Forex markets hold steady despite renewed Middle East tensions

Major currency pairs struggled to move decisively away from last week's closing levels on Monday as investors largely shrugged off developments pointing to a renewed escalation of tensions in the Middle East.

Market participants remained focused on upcoming economic data, with the United States set to release the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) for May later in the day.

US-Iran developments remain in focus

On Friday, US President Donald Trump said in a post on Truth Social that the United States would lift the blockade and allow ships caught in the Strait of Hormuz to begin the process of heading home.

Trump also stated that he would hold a meeting to make a final determination regarding a possible deal with Iran.

In response, Iran's Fars News agency reported that Tehran had rejected Trump's claims.

Further developments emerged over the weekend.

According to a BBC report published late Sunday, Trump is seeking changes related to the Strait of Hormuz and the removal of enriched uranium in the proposed Memorandum of Understanding (MOU).

At the same time, the US military said it had carried out attacks on Iranian radar and drone sites located in the city of Goruk and on the island of Qehm.

Iran's Islamic Revolutionary Guard Corps said on Monday that it had targeted a US air base in response to the latest US attack.

Despite these developments, financial markets showed limited reaction, with investors appearing cautious ahead of fresh economic data and awaiting further clarity on geopolitical developments.

Dollar holds steady ahead of key data

The US Dollar Index remained broadly stable during the European morning session.

The index traded near the 99.00 level as traders refrained from making aggressive directional bets before the release of the ISM Manufacturing PMI report.

Meanwhile, US stock index futures edged modestly higher, indicating a slightly positive tone in equity markets despite ongoing geopolitical uncertainty.

Gold retreats after recent gains

Gold prices moved lower after recording gains during the previous two trading sessions.

The precious metal corrected downward and declined toward the $4,500 level as investors locked in profits and shifted their attention to broader market developments.

The pullback came even as tensions in the Middle East remained elevated, suggesting that safe-haven demand had eased somewhat during the session.

Major currency pairs trade in narrow ranges

In the euro market, EUR/USD posted modest gains on Friday and finished the previous week slightly higher.

However, the pair struggled to establish a clear direction early Monday and fluctuated around the 1.1650 mark.

The British pound also remained largely stable.

GBP/USD traded sideways above 1.3450 after ending the previous week virtually unchanged.

The Japanese yen weakened slightly against the dollar at the start of the week.

USD/JPY edged higher and traded near 159.50 during the European session.

Among commodity-linked currencies, the New Zealand dollar pulled back after a strong run.

NZD/USD had recorded gains for three consecutive trading days and reached its highest level since late February near 0.6000 on Friday.

The pair corrected lower on Monday and traded around 0.5970.

The Australian dollar also lacked a clear direction.

AUD/USD moved within a narrow range below the 0.7200 level during European trading hours.

Overall, currency markets remained subdued, with investors balancing geopolitical risks against upcoming economic data and awaiting fresh signals on both the US economy and developments in the Middle East.