United States
The greenback has surrendered its initial safe-haven bid as market participants pivot toward negotiation narratives and away from escalation fears. The US deadline regarding the Strait of Hormuz has been extended into tomorrow, and this shift in timeline has allowed for a reassessment of near-term geopolitical risks. Early in the session, the dollar rallied sharply on risk-off positioning, but as the North American trading session approaches, the greenback is now trading lower against all G10 and emerging market currencies. The initial flight-to-safety demand that typically accompanies Middle East tensions has faded in favor of optimism surrounding a potential 45-day cease-fire framework being negotiated by Pakistan, Egypt, and Türkiye.
The broad dollar index reflects this pullback, though underlying momentum remains vulnerable to any deterioration in diplomatic efforts. Futures markets are pricing in a fairly high conviction that the Federal Reserve will maintain its current policy stance in the coming months, with no rate adjustments anticipated. The March ISM services survey will be released today and is expected to show a slowdown in activity alongside elevated price pressures. Most economic data arriving this week will be pre-conflict in nature, limiting its immediate policy relevance. The mid-week release of the FOMC meeting minutes from the previous session may provide valuable insight into how policymakers are balancing dual mandate risks, though current market expectations suggest a patient approach to policy calibration.
US index futures are trading firmer, up 0.25% to 0.50%, reflecting the improved risk sentiment. Treasury yields remain elevated, with the 10-year benchmark holding near 4.35%, up substantially from pre-conflict levels near 3.94%. This 41 basis point move higher underscores the structural shift in rate expectations and geopolitical risk premiums embedded in longer-duration US debt.
Eurozone
The euro finished the holiday-thinned session before the weekend on a soft note, trading near session lows around $1.1515. The single currency slipped further to $1.1505 during early Asia-Pacific dealings before rebounding sharply on the back of renewed cease-fire optimism. The recovery has been decisive, with the euro taking out the pre-weekend high near $1.1550 and rallying to almost $1.1570. This move reflects a broader shift in risk sentiment as investors unwind defensive positioning and rotate back into higher-yielding assets.
The technical picture for EUR/USD has turned constructively bullish on this relief rally. The next important technical resistance area sits at $1.1600, with a secondary cluster of resistance between $1.1630 and $1.1640. A decisive break above $1.1600 would open the door to a test of the $1.1630-40 zone. The euro’s ability to sustain these gains will depend heavily on whether the cease-fire negotiations progress or falter. Should diplomatic efforts collapse, the euro could quickly reverse and retest lower support levels, as eurozone economic data remains fragile and the ECB’s policy stance remains accommodative relative to other major central banks.
United Kingdom
Sterling traded with considerable volume ahead of the weekend and slipped back below the $1.32 handle in North American dealings. Earlier in the session, cable held above the weekly low set near $1.3160, a level not seen since last November. However, the currency recovered sharply, clearing last Friday’s high near $1.3245 to reach nearly $1.3260 as risk appetite returned. This recovery reflects the same cease-fire-driven narrative supporting other risk assets.
From a technical standpoint, the next hurdle for cable lies around $1.3285. There are significant option expiries for GBP475 million struck at $1.3300 that expire today, which may act as a soft ceiling in the near term as market makers manage gamma exposure. A break above this level would suggest further upside momentum toward $1.3350 and beyond. The Bank of England’s policy outlook remains in focus, though near-term moves are being driven by broader geopolitical risk-off and risk-on dynamics rather than UK-specific economic developments.
China
The offshore yuan remains range-bound with mainland markets closed for the extended holiday. The greenback has been contained within last Thursday’s range, oscillating between CNH6.8725 and CNH6.9040. This relative stability in USD/CNH has made the currency pair attractive for certain market participants seeking a less volatile hedge or positioning vehicle. The PBOC’s fixing mechanism continues to provide an anchor for offshore price action, though without fresh mainland economic data or policy signals, momentum remains subdued.
The stability of the Chinese currency contrasts sharply with the volatility seen in other major pairs, particularly those with higher geopolitical sensitivity. Chinese government bonds have also attracted attention from international investors given their relative stability since the outbreak of Middle East tensions. The 10-year Chinese bond yield has remained virtually flat, whereas the 10-year Treasury yield has risen 40 basis points, the 10-year Gilt yield has climbed nearly 60 basis points, Japan’s 10-year benchmark has advanced almost 30 basis points, and Germany’s 10-year yield has increased 35 basis points. This divergence highlights the structural demand for Chinese fixed income as a diversifier in a risk-repricing environment.
Japan
The yen has attracted considerable attention from traders and central bank observers alike. The conditions for material intervention by Japanese officials to support the yen do not currently appear present, and the market continues to probe for the official pain threshold. The dollar edged up to almost JPY159.85, marking a five-day high, before retreating to nearly JPY159.30. Last Friday’s low was established around JPY159.45, providing a key reference point for near-term support.
A break of JPY159.00, where approximately $672 million in options expire late today, could trigger a move toward last week’s low near JPY158.30. This option expiry at JPY159.00 represents a potential pivot point for intraday volatility, as market makers may adjust hedges as expiration approaches. The Bank of Japan’s recent meeting minutes and forward guidance remain under close scrutiny, particularly regarding any signals about potential policy normalization or intervention parameters.
