The US Dollar regained support as risk-off sentiment returned after renewed escalation in the Middle East and uncertainty around the Strait of Hormuz. Markets reversed earlier USD-selling that had followed optimism about possible de-escalation.
Donald Trump said Iran had requested a ceasefire, linked to reopening the Strait of Hormuz. He also indicated the conflict could continue for more weeks.
Fed Signals And Market Focus
Markets are awaiting comments from Federal Reserve officials Lorie Logan and Michelle Bowman. Recent remarks from Chair Jerome Powell have continued to shape expectations for Fed policy.
Attention is also on US non-farm payrolls due tomorrow for potential impact on Fed pricing and the Dollar. ADP payrolls came in at 62k, and the ISM manufacturing employment index was 48.7 in March, almost unchanged.
Consensus expects non-farm payrolls at 65k, while one forecast is 60k and the Bloomberg whisper number is 40k. Unemployment is expected to remain at 4.4%, with any clear rise seen as having an outsized market impact.
Reduced liquidity is expected tomorrow and Monday due to the Easter holidays. The piece notes it was created with the help of an AI tool and reviewed by an editor.
Risk Off Dollar Bid
The US Dollar is gaining strength as a risk-off tone returns to the markets. This sentiment is being driven by renewed tensions around key global shipping lanes, prompting a flight to safety. We saw a similar dynamic during the supply chain scares in late 2025, where dollar-denominated assets outperformed.
This environment puts a heavy focus on the Federal Reserve’s next moves and the data that informs them. Comments from Fed officials will be closely watched, especially following recent statements suggesting they are closely monitoring signs of a slowdown. This data-dependency means derivative traders should be positioned for increased volatility around key economic releases.
All attention is now on tomorrow’s non-farm payrolls (NFP) report for March. After the ADP private payrolls report came in this week at 168,000, slightly missing the 175,000 forecast, traders are nervous about the state of the US labor market. A weak NFP number, below the consensus estimate of 180,000, would likely increase bets on a future Fed rate cut and cause significant market movement.
The unemployment rate will be just as critical as the headline jobs number, as it is a direct measure of labor market slack. A surprise increase from the current 3.8% could have an outsized impact on rate expectations. History shows that a sudden jump in the unemployment rate, such as the one seen in the lead-up to the 2008 recession, is a powerful signal for traders.
Be mindful that market liquidity will likely decrease tomorrow due to the Good Friday holiday. The release of the NFP report during these thinner conditions can lead to exaggerated price swings. This environment favors strategies that can profit from a spike in volatility, such as buying straddles on major currency pairs like EUR/USD.
