Fragile Calm Keeps Currency Markets on Edge
A cautious calm settled over global currency markets on Thursday, as traders closely monitored whether the ceasefire between the U.S. and Iran would hold. The agreement, announced a day earlier, had already triggered a broad sell-off in the U.S. dollar.
Ceasefire Doubts and Rising Geopolitical Risks
Despite the initial optimism, the deal appeared unstable. Israel continued airstrikes in Lebanon, while Iran showed no signs of reopening the Strait of Hormuz — a critical global energy route whose closure has caused one of the most severe disruptions to energy supplies in history.
Iranian officials were expected to travel to Pakistan later on Thursday for the first round of peace talks. However, Tehran made it clear that negotiations would not proceed as long as Israeli attacks in Lebanon continued.
At the same time, President Donald Trump stated that all U.S. military assets would remain deployed in and around Iran until full compliance with the agreement was achieved.
Forex Market Reaction: Dollar, Euro, and Pound
Ongoing uncertainty kept currency markets tense.
The euro rose 0.17% to $1.1683 after gaining 0.6% the previous day, though it pulled back from a one-month high of $1.1721.
The British pound followed a similar pattern, climbing 0.21% to $1.342 after a strong 0.77% gain on Wednesday, but retreating from an earlier peak of $1.348.
Yen Weakness and Limited Dollar Recovery
The Japanese yen weakened slightly, with the dollar rising 0.3% to 159.055 yen, after briefly dipping below the 158 level in the prior session.
According to Derek Halpenny, Head of Global Markets Research EMEA at MUFG, the ongoing closure of the Strait of Hormuz underscores the fragile nature of the ceasefire. While the dollar has shown some recovery, overall market movements remain relatively modest.
He added that scheduled peace talks in Pakistan are helping to prevent a full reversal of Wednesday’s currency moves.
Inflation Data and Federal Reserve Outlook
Meanwhile, fresh U.S. economic data added another layer of complexity. Personal spending figures released on Thursday showed inflation rising in line with expectations in February, with further increases likely in March due to geopolitical tensions.
The Personal Consumption Expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — increased by 0.4% following a 0.3% rise in January, according to the Commerce Department.
This trend is expected to reduce the likelihood of near-term interest rate cuts by the Federal Reserve.
Japan’s Economy and Central Bank Signals
In Japan, consumer confidence declined in March for the first time in three months, reflecting concerns over the economic impact of the Middle East conflict.
Bank of Japan Governor Kazuo Ueda noted that real interest rates remain clearly negative, maintaining accommodative financial conditions. Despite the data, the yen showed limited immediate reaction.
Other Currencies and Crypto Market Movement
Elsewhere, currency markets remained relatively stable. The Australian dollar rose 0.15% to $0.7054, while the New Zealand dollar gained 0.46% to $0.585.
In the cryptocurrency market, bitcoin declined by 0.97%, trading at $70,680.
