The US Dollar weakened against major currencies, including the British Pound (GBP) and Canadian Dollar (CAD), as markets responded to evolving headlines regarding the US-Iran conflict. On Monday, GBP/USD climbed above 1.3240, advancing by over 0.40%, while USD/CAD edged lower to trade around 1.3921, near four-month highs for the pair but reflecting CAD strength on the day [1][2]. The improvement in risk appetite was attributed to reports from Axios that US and Israeli officials, along with regional mediators, are discussing a potential 45-day ceasefire, which could be extended if needed. This news lifted market sentiment and weighed on the Greenback, with US equities posting gains between 0.15% and 0.52% [1][2].
However, uncertainty persisted as Iran called for a permanent end to the war and rejected a ceasefire framework conveyed via Pakistan, according to IRNA. A US official cited by Axios described Iran's 10-point response as 'maximalist,' casting doubt on the likelihood of a diplomatic breakthrough before the deadline set by US President Donald Trump. Trump warned of potential strikes on power plants and other civilian infrastructure if the Strait of Hormuz is not reopened by Tuesday, 8:00 p.m. Eastern Time [2].
On the economic front, the US ISM Services PMI for March fell to 54 from 56.1 in February, missing economists' forecasts of 55. The Prices Paid sub-component of the PMI rose to 70.7, its highest level since October 2022, driven by higher oil and fuel costs [1][2]. Last week, US Nonfarm Payrolls increased by 178K in March, exceeding estimates of 60K, while the Unemployment Rate declined to 4.3% from 4.4% in February [1]. Despite these labor market gains, expectations for Federal Reserve rate cuts remain absent, with the Fed funds rate projected to stay in the 3.50%-3.75% range through 2026, according to Prime Market Terminal [1].
Looking ahead, traders are focused on upcoming US inflation data, including the Consumer Price Index (CPI) for March and the Personal Consumption Expenditures (PCE) Price Index for February, as well as the Federal Reserve's meeting minutes. In Canada, March employment data will be closely watched [1][2]. Technical analysis for GBP/USD indicates a mildly bearish near-term bias, with resistance at 1.3320 and support at 1.3187, while a daily close above 1.35 would be needed to shift the tone bullish [1].
CONCLUSION
Ceasefire rumors in the US-Iran conflict have improved risk sentiment and pressured the US Dollar, benefiting both the British Pound and Canadian Dollar. However, ongoing geopolitical uncertainty and mixed economic data are keeping markets cautious, with attention turning to upcoming inflation and employment releases for further direction.