The euro has been primarily supported by diplomatic breakthroughs in the Middle East, including a US-Iran agreement on a two-week ceasefire that includes potential reopening of the Strait of Hormuz, which has eased safe-haven demand for the US dollar and lowered fears of prolonged energy price shocks weighing on eurozone growth. This geopolitical de-escalation has been reinforced by resilient eurozone economic signals, such as moderate inflation around 2.5% driven by prior energy pressures, helping sustain the European Central Bank’s relatively cautious and data-dependent stance compared to mixed US indicators and ongoing Federal Reserve rate path uncertainty. Overall, reduced geopolitical risk premiums have shifted flows in favor of the euro on fundamental grounds.

The yen has been primarily supported by diplomatic breakthroughs in the Middle East, including a US-Iran agreement on a two-week ceasefire with potential reopening of the Strait of Hormuz, which has eased geopolitical tensions, reduced safe-haven flows into the dollar, and lowered concerns over prolonged high energy prices that heavily burden Japan’s import-dependent economy. This de-escalation has offset some pressure from elevated oil costs and helped temper fears of imported inflation, while expectations of a near-term Bank of Japan rate hike and official warnings against excessive yen weakness have provided additional fundamental backing. Overall, the reduced risk premium from geopolitics has shifted flows in favor of the yen against the backdrop of persistent US dollar strength and mixed domestic economic signals.

The Australian dollar has been primarily supported by diplomatic breakthroughs in the Middle East, including a US-Iran agreement on a two-week ceasefire with potential reopening of the Strait of Hormuz, which has eased geopolitical tensions, boosted global risk sentiment, and lowered oil prices sharply. This development has reduced safe-haven demand for the US dollar while alleviating imported inflation pressures for Australia and supporting its commodity export outlook through improved risk appetite. The relief has complemented the Reserve Bank of Australia’s hawkish stance, with recent rate hikes to 4.10% and market expectations for potential further tightening in May amid still-elevated domestic inflation, helping sustain the AUD against mixed US economic signals and Federal Reserve policy uncertainty. Overall, the geopolitical de-escalation has shifted fundamental flows in favor of the risk-sensitive Australian dollar.