Forex Today: Middle East tensions keep investors on edge

Financial markets were cautious at the start of the week, as investors monitored the latest Middle East developments. The US Stock and bond markets were closed for Labor Day. On the European economic calendar, revisions of second-quarter Employment Change and GDP growth, along with Sentix Investors Confidence for September, were reported.

The table below displayed the US Dollar's (USD) percentage change against major currencies over the past seven days. The USD was the strongest against the New Zealand Dollar. Major currencies' percentage changes against each other were shown in a heat map. Data from the US indicated that Nonfarm Payrolls rose by 162K in August, exceeding market expectations.

The Unemployment Rate remained steady at 4.1%. The USD Index held steady above 99.00, while the probability of a 25 basis points Federal Reserve rate hike at the upcoming policy meeting increased to 60%. Analysts at ING suggested the Dollar's underperformance was due to high energy prices and strong economic performance, with global equities, including emerging markets, continuing to thrive.

The US military targeted three Iran-linked oil tankers in the Gulf of Oman, leading to retaliatory actions from Iran. The barrel of West Texas Intermediate oil rose, reaching $90.00, and Deutsche Bank noted heightened concerns about energy supply security due to tanker incidents and maritime attacks. Gold declined slightly after a two-day winning streak, staying negative at around $4,400.

EUR/USD remained relatively stable, fluctuating just above 1.1600. AUDUSD gained bullish momentum, reaching its highest level in mid-May above 0.7200. USD/JPY dropped near 155.50 after a 2.5% decline the previous week. GBP/USD held steady above 1.3500. Risk-on and risk-off markets were discussed, with major currencies, commodities, cryptocurrencies, and safe-haven currencies affected differently based on investor sentiment.