The euro has been supported by a softer US dollar backdrop, helping EURUSD push up toward the 1.1800 area, as easing geopolitical tensions between the US and Iran—on news both sides are set to resume negotiations—have encouraged a more constructive risk tone and reduced safe-haven demand for the dollar. At the same time, US data has leaned dollar-negative, with the recently softer-than-expected US Producer Price Index readings reinforcing expectations for a less aggressive Fed policy outlook, even as labor market signals remain resilient via the ADP National Employment Report. On the eurozone side, firmer German producer prices have offered some modest fundamental backing for the euro, contributing to the relative outperformance as markets continue to balance improving regional data against a still-cautious growth outlook.

The Japanese yen has been under pressure, with USDJPY pressured higher as markets scale back expectations for near-term tightening from the Bank of Japan, particularly amid concerns that rising energy costs could weigh on Japan’s already fragile growth outlook. Geopolitical tensions have also played a role, with renewed strain between the US and Iran supporting the US dollar through safe-haven demand, further dragging on the yen. Domestically, a strong earthquake off Japan’s east coast and reports of a tsunami have added an element of uncertainty, though confirmation of no damage to key infrastructure, including nuclear facilities, has limited direct economic fallout. Overall, the yen remains driven by a combination of dovish central bank expectations, external geopolitical developments, and relative dollar strength.

The Australian dollar continues to hold up well overall despite renewed geopolitical uncertainty around US–Iran tensions, as it’s helped along by offsetting, constructive domestic fundamentals. Ongoing disruptions to global energy supply have lifted inflation expectations, reinforcing the case for further tightening from the Reserve Bank of Australia, especially alongside a still-robust labor market that has markets leaning toward another rate hike at the upcoming meeting. At the same time, mixed signals around ceasefire negotiations and the approaching deadline for de-escalation have kept risk sentiment fragile, limiting upside in the Aussie despite a relatively supportive macro backdrop, with attention now turning to Thursday’s PMI data for clearer direction on growth momentum.