Global foreign exchange markets remained cautious on Friday, with trading volumes subdued due to the Good Friday holiday and heightened geopolitical tensions in the Middle East. The US Dollar (USD) held firm against major peers, supported by safe-haven demand following threats and military actions involving the US and Iran. President Donald Trump warned of intensified military action and urged Iran to negotiate, while Iran's Foreign Minister Abbas Araghchi stated that US strikes on civilian infrastructure would not force a retreat, describing them as evidence of an opponent in disarray and moral decline [3][5][7].
The market's attention was focused on the upcoming US Nonfarm Payrolls (NFP) report for March, with consensus expecting a 60,000 increase in jobs after a 92,000 decline in February and the unemployment rate anticipated to remain at 4.4% [4][5]. The positive ADP employment reading and strong ISM Manufacturing PMI earlier in the week boosted expectations for the payrolls data [4]. Analysts noted that the limited liquidity due to the holiday could amplify market reactions to the jobs report [4][5].
Currency pairs reflected the cautious sentiment and technical positioning. EUR/GBP stalled below the 0.8740 resistance area, with the Euro (EUR) up nearly 0.5% for the week and 1% over three weeks, supported by positive Eurozone manufacturing and inflation data, while UK manufacturing PMI disappointed [1]. Technical indicators for EUR/GBP showed waning bullish momentum, suggesting further consolidation [1]. EUR/JPY traded near 184.15, maintaining a mildly bullish bias above the 100-day EMA, with support from hawkish ECB comments but facing potential safe-haven flows into the Yen (JPY) if Middle East tensions escalate [2].
The Japanese Yen struggled due to uncertainty over the Bank of Japan's (BoJ) rate hike outlook, despite hints of further tightening if economic projections hold. The USD/JPY pair remained around 159.60, with the Yen under pressure from both policy uncertainty and rising fuel costs linked to Middle East tensions [3]. GBP/USD rebounded toward 1.3250 but remained in a bearish trend, capped by key moving averages and technical resistance [6].
USD/CAD held gains above 1.3900, with the Canadian Dollar weighed by risk-off sentiment and a widening trade deficit to CAD 5.74 billion in February. The US jobs report was seen as a potential catalyst for volatility, especially given thin market conditions [4]. USD/CHF stayed near 0.8000, with the Swiss Franc's inflation rising to 0.3% YoY in March, below forecasts but the highest in a year, reflecting energy cost pressures [7].
Across the board, the US Dollar was the strongest against the New Zealand Dollar, while the British Pound and Euro also showed relative strength against the NZD. China's Services PMI eased to 52.1 in March, below expectations, adding to the cautious tone in global markets [5].
Forward-looking statements from central bank officials highlighted ongoing risks: Chicago Fed President Austan Goolsbee warned that rising oil prices could complicate US monetary policy, while the Dallas Fed president supported holding rates steady amid a stabilized but weak labor market [4][7]. ECB policymakers signaled a likely rate hike, but timing remains uncertain [2]. The UN Security Council was expected to vote on a proposal to reopen the Strait of Hormuz, but it faced opposition from China [4].
CONCLUSION
FX markets traded cautiously amid thin liquidity, with the US Dollar supported by safe-haven flows and anticipation of the US jobs report. Geopolitical tensions and central bank policy uncertainty added to market nerves, keeping volatility risks elevated. The outcome of the US NFP and developments in the Middle East are likely to drive the next major moves in global currencies.