Financial markets opened the week on a cautious note after US President Donald Trump rejected Iran's latest peace proposal, calling it 'totally unacceptable' [1][2][3][4][7]. Iran, via Pakistan, had sought an immediate end to the war, a halt to the US naval blockade, guarantees against further attacks, and recognition of its sovereignty over the Strait of Hormuz [1][3]. The lack of a concrete timeline for reopening the waterway and renewed weekend attacks have threatened the fragile ceasefire in place since early April [4][7]. Israeli Prime Minister Benjamin Netanyahu stated that the conflict with Iran is 'not over,' further dampening hopes for a swift resolution [1][9].
The US Dollar (USD) initially strengthened on safe-haven demand, particularly against the New Zealand Dollar (NZD), with the USD Index opening with a bullish gap before stabilizing near 98.00 [1][3]. The USD was the strongest against the NZD, gaining 0.33-0.36% [1][3]. However, the USD gave back some early gains as the session progressed [3]. US stock index futures traded marginally lower, with Dow Jones futures down 0.12% to near 49,630, S&P 500 futures down 0.10% to 7,410, and Nasdaq 100 futures down 0.06% to 29,300, reflecting increased risk aversion [1][4]. Rising oil prices, with Brent climbing back above $100, added strain to oil-importing economies like New Zealand and contributed to the risk-off sentiment [2][4][7][9].
US economic data showed Nonfarm Payrolls rising by 115K in April, surpassing expectations of 62K but slowing from March's 185K [1][4][7][9][10]. The unemployment rate held steady at 4.3% [4][9][10]. Despite the strong jobs report, the USD failed to gather significant strength, and the Federal Reserve is seen as having justification to maintain a restrictive monetary policy [4][7][10]. Investors are now awaiting the US Consumer Price Index (CPI) data for April, expected to show headline inflation rising to 3.4% from 3.3% in March, which could further influence Fed policy expectations [1][3][4][10].
In other markets, the USD/CHF pair attracted buyers but remained below the 0.7800 mark, with technical indicators suggesting persistent downside pressure unless prices recover above the 200-day SMA at 0.7926 [5]. The USD/CAD pair traded flat around 1.3675, with higher oil prices providing some support to the Canadian Dollar, though the broader tone remained mildly bearish [9]. The Japanese Yen (JPY) experienced volatile swings against the USD but ended the week broadly unchanged, with G10 currencies moving less than 1% against the dollar [8].
Silver (XAG/USD) extended its rally toward $81.00, but analysts warned of potential downward pressure due to rising energy costs, a stronger USD, and cautious central bank outlooks [7]. Meanwhile, the Indian Rupee (INR) remained the weakest Asian currency year-to-date, down 4.9% versus the USD, despite resilient PMI data and a modest weekly gain as oil prices softened on earlier peace hopes [6].
Looking ahead, President Trump is expected to visit Chinese President Xi Jinping this week to discuss Iran, the Strait of Hormuz, and nuclear issues, which may influence market sentiment [2]. Corporate earnings from major US companies and the upcoming US inflation data are also in focus for investors [4][10].
CONCLUSION
Markets have turned risk-averse following the US rejection of Iran's peace proposal, with rising oil prices and geopolitical tensions weighing on sentiment. The US Dollar has benefited from safe-haven flows, while equities and risk-sensitive currencies have come under pressure. Investors are now closely watching upcoming US inflation data and diplomatic developments for further direction.