Market tone was shaped by a softer dollar, improved appetite for risk and a more cautious view of U.S. monetary easing. Most economists now expect the Federal Reserve to keep rates at 3.50%-3.75% through 2026, as inflation linked to the Iran war remains harder to tame. Futures markets have even moved toward the possibility of a rate increase by year-end. Hopes for a Middle East peace deal supported global stocks and helped risk-sensitive currencies, but the stronger U.S. jobs picture kept central-bank expectations tight and left investors focused on whether price pressures will persist.

Asia Pacific Markets

In Asia Pacific, attention centred on Japan, where yen weakness increased pressure on the Bank of Japan. The currency traded around 160 per dollar, a level that has already triggered intervention, while the U.S. jobs report pushed investors away from earlier expectations for Fed cuts. Markets now see a high chance that the BOJ will raise its main rate to 1% in June, with another move to 1.25% priced by December. Analysts said the next hike may be defensive, aimed at limiting further yen depreciation, as the wide gap between U.S. and Japanese rates remains a key pressure point.

European Markets

European markets drew support from a firmer pound and mixed German data. Sterling rose against the dollar and reached a two-week high versus the euro as risk appetite improved and the U.S. currency eased. Investors also watched signs that the UK economy may be more resilient than first feared after an upward revision in business surveys. In Germany, industrial production rose 0.4% in April, below forecasts, while exports unexpectedly gained 0.9%. However, economists warned that the rise in output was still too small to change the weak broader picture.

American Markets

American markets remained focused on the Fed after strong labour data reduced the case for policy easing. Economists expected the central bank to leave rates unchanged for the rest of 2026, and none forecast a cut at the June 16-17 meeting, the first under Kevin Warsh. Inflation is still well above the 2% target, with consumer prices expected to reach 4.2% and the Fed’s preferred measure forecast near 3.8%-3.9% in coming quarters. Growth and unemployment forecasts were largely unchanged, keeping attention on inflation rather than activity.