Financial markets maintained a cautious stance on Friday following the announcement of a 10-day ceasefire between Israel and Lebanon, as confirmed by US President Donald Trump. However, Israeli Prime Minister Benjamin Netanyahu clarified that Israel has not agreed to withdraw from southern Lebanon, and the Israeli military stated that troops would remain in a 10-km deep security zone, warning residents not to return. Meanwhile, a senior Iranian official indicated that a permanent ceasefire would depend on Iran's conditions, and diplomatic efforts continue with the UK and France chairing a meeting on freedom of navigation in the Strait of Hormuz, attended by representatives from around 40 countries. Reports also suggest that a second round of US-Iran talks could occur this weekend, though no time or venue has been set [1][2].
The US Dollar Index (DXY) held steady above 98.00 in the European morning and traded around 98.20–98.30, extending gains for the second consecutive day but remaining below the nine-day EMA at 98.50. Technical analysis indicates a bearish near-term bias, with the DXY in a descending channel and the 14-day RSI around 40. Key support lies at 97.50, with a break below potentially targeting 95.56, while resistance is seen at 98.58 and 98.87. The DXY is on track to close negative for the second straight week, reflecting mixed sentiment as traders price in a roughly 30% chance of a Fed rate cut by year-end [1][2][3][5].
Currency markets reflected these geopolitical and monetary uncertainties. The US Dollar was strongest against the Japanese Yen, gaining 0.11%, while the NZD/USD pair remained depressed below 0.5900, pressured by safe-haven flows into the USD amid Hormuz risks, despite hopes for a US-Iran peace deal. The NZD/USD pair is still on track to register gains for the second week in a row, with traders awaiting further developments and FOMC member speeches for direction [1][2].
The Australian Dollar outperformed, trading up 0.1% around 0.7170 against the USD, supported by risk-on sentiment and expectations of further RBA rate hikes. The RBA is anticipated to raise its Official Cash Rate by 55 basis points to 4.65% by year-end, according to a Reuters report. Technicals for AUD/USD remain constructive, with the pair above its 20-day EMA and the RSI at 65, indicating bullish momentum [5].
In the GBP/JPY cross, the Pound struggled to attract buyers despite a better-than-expected UK GDP print, as the IMF identified the UK as the most vulnerable G7 economy to the Iran war, downgrading its 2026 growth forecast to 0.8% from 1.3%. The Japanese Yen continued to underperform due to concerns over economic strains from shipping disruptions in the Strait of Hormuz and declining expectations for a Bank of Japan rate hike in April [4].
CONCLUSION
Markets remain cautious amid ongoing geopolitical tensions and diplomatic efforts in the Middle East. The US Dollar holds steady but faces technical resistance, while the Australian Dollar benefits from risk-on sentiment and rate hike expectations. Currency pairs such as NZD/USD and GBP/JPY reflect the prevailing uncertainty, with traders awaiting further developments in US-Iran negotiations and central bank guidance.