Markets were cautious early Tuesday after volatile trading at the start of the week. Preliminary March Manufacturing and Services PMI readings are due from Germany, the Eurozone, the UK and the US. On Monday, Donald Trump said military strikes against Iran’s power plants would be postponed after “good and productive conversations”. Later, Iran’s foreign ministry said there was “no dialogue”, and the White House said the situation was “fluid”.

Market Focus Shifts To Pmi Releases

Early Tuesday in Europe, US stock index futures were lower and the USD Index held small gains above 99.00. After falling more than 9% on Monday, WTI recovered towards $90, up about 1.5% on the day. Gold fell to a 2026-low near $4,100 on Monday before ending near $4,400. It traded slightly above $4,400 in a narrow range in the European session. In Australia, the S&P Global Composite PMI fell to 47 in March’s flash reading from 52.4 in February. AUD/USD traded slightly below 0.7000. USD/JPY traded near 158.50; Japan’s Manufacturing PMI fell to 51.4 from 53 and Services PMI to 52.8 from 53.8. Japan’s annual CPI rose 1.3% in February after 1.5% in January. EUR/USD reached 1.1640 on Monday and held above 1.1600 early Tuesday. GBP/USD was above 1.3400 after rising more than 0.6% on Monday.

Volatility Signals Elevated Headline Risk

The extreme volatility driven by the US-Iran situation suggests we should prepare for more sharp, headline-driven moves. The White House calling the situation “fluid” after an initial de-escalation is a classic recipe for uncertainty. We should anticipate that implied volatility on major indices and commodities will remain elevated in the coming days. Monday’s 9% collapse in WTI crude oil, followed by a partial recovery, is a clear signal of instability. This kind of price action is very similar to what we witnessed during the early stages of the geopolitical conflict in 2022, where daily price swings often exceeded 5%. We see this as an opportunity to structure trades that profit from large moves in either direction, as picking a firm direction is treacherous. The US Dollar’s sharp decline and subsequent rebound shows the market is torn between risk-on and risk-off sentiment. Upcoming PMI data from the US and Europe will be critical, as weak numbers could quickly shift sentiment back toward the safety of the dollar. We are using options to hedge our currency exposures, particularly in EUR/USD, which is sitting at a key technical level. Gold’s massive recovery from its 2026 low shows that despite an initial sell-off for liquidity, underlying demand for safe havens is extremely strong. This quick snap-back rally from near $4,100 is a warning that any further signs of conflict or economic weakness will likely send capital rushing into bullion. This makes buying protective puts on equity portfolios a more attractive strategy, even at higher premiums. The poor PMI readings from Australia and Japan are the first red flags for the global economy this month. If the upcoming European and US figures also show contraction, it will confirm the slowdown fears we saw building throughout 2025. This justifies a cautious stance, and we are looking at weakness in the AUD as a barometer for global risk appetite. Create your live VT Markets account and start trading now.

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