Global markets continued their steady climb on Friday, hovering near record highs despite simmering international tensions. The dollar was strong, holding near a six-week high as traders trimmed bets on Federal Reserve interest rate cuts. Safe-haven gold fell, while oil prices rebounded from an earlier retreat after US President Donald Trump adopted a wait-and-see attitude towards Iran.
## US Public Holiday Cuts Market Activity
Market participants may lack conviction ahead of the Martin Luther King Jr Day US holiday on Monday, according to Michael Brown, senior research strategist at Pepperstone. “I wouldn’t be entirely confident if I was running a book to be long-risk or short-crude into a three-day weekend with this amount of Middle East tension going on,” he said.
The pan-European Stoxx 600 index was flat, after notching a record high on Thursday. France’s CAC 40 was 0.4% lower, underperforming regional peers on political uncertainty. The French government on Friday postponed talks about its 2026 budget as lawmakers failed to reach a compromise.
## Traders Keep a Close Eye on Yen Intervention
The yen grabbed the spotlight in the currency markets after Japanese Finance Minister Satsuki Katayama said on Friday Tokyo would not rule out any options to counter excessive foreign exchange volatility, including coordinated intervention with the United States. Her comments lifted the yen slightly. The currency extended gains after a Reuters report that some Bank of Japan policymakers see scope to raise interest rates sooner than markets expect, with April a distinct possibility.
The dollar was last down 0.3% at ¥158. The yen has been sold off on the prospect of a snap election in Japan as early as next month, which investors bet could lead to expanded fiscal stimulus from Prime Minister Sanae Takaichi. The dollar hovered near a six-week high after US economic releases this week, including data that showed the number of Americans filing new applications for unemployment benefits unexpectedly fell last week.
## Oil Prices Rebound Amid Supply Risks
In oil markets, prices rose slightly as supply risks remained in focus despite the receding likelihood of a US military strike against Iran. Brent crude and US West Texas Intermediate both traded just over 1% higher. Spot gold was down 0.12% at around US$4,609 an ounce.
Markets have priced in a 20% chance of Fed rate cut in March, down from roughly 50% a month ago. The outlook is uncertain, with international politics dominating the headlines and economic releases providing mixed signals. As the situation continues to unfold, one thing is clear: the global markets are holding their ground amidst the uncertainty.
