Market sentiment remains upbeat early Wednesday as U.S. President Donald Trump’s two-week Iran ceasefire, even without major concessions from Tehran, boosts risk appetite and pressures the U.S. Dollar (USD). Softer U.S. data, mixed signals from the Federal Reserve (Fed), and trader caution ahead of the Federal Open Market Committee (FOMC) Minutes also weigh on the USD. However, uncertainty around the April 10 U.S.-Iran talks in Islamabad and the possibility of hawkish FOMC Minutes limit further downside in the USD ahead of a packed economic schedule.
The key update came from Donald Trump, who announced on Truth Social a two-week halt to military action against Iran to allow negotiations to move forward. He noted that Washington had received a 10-point proposal from Tehran, calling it a workable starting point for a broader deal, with several major issues already addressed. The pause is aimed at finalising a longer-term agreement. Iran later confirmed its participation, with its Supreme National Security Council sending the proposal via Pakistan, and talks scheduled for April 10 in Islamabad. Markets reacted quickly, with oil prices dropping, the USD weakening, and equities and gold moving higher, and these trends have largely continued.
That said, caution persists as some of Iran’s demands—such as full sanctions removal, continued backing of regional proxies, and increased control over the Strait of Hormuz with possible transit fees—remain difficult to reconcile. Adding to concerns, unverified reports suggest vessel traffic through Hormuz may be restricted to 10–15 ships per day during the ceasefire, which would not significantly reduce the backlog of around 800 vessels in the Gulf. Israel also clarified that the ceasefire does not apply to its operations in Lebanon, keeping geopolitical risks in play. Even so, markets for now appear to favour a near-term easing of tensions.
On the data front, U.S. February durable goods orders came in at -1.4% compared to -1.0% expected, with the previous figure revised from 0.0% to -0.5%. The New York Federal Reserve (NY Fed) reported one-year inflation expectations rising to 3.4% from 3.0%, three-year expectations at 3.1% versus 3.0% earlier, and five-year expectations unchanged at 3.0%. Meanwhile, the Automatic Data Processing (ADP) Employment Change four-week average increased to 26K from 10K.
Federal Reserve (Fed) Vice Chair Philip Jefferson highlighted the challenge policymakers face, pointing to rising inflation risks alongside weakening labour market conditions. New York Federal Reserve (NY Fed) President John Williams maintained a neutral, wait-and-watch stance, noting that while the Iran conflict could lift headline inflation through energy prices, core inflation remains stable, supported by steady consumer spending, productivity gains, and balanced wage growth. Chicago Federal Reserve (Fed) President Austan Goolsbee leaned slightly hawkish, warning that inflation risks remain elevated and could resurge, especially with rising oil prices, while stressing the importance of maintaining Fed independence.
Amid this, the U.S. Dollar Index (DXY) falls to a one-month low, pushing EURUSD to its highest since March 03 and GBPUSD to a two-week high. USDJPY drops to a two-week low, while AUDUSD and NZDUSD rise to two-week highs. USDCAD falls to a two-week low despite weaker oil prices. Gold reaches its highest since March 19, while Bitcoin (BTC) and Ethereum (ETH) lose momentum after hitting monthly highs. Asia-Pacific stocks rise on ceasefire optimism and steady signals from the RBNZ and the Reserve Bank of India (RBI), even as Wall Street ends mixed.
The U.S. Dollar’s (USD) weakness, along with market relief from the Iran war—even if temporary—supports the EURUSD rally. Cautious optimism ahead of today’s data from Germany and the Eurozone, combined with mixed signals from the Federal Reserve (Fed), also helps push EUR/USD to a five-week high, marking its third straight day of gains before the key Federal Open Market Committee (FOMC) Minutes.
Germany and Eurozone data may support market sentiment, but the main focus will be on whether Federal Reserve (Fed) officials are leaning toward pausing further rate cuts and carefully supporting possible rate hikes. If confirmed, this could challenge the Euro’s upward momentum.
Despite softer final readings of the United Kingdom (UK) Purchasing Managers’ Index (PMIs) for March and the Reserve Bank of New Zealand (RBNZ) keeping rates unchanged, GBPUSD, AUDUSD, and NZDUSD still rose to two-week highs. At the same time, strong Japanese wage data, along with mixed U.S. updates and signals from the Federal Reserve (Fed), pushed USDJPY closer to a two-week low. Meanwhile, USDCAD also fell to its lowest level in over a week due to broad U.S. Dollar (USD) weakness, ignoring a drop in crude oil prices, Canada’s key export.
Japan’s February wage data surprised on the upside, with real wages increasing 1.9% year-on-year, the fastest growth in five years, compared to a revised 0.7% previously. This supports expectations of further policy tightening by the Bank of Japan (BoJ) and indicates improving household purchasing power.
The Reserve Bank of New Zealand (RBNZ) kept its Official Cash Rate (OCR) unchanged at 2.25%, highlighting that the Middle East conflict has increased uncertainty, with higher inflation and slower growth ahead. The RBNZ maintained its focus on medium-term inflation and signaled readiness to act if necessary. Governor Anna Breman is scheduled for several media appearances after the April 8 Monetary Policy Review (MPR) to help guide market expectations during this uncertain period.
After the much-awaited U.S. ceasefire announcement by U.S. President Donald Trump, even without major concessions from Iran, market risk appetite improved and weighed on the U.S. Dollar (USD). This also eased concerns about an energy supply shortage and pushed West Texas Intermediate (WTI) crude oil sharply lower, dropping more than 15% intraday before recovering from $91.05 to $94.70 by the time of writing.
At the same time, gold prices climbed to a three-week high, supported by the weaker USD, positive market sentiment, and positioning ahead of the Federal Open Market Committee (FOMC) Minutes.
Unlike other major assets, Bitcoin (BTC) and Ethereum (ETH) did not benefit from U.S. Dollar (USD) moves and instead traded sideways near a one-month high, likely due to cautious sentiment in the crypto market. Meanwhile, Asia-Pacific equities moved higher, brushing aside a mixed close in Wall Street benchmark indices.
German Factory Orders, Eurozone Producer Price Index (PPI), and Retail Sales will lead Wednesday’s economic calendar ahead of the Federal Open Market Committee (FOMC) Minutes, keeping traders busy.
The U.S. Dollar (USD) remains under pressure amid market optimism, even without major progress from Iran and ahead of the April 10 peace talks in Islamabad. Any negative developments or mixed signals from Iran or the U.S. could revive USD buying and reverse today’s gains in major currencies, cryptocurrencies, and commodities. Similarly, hawkish FOMC Minutes could limit the USD’s weakness and trigger pullbacks in assets like EUR/USD, crude oil, and gold.
However, with global traders still focused on the Iran ceasefire news until April 10, the risk-on sentiment could continue to weigh on the Greenback and allow other assets to extend their gains.
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