There are a couple of decent-sized expiries today, but they are unlikely to greatly impact trading. Major currencies remain fairly stable, with the dollar showing vulnerability after yesterday’s struggles.

The dollar’s closing changes were not severe, yet they were enough to keep it in a weak position. Focus now shifts to month-end flows, which are expected to dominate today and Monday next week.

### The Impact Of Iran-Israel Conflict On Currency Markets

Following these flows, the dollar’s status and the influence of the Iran-Israel conflict on market sentiment will become clearer.

Today’s agenda suggests a potentially quiet session until the US PCE price index release later.

As we look at the current situation, we notice that the dollar continues to show some softness. While initial moves weren’t large in percentage terms, the pattern that’s being formed does paint a picture of vulnerability. The current positioning seems finely balanced. Recent struggles have pushed the greenback into more sensitive territory, and we’re watching now to see whether it can steady or if fresh selling pressure builds.

The focus over the next few sessions is likely to stay fixed on month-end flows. These can often pull markets in unexpected directions, particularly when they coincide with other data or geopolitical tension. They tend to show strongest during the London fix and the last trading sessions of the month. We’ve seen before how these flows can trigger moves that may not necessarily last long but still cause temporary dislocations, especially in short-dated options.

With fewer important expiries on the radar, and many traders looking ahead to today’s PCE figures out of the US, we’re not expecting immediate disruptions. That said, option-related activity sometimes clusters around times of lower liquidity. This can exaggerate movement, so traders of short-tenor contracts should be slightly more cautious than usual from now into early next week.

### Middle East Tensions And Risk Appetite

In the macro background, tensions in the Middle East continue to weigh on risk appetite. This factor cannot be sidelined. Pricing remains sensitive to new headlines, which means intraday volatility may suddenly lift without any warning from scheduled releases. For those of us managing gamma exposure, it becomes important to remain alert during otherwise quiet hours, particularly leading up to New York open.

Powell and his colleagues remain mostly silent for now, following several recent public remarks that left markets unconvinced of any dramatic policy shift. As such, the PCE inflation number today will likely do more of the talking. Derivatives linked to US rates may start to reflect forward skews if the print surprises meaningfully in either direction.

Looking across other G10 currency pairs, most are treading water in calm ranges, but we’ve noticed small signs that positioning is no longer one-sided. When markets become more balanced, the cost of hedging typically rises. This shift slowly builds a case for a pick-up in realised volatility.

For now, risk sentiment is cautious, driven more by uncertainty than by any single dominant theme. Until that changes, short-dated gamma remains somewhat underpriced considering what’s on the horizon. Those of us trading around these structures may want to prepare for a less predictable tape in the coming days.

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