USD: Dollar unmoved by jobs beat
The US dollar ended Friday’s session broadly lower, despite some upbeat news on the data front. The April jobs report showed the economy adding 115k jobs, alongside an upwardly revised 185k gain for March (178k previously). The unemployment rate was unchanged at 4.3%. The outcome marks the first back‑to‑back increase in nearly a year, pointing to a labour market that is stabilising after near‑zero job growth in 2025. Demand for labour remains subdued, but given that expectations for what constitutes a “strong” NFP print have been lowered – amid slower immigration, AI‑driven transformation – the result still appears constructive, even as conflict‑related uncertainty lingers in the background.
The US dollar appeared largely unresponsive, suggesting that the macro picture and relative rate trajectories continue to play second fiddle as markets remain focused on geopolitical developments. It may also be that uncertainty around Kevin Warsh’s imminent appointment as the new Fed Chair is contributing to the muted reaction. Concerns about his political leanings make it difficult for markets to gauge how hawkish the Fed may turn, encouraging a more cautious stance until there is greater clarity once he takes office. Pricing for greater hawkishness later in the year has also remained muted following the data outcome.
On geopolitics, over the weekend President Trump and Iran rejected each other’s latest peace proposals to end the conflict, putting the fragile ceasefire to the test and pushing oil prices higher as the Strait of Hormuz remains shut. Brent crude opened around 4% higher, hovering near $105 per barrel, while the US dollar benefited from a renewed safe‑haven bid following last week’s softer profile as de‑escalation hopes built. The latest peace efforts aimed to end the US naval blockade, reopen the strait, and pave the way for nuclear talks. For now, it remains unclear what follows from this setback in resolution efforts. However, both sides have reiterated their reluctance to return to the levels of escalation seen in March, while China has confirmed it will meet with President Trump this week – factors that may prevent markets from fully re‑pricing a renewed escalation scenario just yet. Meanwhile, earnings optimism continues to pull in the opposite direction, with Asian equities rising as investors double down on the AI trade. MSCI’s Asia Pacific equity index is up around 0.5%, led by technology shares.
This bifurcated sentiment backdrop helps explain the dollar’s more modest gains, up around 0.2% this morning (BST) and trading just above the 98 level. Should the US revive “Project Freedom” to escort vessels through the strait, we would see clearer upside for the dollar, with last week’s highs near 98.300 coming back into focus. The initiative was abandoned shortly after its announcement last week, as it triggered an exchange of fire in the strait amid US‑backed vessel transits. Tomorrow brings the April CPI release, but given the dollar’s muted reaction to last week’s NFP, we doubt it will generate significant movement.
EUR: Easy gains over
The euro opened softer against the dollar and broader commodity currencies (e.g. NOK and CAD), while strengthening against high‑beta CEE currencies – a typical pattern observed since the conflict entered its “naval blockade” phase and when hopes for a swift resolution recede. While tangible de‑escalation progress remains limited, the apparent commitment from both the US and Iran to avoid a full‑blown escalation has been sufficient to keep EUR/USD from revisiting its March lows. Since the conflict erupted at the end of February, the pair has broadly retraced its conflict‑driven losses and is now trading toward the upper end of the 1.17 handle.
What stands out relative to the pre‑conflict period, however, is the less crowded euro bullish positioning among institutional investors – the slower‑moving players that tend to focus on longer‑term trends rather than short‑term tactical moves pursued by speculative accounts. In 2026, the dollar’s safe‑haven appeal has re‑emerged after being challenged through much of 2025 by de‑dollarisation fears linked to Trump’s erratic policy agenda. While that theme has not disappeared, it has been sidelined by the geopolitical backdrop.
At the same time, the US macro backdrop remains relatively solid, and structural advantages – such as the US being a net oil exporter – are likely to help insulate the economy from conflict‑related shocks, further reinforcing the dollar’s relative appeal. This suggests that, while the euro “had it easy” in 2025 from episodes of softer dollar sentiment with little input of its own, the current environment may be less conducive to similar “borrowed” strength and instead require more heavy lifting from the euro side.
For the week, EUR/USD price action should remain anchored around the 1.17 handle, barring significant geopolitical re‑escalation.
GBP: On the defensive, but global forces still anchor
Sterling enters the new week trading on two distinct tracks, with global forces clearly dominating near‑term price action, while domestic risks remain a medium‑term constraint rather than an immediate trigger. GBP/USD notched its fifth consecutive weekly gain last week, underscoring the resilience of the April recovery, but has opened this week on the back foot after President Trump rejected Iran’s latest peace proposal. That development lifted crude prices and pushed US Treasury yields higher, dragging cable lower in sympathy.
Crucially, however, the pullback has so far been contained above the rising 21‑day moving average, reinforcing the view that recent weakness remains corrective rather than trend‑breaking. Despite oil prices surging once again, broader risk appetite has remained surprisingly resilient, with global equities holding up well. That combination — higher energy prices but firm equity markets — has limited downside pressure on the risk‑sensitive pound, preventing a more forceful unwind.
Domestic politics, meanwhile, has receded as an immediate market catalyst. The UK local election results delivered a clear setback for Labour, with heavy losses across England and further erosion in Scotland and Wales, raising longer‑term questions over fiscal discipline and political coherence. Yet markets have so far taken the fallout in stride. The absence of any immediate leadership challenge to Prime Minister Starmer, coupled with no visible cabinet revolt, has reduced near‑term political risk, allowing sterling and gilts to stabilise late last week. Still, prediction markets still see a two‑thirds chance that Starmer is forced out by the end of the year, though odds remain volatile ahead of a speech billed as career‑defining later today.
The local elections reinforce a broader theme of political fragmentation, with risks skewed toward policy paralysis and fiscal slippage over the medium term rather than abrupt change. For now, however, sterling remains anchored to global dynamics. Elevated oil prices should continue to cap upside, but as long as geopolitical stress does not begin to meaningfully weigh on equities, the pound is likely to remain supported, if constrained, rather than vulnerable to a sustained downturn.
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Calendar: May 11-15
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
