The euro has come under notable pressure as dollar strength weighs amid elevated geopolitical tension. The euro was already under pressure after softer Eurozone inflation, raising the risk that further weakness in upcoming CPI data could revive expectations for ECB rate cuts. Near-term price action will be likely be driven more by risk sentiment and oil price swings than by economic releases. Overall, markets expect choppy trading, with downside risks if tensions escalate or inflation disappoints, while stabilization in geopolitics and data could allow modest upside.

The yen has softened against the dollar despite a broader risk-off backdrop, even as stronger manufacturing PMI data points to improving domestic conditions and rising business confidence. While geopolitical tensions and safe-haven demand may offer intermittent support, structural factors—including capital outflows ahead of Japan’s fiscal year-end, elevated oil prices, and still-accommodative BOJ policy relative to the Fed—continue to limit sustained yen strength. Although gradual BOJ tightening and firm inflation dynamics support the yen over the medium term, near-term gains are likely to remain shallow amid wide rate differentials, cautious policy guidance, and persistent external pressures, leaving the currency vulnerable to continued two-way volatility.

The Australian dollar is weaker, pressured by safe-haven demand amid escalating US-Israel-Iran tensions, though supportive domestic data and strong commodity prices are providing some offset. If the conflict remains contained, volatility should ease and AUD could gradually recover, especially if Australian GDP and household spending surprise to the upside and reinforce signs of stabilizing growth. However, a deeper escalation that disrupts oil flows would likely strengthen the USD further and weigh on AUD, even if Australia’s commodity exposure offers some resilience, while only a rapid de-escalation would allow AUD to meaningfully re-rate higher in the near term.