Market Overview
Geopolitical tensions in the Middle East are weighing heavily on risk appetite as markets head into the Good Friday holiday. The recent attack on an Iranian bridge has raised the specter of a retaliatory response from Tehran, creating a cautious undertone across asset classes ahead of the weekend. With many financial centers closed on Monday as well, traders are approaching the session with measured positioning, particularly ahead of the critical US March employment figures that will provide crucial insight into labor market dynamics.
United States
The focal point of trading activity today centers on the US March non-farm payrolls report, which carries outsized significance given the structural shifts in the American labor market. The median Bloomberg forecast calls for a 65,000 rise in payrolls, with the unemployment rate expected to remain unchanged at 4.4%. This modest jobs growth projection reflects a fundamental shift in labor market equilibrium, driven substantially by the tightening of immigration policy affecting both legal and illegal entry. The US labor force is barely expanding, which means that relatively flat job creation is now consistent with a new steady-state equilibrium rather than signaling economic weakness.
Over the past 12 months, the US economy has generated approximately 156,000 jobs, while the unemployment rate has averaged 4.3%. The current jobless rate stands at 4.4%, which aligns precisely with the Federal Reserve’s median projection for year-end, as communicated in last month’s policy guidance. This low unemployment rate appears to contradict widespread concerns about stagflation, suggesting that labor market slack remains limited and wage pressures may persist.
It is worth noting that February’s payroll loss of 92,000 jobs remains subject to revision, and the trajectory since April’s previous employment milestone has been decidedly negative. The US economy has shed approximately 20,000 jobs overall during this period, with the manufacturing sector bearing particular strain at a loss of 90,000 positions. Persistent downward revisions to employment figures have become a recurring theme, partly attributable to reduced participation by businesses in timely reporting procedures.
The final services and composite purchasing managers’ indices carry secondary importance today, as preliminary readings typically prove sufficiently accurate for trading purposes. Meanwhile, broader geopolitical developments are also influencing market sentiment. Reports of significant personnel changes within the US military establishment—specifically the removal of the Army Chief of Staff and two additional generals—have sparked considerable discussion. While ostensibly related to disagreements over promotions and operational strategy, these moves have fueled speculation about potential military escalation and the possibility of direct ground intervention in the Middle East conflict. Such concerns are naturally dampening risk appetite ahead of the weekend.
On the monetary policy front, foreign central banks demonstrated renewed appetite for US assets during the week ending Wednesday. This marked the first week in six weeks that foreign custody holders did not liquidate Treasury and Agency holdings at the Federal Reserve. In fact, holdings increased by approximately $3.3 billion, signaling a potential shift in the international demand for dollar-denominated fixed income assets.
The US dollar index remains supported by the current risk-off environment, though the thin holiday markets are limiting the scope for aggressive directional moves. The greenback is likely to find additional support if Middle East tensions escalate further, though strong US employment data could provide countervailing upward momentum.
Eurozone
The euro has experienced considerable volatility following President Trump’s national address on Wednesday evening, which triggered a sharp selloff in the single currency. The euro retraced 61.8% of the week’s prior rally, dipping slightly below the $1.1515 level before recovering to approximately $1.1565. However, momentum stalled at that juncture, and the currency has since consolidated into a narrow range of roughly $1.1530 to $1.1545 in thin holiday trading.
Two significant option expiries are constraining intraday range development: approximately 512 million euros struck at $1.1525 and roughly 850 million euros at the $1.1550 level, both expiring today. While the US employment data could potentially expand trading ranges, the persistent geopolitical risks surrounding Middle East escalation are likely to deter aggressive euro strength ahead of the weekend closure.
On the data front, France reported a larger-than-expected 0.7% decline in February industrial output, with January’s previously reported 0.5% increase revised downward to 0.2%. The aggregate eurozone industrial production estimate is scheduled for release on April 15th. These softer manufacturing readings add to concerns about economic momentum in the currency bloc and may provide additional headwinds to euro appreciation.
United Kingdom
Sterling has experienced a volatile week, marking new lows for the year near $1.3160 on Tuesday before rallying to approximately $1.3345 on Wednesday. However, the currency retreated sharply yesterday, sliding back to almost $1.3180 before recovering to around $1.3250, where momentum subsequently stalled. Cable is currently confined to a narrow band of approximately $1.3220 to $1.3245, with option expiries of 375 million pounds at the $1.32 strike adding technical significance to this level today.
The Bank of England’s policy stance and broader UK economic conditions remain relevant backdrops, though holiday-thinned liquidity is limiting the scope for significant directional movement. The geopolitical uncertainty surrounding Middle East developments is similarly constraining sterling’s upside potential ahead of the weekend.
China
The Chinese yuan has demonstrated resilience despite broader dollar strength, finding support in front of the CNH6.8720 level offshore. The offshore yuan has not traded below CNH6.8700 for three weeks, establishing a meaningful technical floor. Although the dollar traded up to CNH6.9040, it subsequently settled below CNH6.89, and has barely spent any time above yesterday’s settlement level, slipping slightly below CNH6.88.
