The US Dollar gained support as risk-off sentiment returned after renewed Middle East escalation and uncertainty about the Strait of Hormuz. President Donald Trump said Iran has requested a ceasefire, but linked it to reopening the Strait.
Markets had moved into USD-bearish trades on hopes of de-escalation, but this reversed after Trump’s speech suggested more weeks of fighting. Attention now turns to comments from Federal Reserve officials Lorie Logan and Michelle Bowman, following dovish-leaning remarks from Chair Jerome Powell on Monday.
Jobs Data And Fed Watch
US data in focus include tomorrow’s non-farm payrolls, with ADP payrolls reported at 62k. The ISM manufacturing employment index was 48.7 in March.
Consensus for non-farm payrolls is 65k, ING’s macro team forecast is 60k, and the Bloomberg whisper number is 40k. Unemployment is expected to remain at 4.4%, with any rise seen as likely to move markets.
Reduced liquidity is expected tomorrow and Monday due to the Easter holidays. The article notes it was produced using an AI tool and reviewed by an editor.
We are seeing the US Dollar gain strength as a risk-off tone returns to the market. Renewed tensions in the South China Sea are unsettling investors, pushing the VIX volatility index up to 19, its highest point this quarter. This shift favors safe-haven assets like the dollar.
Options Positioning And Volatility
Upcoming comments from Federal Reserve officials and Friday’s non-farm payrolls report are now the key focus for markets. We heard Fed Governor Waller stress patience on rate cuts earlier this week, making tomorrow’s jobs data critical for the Fed’s assessment. Any surprise in the numbers could significantly shift interest rate expectations.
The consensus forecast for tomorrow’s non-farm payrolls is a gain of 180,000, a slight cooling from the 210,000 jobs added in February. We agree with the market that the unemployment rate will likely hold steady at 3.9%. A surprise move above the 4% level could spook markets and accelerate calls for a Fed pivot.
This environment reminds us of the volatility we saw in energy markets back in 2022 after the Ukraine invasion. Looking back from our 2025 perspective, we saw how options on oil and natural gas provided significant opportunities during that period of uncertainty. Therefore, traders should be considering buying call options on energy ETFs to hedge against or profit from a potential spike in shipping costs and commodity prices.
With the VIX climbing, implied volatility in equity options is rising, making protective puts more expensive. Traders may want to look at put debit spreads on indices like the S&P 500 to define their risk and lower the cost of entry. This offers a more capital-efficient way to position for potential downside.
