The euro has edged higher into Friday following the ECB decision, with the currency finding support after policymakers held rates steady while maintaining a cautious, data-dependent stance amid rising inflation risks. The ECB’s acknowledgment that upside risks to inflation have intensified, even as growth risks increase, has reinforced expectations that further tightening—potentially as soon as June—remains on the table, offering some support to the single currency. At the same time, gains have been measured, with ongoing geopolitical tensions around the US-Iran conflict and elevated energy prices underpinning the US dollar’s safe-haven appeal. As a result, euro price action is being driven by the balance between a slightly firmer ECB policy outlook and broader dollar strength tied to global risk sentiment and inflation concerns.

The yen has strengthened sharply into Friday following what appears to be direct intervention from Japanese authorities, marking its strongest one-day rally in several years and abruptly reversing a prolonged period of weakness. The move was driven by escalating warnings from officials and subsequent reported action by the Ministry of Finance and Bank of Japan to support the currency, triggering a rapid unwind of short yen positions. While the intervention has provided immediate support, the broader backdrop remains challenging, with wide rate differentials and carry dynamics still favoring yen weakness. As a result, the key question now is whether authorities will follow through with additional action to sustain the move, with near-term price action likely to remain highly sensitive to both intervention risk and incoming US data, particularly as markets reassess Fed expectations.

The Australian dollar has strengthened into Friday, supported primarily by broad US dollar weakness following Japanese intervention, which triggered a sharp unwind in long dollar positioning across major currencies. The move has been reinforced by a relatively supportive domestic backdrop, with markets still pricing a meaningful probability of an RBA rate hike after the recent firm CPI print, underpinning expectations for a comparatively hawkish policy stance. However, gains have been somewhat capped by softer producer price data, which has introduced a degree of caution around the inflation outlook and tempered the extent of rate hike expectations. As a result, near-term price action in the Australian dollar is being driven by the balance between external dollar dynamics and internal policy signals, with upside supported by USD weakness but limited by signs of easing price pressures domestically.