Global markets traded with a cautiously upbeat tone early Thursday as easing U.S.-Iran tensions continued to improve risk appetite. Optimism strengthened after positive developments from Washington and Tehran on Wednesday, while stronger April Purchasing Managers’ Indexes (PMIs) from major economies and encouraging China-Europe trade headlines further lifted sentiment. Still, traders stayed cautious ahead of major U.S. economic data, Iran’s response to the latest U.S. peace proposal, and continued hawkish comments from central bank officials.
The Middle East remained the primary market focus. Tehran is expected to respond Thursday to Washington’s proposed peace framework, while crude oil prices falling below $100 per barrel reflected expectations of easing geopolitical risks. Lower oil prices also pushed bond yields down, easing concerns over further interest rate hikes that recently pressured equities.
Analysts said economic, political, and strategic pressures strongly support maintaining the ceasefire and moving toward diplomatic negotiations by late May or shortly after, especially as a military solution appears increasingly unlikely. Concerns are also reportedly rising among Trump advisers over the political and economic costs of a prolonged Iran conflict and higher fuel prices ahead of the 2026 midterm elections.
On the trade side, U.S. Senator Steve Daines met Chinese Foreign Minister Wang Yi in Beijing ahead of next week’s planned meeting between U.S. President Donald Trump and Chinese President Xi Jinping on May 14-15. The visit will mark the first U.S. presidential trip to China since 2017. Daines said Washington wants “de-escalation, not decoupling,” while acknowledging that trade disputes between both countries remain unresolved.
U.S. economic data also supported sentiment after the April Automatic Data Processing (ADP) employment report showed private payrolls increased by 109K versus forecasts of 99K, marking the strongest growth since April 2025.
Meanwhile, Federal Reserve (Fed) officials continued highlighting inflation risks. Chicago Fed President Austan Goolsbee warned that the Iran conflict is creating an inflation shock and said prolonged high energy prices could raise inflation expectations further. St. Louis Fed President Alberto Musalem also said inflation remains above target, with tariffs and oil-related pressures still posing upside risks despite stable labor market conditions.
In currency markets, the U.S. Dollar Index (DXY) stayed near a 10-week low, supporting major currencies despite limited momentum. EURUSD and GBPUSD extended gains for a third straight day, while USDJPY lacked clear direction. AUDUSD and NZDUSD remained near their strongest levels since June 2022 and early March, respectively, while USDCAD rose for a second consecutive session. Crude oil prices weakened for a third straight day after hitting a two-week low on Wednesday, while gold stayed mildly supported near weekly highs. Cryptocurrencies trimmed part of their weekly gains after a late Wednesday pullback, although Asia-Pacific equities continued tracking Wall Street higher amid improving risk sentiment.
EURUSD struggles to extend its three-day recovery as stronger U.S. data offsets upbeat European Union (EU) and German Purchasing Managers’ Indexes (PMIs), while mixed signals over the EU-U.S. trade deal and Trump’s latest tariffs on the bloc also test the buyers.
In Europe, EU trade negotiator Bernd Lange said progress is being made on EU-U.S. trade legislation, though further talks are needed ahead of the May 19 trilogue meeting in Strasbourg.
Meanwhile, cautious sentiment ahead of today’s key Iran update on the U.S. proposal to end the conflict is limiting EURUSD movement, although hopes for de-escalation continue supporting buyers.
Looking ahead, traders will watch EU Retail Sales, U.S. Jobless Claims, and other labor market data, along with comments from mid-tier European Central Bank (ECB) and Federal Reserve (Fed) officials, for fresh EURUSD direction.
GBPUSD follows EURUSD and stays firm for a third straight day, though upside momentum remains limited. The recent gains in the Cable pair are mainly driven by a weaker U.S. Dollar.
In Japan, USDJPY trades unevenly as markets react to improved global risk sentiment, Bank of Japan (BOJ) minutes, and renewed concerns over possible currency intervention after the holiday break.
BOJ March minutes showed policymakers remain open to further rate hikes if economic growth and inflation continue improving. The central bank kept interest rates unchanged at 0.75% in an 8-1 vote, but members expressed concern over Iran-related inflation risks and the danger of tightening too slowly. Japan’s top currency official, Masato Mimura, also reiterated that authorities are closely monitoring foreign exchange markets, reinforcing speculation of recent yen-buying intervention.
