECB) President Christine Lagarde’s speech in focus before key U.S. releases, including the final S&P Global PMI (Purchasing Managers’ Index) for April, ISM Services PMI (Institute for Supply Management Services Purchasing Managers’ Index), JOLTS Job Openings (Job Openings and Labor Turnover Survey), U.S. New Home Sales, and Goods Trade Balance, along with speeches from mid-tier FOMC (Federal Open Market Committee) officials.
Recent geopolitical jitters around Iran and the fragile ceasefire weigh on sentiment, while stronger-than-expected U.S. data could support a USD (United States Dollar) rebound. A firmer USD may pressure EURUSD and GBPUSD lower, while USDJPY could also rise despite speculation of Japan intervention, especially with Tokyo markets closed.
At the same time, weak sentiment and a possible USD rebound, combined with a dovish Reserve Bank of Australia (RBA) rate hike, may keep AUDUSD under pressure, while NZDUSD could extend losses. USDCAD remains uncertain as crude oil prices may recover part of their intraday losses if Iran-related risk aversion intensifies.
Elsewhere, gold may test key support near $4,495 amid a stronger USD, while equities are likely to drift lower. Cryptocurrencies like Bitcoin and Ethereum, however, are expected to stay firm due to technical breakouts and month-start buying support.