The 10-year Japanese Government Bond yield has risen 3.5 basis points to a new high near 2.43%, up substantially from pre-conflict levels near 2.11%. This move reflects both the global repricing of longer-duration risk and potential expectations for continued BOJ policy normalization. The yield differential between Japanese and US debt remains a key driver of USD/JPY dynamics, and continued divergence could pressure the yen further if the Bank of Japan maintains its patient approach to policy tightening.
Canada
The loonie has traded with downside pressure as the US dollar continues to find buyers on a relative basis. The US dollar reached a four-month high against the Canadian dollar last week, slightly above CAD1.3965. The greenback has held below the pre-weekend high near CAD1.3950 and has returned to last Friday’s low around CAD1.3915. A break of CAD1.3900 could signal a move toward CAD1.3870, providing traders with a clear technical target on the downside for USD/CAD.
Canada’s economic backdrop remains weak even before accounting for any conflict-related disruptions. The services and composite PMI for March will be released today, offering insight into business activity trends. The composite PMI was above the 50 boom/bust level only once during the past year (in October) and stood at 47.1 in February. The average for the fourth quarter of 2025 was 47.3, and the first two months of 2026 averaged 46.8, indicating persistent weakness in the Canadian services sector. The Bank of Canada’s policy trajectory will likely remain data-dependent, with soft economic activity potentially opening the door to future rate cuts if geopolitical risks do not translate into persistent inflation pressures.
Australia
The Australian dollar settled about 0.25% higher last week, though this represented a faint-hearted bounce following a substantial 2.1% sell-off in the previous week. The aussie closed below the psychologically important $0.6900 level. It was initially sold to almost $0.6875 today before recovering to around $0.6935 on the back of broader risk-on sentiment. Options for A$330 million struck at $0.6900 expire today, and this expiry may act as a technical pivot point for near-term trading dynamics.
To confirm a bullish outside up day pattern, the aussie must close above $0.6915. A sustained break above this level would suggest follow-through buying and could target $0.6950 and $0.6975 in subsequent sessions. The Reserve Bank of Australia’s policy outlook and broader commodity price dynamics remain key drivers for the currency. The RBA’s recent meeting minutes and forward guidance on rate settings will be important for positioning, particularly as global financial conditions continue to adjust to geopolitical developments.
Emerging Markets
The Mexican peso has found support over the past three sessions near the 20-day moving average, which currently sits around MXN17.8350. The greenback has been sold a little through MXN17.77 today, marking its lowest level since March 26. The greenback is posting an outside down day against the peso, and a convincing close below MXN17.8250 would confirm this pattern. Should such a break materialize, initial downside targets could extend to MXN17.70. Mexican markets have reopened after the four-day weekend, and high-frequency data including gross fixed investment and private consumption from January will be released, though these readings are too historical to carry significant market impact. March domestic vehicle sales are also due, and there is a strong seasonal tendency for March sales to improve, having risen in 18 of the past 20 years. February sales stood near 118.3 thousand units.
The Indian rupee has experienced significant volatility as the Reserve Bank of India’s short squeeze campaign continues to constrain dollar positioning. The RBI engineered a squeeze last week by limiting the positions of banks and denying them access to the non-deliverable forward market, a tactic that has extended into current trading activity. The dollar peaked near INR95.1250 on March 30 but has since traded down to INR92.78, the lowest level since March 18. This represents a substantial move lower and reflects both the technical squeeze and the improving risk sentiment. The greenback frayed the 20-day moving average near INR92.83 and settled a little above INR93.06. India’s final March composite PMI stands at 57.0, up from the 56.5 preliminary estimate, though this represents the weakest reading since October 2022. While such a figure would be constructive for most countries, for India it signals a moderation in activity. The Reserve Bank of India meets at week’s end, and while none of the 13 economists surveyed by Bloomberg anticipate a change in the 5.25% repo rate, the swaps market recognizes the risk of a hike as the central bank takes measures to curtail banks’ ability to short or foster short rupee positions.
Global Markets
The extended holiday period means many global equity markets are closed today. Japanese equities were mixed, while the Kospi and Indian equity markets gained more than 1% each. S&P 500 and Nasdaq futures are trading 0.25% to 0.50% firmer, reflecting the broader improvement in risk appetite stemming from cease-fire negotiations.
Gold is trading firmly but remains within the pre-weekend range of approximately $4,554 to $4,800. The precious metal has held its ground as a geopolitical hedge, though the reduction in escalation fears has limited fresh safe-haven buying. Silver is trading marginally better than flat, slightly above the $73 level. Both metals remain supported by structural demand from central banks and inflation hedging considerations, though near-term momentum is constrained by the improved risk sentiment.
Crude oil has experienced considerable volatility in response to the geopolitical headlines. May WTI initially rose to almost $115.50, marking a new high as conflict fears peaked. However, hope that a cease-fire could be negotiated ahead of the US deadline pushed the contract down through $109, and it is currently straddling the $110 level ahead of the North American open. This represents approximately a 1% decline from earlier peaks but maintains a premium to pre-conflict levels. Brent crude has tracked similar dynamics. The binary nature of the market remains evident, with prices highly sensitive to any fresh developments regarding negotiations or escalation rhetoric. Should diplomatic efforts fail and conflict intensity increase, oil could rapidly re-test the $115+ levels, while a successful cease-fire agreement could accelerate the move toward $100 or lower.