Market’s cautious optimism, along with broadly softer U.S. Dollar conditions and supportive regional cues from Australia and New Zealand, keeps AUDUSD and NZDUSD firm near recent highs, marking their strongest levels since June 2022 and early March, respectively. However, USDCAD moves against the trend, extending gains for a second straight day as weaker crude oil prices weigh on Canada’s key export, oil.
The Australian Dollar (AUD) and New Zealand Dollar (NZD) remain supported as falling oil prices and lower bond yields help ease inflation concerns.
However, Australia’s trade data was weaker, showing the first trade deficit since 2017 with a March shortfall of AUD 1.8 billion. Imports surged 14.1% month-on-month, driven by a 204% jump in data centre equipment and a 54% rise in fuel costs, while exports fell 2.7%. On a quarterly basis, imports rose 2.5% while export earnings declined 1.2%, highlighting structural pressure in trade flows.
Reserve Bank of New Zealand (RBNZ) Governor Breman said inflation could remain elevated in the near term while growth slows, adding that New Zealand house prices are expected to stay broadly stable with only modest long-term gains.
Bank of Canada Governor Tiff Macklem warned that persistently high oil prices could eventually force consecutive interest rate hikes if inflation spreads more widely across the economy, even though policy rates remain unchanged for now.
WTI crude oil remains under pressure, falling for a third straight session after touching a two-week low on Wednesday. Expectations of easing supply risks from a possible end to the U.S.-Iran conflict outweighed a larger-than-expected draw in weekly U.S. crude inventories, keeping sellers in control.
Gold prices, meanwhile, extended gains for a third consecutive day, supported by a softer U.S. Dollar and mildly positive market sentiment, with prices testing the 50-day Exponential Moving Average (EMA). Additional support comes from steady central bank demand, though upside remains limited as major central banks maintain a hawkish stance. Concerns that Iran may resist U.S. conditions and that the conflict may not resolve quickly are also tempering bullish momentum.
Cryptocurrencies lag behind broader risk-on sentiment, with Bitcoin (BTC) posting its first daily loss in four sessions after reaching its highest level since late January the previous day. Ethereum (ETH) extends losses for a second straight day, continuing its pullback from a two-week high.
In Asia, markets reflect a stronger risk appetite. Japan’s Nikkei 225 surged more than 4% after returning from the Golden Week holiday, supported by easing Iran tensions, firmer Japanese government bonds, and strong technology-sector earnings.
In the U.S., stock futures traded mostly flat ahead of Friday’s Nonfarm Payrolls (NFP) report, following record closes on Wall Street. Speculation briefly emerged after optimistic labor market comments from Trump, though suggestions that he had advance knowledge of a strong NFP print remain unconfirmed.
The S&P 500 and NASDAQ Composite both finished at record highs, while the Dow Jones Industrial Average (DJIA) briefly moved above 50,000 for the first time since February 12 before closing slightly below that level. The DJIA still rose 612 points, or 1.24%, while the NASDAQ gained 2.02% and the S&P 500 advanced 1.46%.
Eurozone Retail Sales, U.S. Jobless Claims, Nonfarm Productivity, and Unit Labor Costs will join speeches from mid-tier European Central Bank (ECB) and Federal Reserve (Fed) officials in shaping Thursday’s economic calendar. However, the main focus remains on developments in the U.S.-Iran peace process, with Tehran expected to deliver its response to the U.S. peace proposal via Pakistan later in the day.
While incoming U.S. data and Federal Open Market Committee (FOMC) signals may challenge U.S. Dollar weakness, growing optimism around a potential end to the U.S.-Iran conflict could limit any Dollar rebound. As a result, major currencies and most commodities, excluding crude oil, may stay slightly supported, while cryptocurrencies could remain mixed and turn weaker if sentiment deteriorates.
EURUSD may continue to hold its recovery above the 200-day Simple Moving Average (SMA), while USDJPY could drift toward that same key SMA support level. GBPUSD, AUDUSD, and NZDUSD are likely to trade with a mild upward bias, with gains possible if no negative surprises emerge, and further upside supported by softer crude oil. Gold may need a break above the 50-day Exponential Moving Average (EMA) to extend its recovery, while equities are expected to maintain a slower upward drift rather than a strong rally.
May the trading luck be with you!
