Market Focus Shifts to Pivotal U.S. Nonfarm Payrolls Data

EUR/USD remained under pressure on Thursday, as persistent geopolitical tensions in the Middle East supported the US Dollar and weighed on the Euro.

Market sentiment continues to be driven by rapidly shifting headlines surrounding the US-Iran conflict. Earlier expectations of a potential de-escalation were dampened after US President Donald Trump signaled that military operations would continue, offering no clear timeline for resolution.

Following these remarks, oil prices resumed their upward trajectory amid renewed concerns over potential supply disruptions, particularly through the Strait of Hormuz. The move higher in crude also supported the US Dollar, which rebounded from a one-week low as demand for safe-haven assets increased.

Markets are currently pricing in two to three additional rate hikes from the European Central Bank by year-end. In contrast, expectations for the Federal Reserve point to a prolonged pause, with rates likely to remain unchanged through 2026.

The Eurozone is seen as more exposed to an energy shock due to its reliance on imported energy, while the United States, as a net exporter, is relatively better positioned to absorb rising oil prices.

At the same time, inflation in the Eurozone is closer to the ECB’s 2% target, whereas US price pressures remain comparatively elevated, reinforcing a cautious stance from the Federal Reserve.

Looking ahead, market focus shifts to Friday’s US Nonfarm Payrolls report, which is expected to provide further insight into the Federal Reserve’s policy path and could drive near-term direction in EUR/USD.

Gold prices edged lower on Thursday, with XAU/USD ending the session near $4,675 as markets remained cautious ahead of the US Nonfarm Payrolls report.

The precious metal came under pressure after US President Donald Trump signaled an escalation in the conflict with Iran, a move that drove oil prices higher and shifted expectations around US monetary policy.

In a televised address on Thursday, Trump stated that key objectives in Iran were “nearing completion,” but warned that the United States would intensify its actions over the next two to three weeks. The comments dampened hopes for a near-term de-escalation and reinforced concerns about prolonged geopolitical tensions.

Market participants now turn their attention to the US March employment report, which is expected to provide fresh guidance on the Federal Reserve’s policy outlook. Economists forecast Nonfarm Payrolls to rise by 60,000 in March, while the Unemployment Rate is projected to hold steady at 4.4%.

A weaker-than-expected labor market report could pressure the US Dollar and offer support to gold prices in the near term, while a stronger reading may reinforce the current bearish bias in the metal.

Oil prices rallied sharply on Thursday with US crude jumping more than 13% as markets reacted to escalating tensions in the Middle East.

The surge followed remarks from US President Donald Trump, who signaled that military operations against Iran would intensify, while offering no clear timeline for a resolution. The comments heightened concerns over prolonged supply disruptions, particularly through the strategically critical Strait of Hormuz.

The waterway, which handles roughly a fifth of global oil and liquefied natural gas shipments, has effectively been shut following Iranian retaliation to US-Israeli strikes. Efforts to reopen the passage are now a top priority for governments, as the disruption continues to drive energy prices higher.

Market participants are increasingly focused on the risk of damage to Iran’s oil infrastructure and the potential for extended delays in restoring regional supply flows. Even in the absence of further damage, uncertainty around the timing of a restart is keeping risk premiums elevated.

On the supply side, US oil rig counts rose modestly this week, signaling a potential increase in future production. However, producers remain cautious, indicating they would need to see sustained higher prices before committing to significant expansion.

Meanwhile, diplomatic efforts are underway to address the crisis. The UK is set to host talks with multiple countries on reopening the Strait of Hormuz, while OPEC+ is expected to consider additional output increases in the coming days, although any immediate impact on supply is likely to be limited.

US equities closed marginally higher on Thursday, staging a late-session rebound after early losses as investors navigated conflicting signals on the Iran conflict.

Markets were initially pressured after US President Donald Trump dampened expectations for a near-term de-escalation with Iran, but sentiment improved later in the session following reports that Tehran is working with Oman on a framework to manage shipping through the Strait of Hormuz.

Despite the late recovery, overall sentiment remained cautious, with traders reluctant to take large positions ahead of the Good Friday holiday and the release of key US employment data.

The week has been marked by sharp swings in sentiment. Earlier optimism, driven by signs of potential diplomatic progress and reports of ceasefire discussions, fueled a strong rally in equities. However, that momentum faded as uncertainty around the conflict’s duration and impact resurfaced.

Attention now turns to the US Nonfarm Payrolls report, due Friday, which is expected to provide further clarity on the strength of the labor market and the Federal Reserve’s policy outlook.

In corporate news, Tesla shares fell 5.4% after the company reported weaker-than-expected vehicle deliveries for a second consecutive quarter.