The euro has been supported over the past 24 hours primarily by a softer U.S. dollar backdrop, with markets reassessing Fed policy expectations after mixed U.S. data and cautious commentary around inflation risks. At the same time, improving risk sentiment—driven by easing geopolitical concerns—has reduced demand for the dollar as a safe haven, indirectly benefiting the single currency. On the European side, relatively stable data and a lack of dovish surprises from the European Central Bank have helped anchor rate expectations, while resilience in recent regional indicators continues to support the view that policy will remain restrictive for longer. Overall, the move has been less about euro-specific catalysts and more a function of shifting rate differentials and broader macro positioning.

The yen has come under pressure amid a combination of external and policy-driven factors, with elevated oil prices on the back of Middle East tensions weighing on Japan’s terms of trade given its heavy reliance on energy imports. At the same time, persistent divergence in rate expectations continues to act as a headwind, with the Bank of Japan maintaining a cautious normalization path relative to other central banks, despite firmer domestic data and ongoing inflation concerns. While Japanese officials have reiterated warnings around excessive FX moves, markets remain unconvinced about the likelihood of imminent intervention, leaving the currency sensitive to broader yield differentials and shifts in global risk sentiment.

The Australian dollar has been supported by an improvement in global risk sentiment and a softer U.S. dollar backdrop, with easing geopolitical tensions helping to lift demand for higher-beta currencies. On the domestic side, relatively resilient data and stable expectations around the Reserve Bank of Australia have reinforced the view that policy will remain on hold for now, without a shift toward aggressive easing. At the same time, stronger signals out of China—Australia’s key trading partner—have provided an additional tailwind, particularly through the commodities channel, leaving the currency primarily driven by external growth expectations and broader macro positioning.