The euro has been supported by a combination of external dollar weakness and a relatively steady eurozone backdrop, pushing EURUSD through 1.1800. On the geopolitical front, improved risk sentiment—driven by expectations of further US-Iran negotiations and hopes of avoiding near-term escalation—has reduced safe-haven demand for the dollar, indirectly lifting the euro. This has been reinforced by softer-than-expected US producer price data, which came in well below consensus and tempered Fed tightening expectations, weighing on the USD despite still-solid labor market readings and persistent energy-driven inflation pressures. On the European side, the absence of major negative surprises, alongside steady inflation dynamics around 2.5% and a broadly patient/neutral stance from the ECB, has helped the euro hold firm. Markets appear comfortable that policymakers can remain data-dependent while assessing external shocks, allowing EUR strength to be driven primarily by the shift in relative macro expectations versus the US.

The yen has shown tentative resilience, with USDJPY easing back toward the lower end of its recent range amid a softer US dollar and persistent intervention jitters from Tokyo. Improved geopolitical sentiment—fueled by hopes for progress in US-Iran diplomacy and potential de-escalation steps, including rare Israel-Lebanon talks—has reduced safe-haven demand for the dollar, while a partial retreat in oil prices from recent highs has further tempered expectations for aggressive Fed tightening. At the same time, renewed verbal warnings from Finance Minister Katayama regarding excessive volatility and speculative moves have reinforced market expectations of potential intervention, providing intermittent support to the yen. However, any meaningful or sustained JPY appreciation remains capped by Japan’s acute vulnerability to energy supply disruptions around the Strait of Hormuz, where ongoing restrictions continue to weigh on import costs, the trade balance, and the broader economy despite efforts to tap reserves and diversify routes.

The Australian dollar has strengthened notably amid a clear improvement in global risk sentiment, with easing geopolitical tensions and a partial retreat in oil prices from recent highs supporting demand for higher-beta currencies and extending the AUDUSD run to a fresh yearly high. The move has been reinforced by a softer US dollar backdrop, as cooling inflation signals and a more cautious Fed tone have tempered expectations for aggressive further tightening, even as policymakers stay alert to lingering oil-driven inflation risks. On the domestic side, Australia’s labor market continues to display resilience, with unemployment holding steady at 4.3% in the latest March data, reinforcing the view that the Reserve Bank of Australia can maintain a tightening bias and helping anchor rate differentials in the Aussie’s favor.