Major currency pairs traded within tight ranges on Monday as investors largely ignored the latest escalation in Middle East tensions, choosing instead to focus on upcoming economic data. The US dollar index remained near the 99.00 level during the European session, with traders refraining from aggressive bets ahead of the ISM Manufacturing Purchasing Managers' Index (PMI) for May, due later in the day.
Geopolitical Developments Take a Back Seat
Over the weekend, US President Donald Trump announced on Truth Social that the United States would lift the blockade and allow ships stuck in the Strait of Hormuz to begin heading home. He also indicated plans to hold a meeting to finalize a potential deal with Iran. However, Iran's Fars News agency reported that Tehran rejected Trump's claims, and further reports suggested Trump is seeking changes related to the Strait of Hormuz and the removal of enriched uranium in a proposed Memorandum of Understanding.
The US military also confirmed attacks on Iranian radar and drone sites in Goruk and on Qehm island, while Iran's Islamic Revolutionary Guard Corps said it had targeted a US air base in response. Despite these developments, financial markets showed limited reaction, with investors remaining cautious ahead of fresh economic data and awaiting further clarity on geopolitical risks.
Dollar Steady Ahead of Key Data
The US Dollar Index held broadly stable, trading near the 99.00 mark as market participants awaited the ISM Manufacturing PMI report. US stock index futures edged modestly higher, indicating a slightly positive tone in equity markets despite ongoing geopolitical uncertainty. For more on how the dollar is positioning ahead of jobs data, see Dollar Steady, Markets Cautious Ahead of US Jobs Report; Gold, Oil Range-Bound.
Rupee Flat, Gold Retreats
The Indian rupee closed little changed on Monday, as gains from MSCI equity index rebalancing inflows were offset by corporate hedging demand. Market participants largely stayed on the sidelines ahead of the upcoming monetary policy decision, keeping the currency range-bound.
Gold prices moved lower after recording gains in the previous two sessions, declining toward the $4,500 level as investors locked in profits. The pullback came even as Middle East tensions remained elevated, suggesting safe-haven demand had eased. For a broader perspective on gold amid geopolitical crosscurrents, see Gold Holds Near $4,485 as Gulf Tensions and Fed Rate Risks Create Crosscurrents.
Major Currency Pairs in Narrow Ranges
EUR/USD posted modest gains on Friday but struggled to establish a clear direction early Monday, fluctuating around the 1.1650 mark. The British pound remained largely stable, with GBP/USD trading sideways above 1.3450 after ending the previous week virtually unchanged. The Japanese yen weakened slightly against the dollar, with USD/JPY edging higher to near 159.50 during the European session.
Among commodity-linked currencies, the New Zealand dollar pulled back after a strong run. NZD/USD had recorded gains for three consecutive trading days, reaching its highest level since late February near 0.6000 on Friday, before correcting to around 0.5970 on Monday. The Australian dollar also lacked a clear direction, moving within a narrow range below the 0.7200 level.
Outlook
Currency markets remain subdued as investors balance geopolitical risks against upcoming economic data. The focus now shifts to the US ISM Manufacturing PMI and further developments in the Middle East. For more on how Middle East tensions are affecting broader markets, see Global Markets Turn Cautious as Middle East Tensions Escalate; Oil Surges 5%.
This article is for informational purposes only and does not constitute financial advice.