The People’s Bank of China has been signaling a more accommodative tone through its daily reference rate settings. The PBOC has lowered the midpoint rate sharply over the past two sessions, totaling a reduction of slightly less than 0.5%. More significantly, the central bank has now lowered the fix for three consecutive sessions. This represents a noteworthy pattern, as the PBOC has not set the rate lower for four consecutive sessions anywhere during 2025. Today’s fix was set at CNY6.8929, compared to CNY6.8880 yesterday (a new three-year low) and CNY6.9141 one week ago.
China’s economic momentum is showing signs of deceleration. The RatingDog March services purchasing managers’ index slowed to 52.1 from 56.7 in February, unwinding the previous month’s significant gains from January’s 52.3. The composite PMI similarly eased to 51.5 from 55.4 in February. For context, the composite index averaged 51.3 throughout 2025 and 51.4 in the fourth quarter of 2025, while the first quarter 2026 average stands at 52.8, suggesting a modest acceleration in recent weeks.
Japan
The US dollar approached JPY159.75 in early North American turnover yesterday before pulling back to around JPY159.25. The greenback subsequently recovered and is currently trading quietly within a narrow band of approximately JPY159.45 to JPY159.70. Options expiring today for approximately $430 million struck at JPY160 are providing technical resistance at that level.
Japan reported its final March services and composite purchasing managers’ indices. The services PMI stands at 53.4, revised upward from the initial flash estimate of 52.8, though down from 53.8 in February, which represented the highest reading since April 2024. The composite index came in at 53.0, better than the preliminary estimate of 52.5 but down from 53.9 in February. These readings suggest a moderation in Japanese service sector momentum despite remaining in expansionary territory.
The Japanese yen remains sensitive to geopolitical risk developments and the broader dollar strength narrative. With the Bank of Japan maintaining its gradual policy normalization path, the USD/JPY pair is likely to remain range-bound in the absence of significant new catalysts or escalation in Middle East tensions.
Canada
The US dollar recorded the year’s high against the Canadian dollar on Tuesday near CAD1.3965 before backing off to almost CAD1.3870 on Wednesday. The greenback caught a fresh bid yesterday that lifted it to CAD1.3935. Currently, the loonie is confined to a narrow range of approximately CAD1.3915 to slightly above CAD1.3925.
Daily momentum indicators are stretched, though they are unlikely to prevent a challenge on this week’s highs and potentially a test of the CAD1.4000-15 resistance area. The US dollar’s strength reflects both the broader risk-off environment and relative yield differentials between US and Canadian fixed income markets. Canadian economic data and Bank of Canada policy communications will remain secondary considerations until holiday-driven volatility subsides.
Australia
The Australian dollar was sold aggressively to $0.6860 during the risk-off moves that followed President Trump’s address on Wednesday. The aussie recovered to almost $0.6920 in North American turnover but has remained slightly below that level today. The currency frayed the $0.6900 level but not by a meaningful margin, with technical support provided by option expiries of approximately 840 million Australian dollars struck at $0.6880 and roughly 540 million dollars at $0.6870, both expiring today.
The Reserve Bank of Australia’s policy stance and broader commodity price dynamics remain relevant considerations for the aussie, though geopolitical risk aversion is currently the dominant driver of currency movements. Holiday-thinned liquidity is confining the currency to relatively tight ranges ahead of the weekend.
Emerging Markets
The US dollar recorded an inside day against the Mexican peso yesterday, remaining confined to Wednesday’s range of approximately MXN17.7960 to MXN17.9680. Local Mexican markets were closed yesterday and remain on holiday today. The dollar has been confined to a narrow range around yesterday’s MXN17.87 close, exhibiting a modest downside bias in the absence of domestic catalysts.
Indian markets are closed for the holiday today, limiting activity in the Indian rupee. The broader emerging market complex is experiencing typical holiday-driven thinness, with risk appetite constrained by geopolitical considerations.
Global Markets
The holiday period has resulted in widespread financial center closures, leaving equity market activity concentrated in a limited number of Asia-Pacific bourses that remained open. The Nikkei gained approximately 1.25%, while South Korea’s Kospi advanced 2.75%. However, mainland China and several smaller regional bourses eased during the session. European bourses are closed, though the Stoxx 600 has recorded a 2.7% gain for the week. US stock market futures are trading off by approximately 0.2% to 0.3%, though they remain up 2.6% to 3.5% for the week ahead of the employment report.
Benchmark 10-year Treasury yields are trading flat, while the 10-year Japanese Government Bond yield has slipped slightly and is up approximately 1.5 basis points for the week. European bond yields are off 4 to 13 basis points lower for the week, with peripheral spreads narrowing. The US 10-year Treasury yield is currently at 4.30%, approximately 4.5 basis points lower than last week’s settlement.
Trading in precious metals and crude oil has been curtailed by the holiday, with gold and silver not actively trading. Similarly, crude oil markets (both WTI and Brent) are experiencing reduced activity. The broader commodity complex remains sensitive to geopolitical developments, with any escalation in Middle East tensions likely to support energy prices when markets resume normal operations.
