Forex markets remain range-bound ahead of key economic releases

Financial markets traded cautiously early Thursday as investors awaited fresh economic data from Europe and the United States for further direction.

Market participants are closely watching preliminary May Manufacturing and Services Purchasing Managers' Index (PMI) data from Germany, the Eurozone, and the UK.

Later in the day, investors will focus on the US weekly Initial Jobless Claims figures and PMI reports.

The US dollar remained steady after failing to extend gains recorded earlier in the week, while geopolitical developments in the Middle East continued to influence investor sentiment.

Dollar steadies as geopolitical tensions remain in focus

The US Dollar Index stayed above the 99.00 mark early Thursday after posting losses on Wednesday.

Meanwhile, US stock index futures traded slightly lower.

Investor sentiment improved during Wednesday’s American session after US President Donald Trump said negotiations with Tehran were in their final stages.

Trump said the parties could wait a few days to “get the right answers.”

However, Trump also warned that the situation could escalate quickly if an agreement was not reached.

At the same time, Iran’s President Masoud Pezeshkian stated that Tehran remained open to a diplomatic solution. Despite that, Iran’s Revolutionary Guards warned in a statement that “if aggression against Iran is repeated, the promised regional war will extend beyond the region this time.”

The minutes from the Federal Reserve’s latest policy meeting, released late Wednesday, showed policymakers broadly agreed that inflation risks remained tilted to the upside.

According to the minutes, officials pointed to escalating Middle East tensions, rising energy prices, and ongoing tariff pressures as key concerns.

Australian labour data pressures Aussie dollar

In Australia, economic data released earlier Thursday showed the unemployment rate rose to 4.5% in April from 4.3% in March.

Employment Change came in at negative 18.6K, missing market expectations for an increase of 17.5K jobs.

Following the weak labour market data, AUD/USD remained under pressure and traded near 0.7120 during the European session.

The pair had risen more than 0.6% on Wednesday before reversing lower.

Euro holds firm as ECB rate outlook stays in focus

EUR/USD held steady above 1.1600 in European trading on Thursday.

European Central Bank policymaker Olli Rehn said earlier in the day that under adverse conditions, raising interest rates could become necessary to maintain credibility.

Separately, Reuters reported late Wednesday, citing sources familiar with discussions, that a European Central Bank rate hike in June appeared very likely.

However, policymakers were reportedly reluctant to guide for July, with several preferring to wait for updated September projections before deciding on further action.

Pound trades cautiously ahead of UK PMI data

GBP/USD moved within a narrow range below 1.3450 after recovering on Wednesday.

Markets are expecting the UK’s S&P Global Composite PMI to decline to 51.7 in the preliminary May estimate from 52.6 in April.

Meanwhile, USD/JPY remained stable near the 159.00 level after slipping slightly on Wednesday and ending a seven-session winning streak.

Data released from Japan earlier in the day showed the Jibun Bank Manufacturing PMI edged down to 54.5 in May from 55.1 in April.

The Services PMI also declined to 50 from 51.

Gold retreats after a strong rally

Gold prices pulled back slightly on Thursday after posting strong gains in the previous session.

XAU/USD climbed more than 1% on Wednesday as US Treasury bond yields moved lower.

The precious metal rose to $4,570 during Asian trading hours on Thursday before losing momentum.

Gold was last seen trading near $4,530, marginally lower on the day.