Market sentiment stays fragile early Wednesday as mixed Iran-related headlines keep traders cautious. Strong US data and higher inflation in the UK and other regions are also supporting a hawkish stance from central banks.
At the same time, the cancellation of US–Iran talks came before fresh signals that Washington may soften its position to support peace negotiations, especially after President Donald Trump extended the ceasefire indefinitely and hinted that the US naval blockade on Iranian ports could be lifted.
Early Wednesday, Bloomberg, citing Tasnim News Agency linked to the Islamic Revolutionary Guard Corps (IRGC), reported that Iran received “some sign” that the US may be willing to ease its naval blockade. If confirmed, this could push Iran toward negotiations. The ceasefire currently remains in place following President Donald Trump’s announcement, although further talks are postponed.
During the late US session on Tuesday, Trump declared an indefinite extension of the Iran ceasefire as negotiations stalled. Vice President JD Vance and Iranian officials are no longer expected to travel to Islamabad. The extension is meant to create space for diplomacy, but it is still uncertain whether Iran or Israel will formally support it. The US naval blockade continues unchanged.
Iran rejected the move, arguing that maintaining the blockade amounts to an act of war and contradicts the idea of a ceasefire. Tehran warned it could break the blockade by force if needed, keeping escalation risks elevated. At the same time, unverified reports suggested that a pro-negotiation faction within Iran had been detained by the IRGC, pointing to internal political divisions.
The situation shifted multiple times throughout the day. Early optimism about possible US-led talks in Pakistan faded quickly after Trump remarked on CNBC. Strong retail sales data from the US failed to influence sentiment. Concerns increased when JD Vance returned to Washington instead of heading to Islamabad, and were later confirmed by Iranian and US media reports stating that talks had been cancelled. Trump then moved to extend the ceasefire on his own. The current ceasefire deadline stands at 7:50 pm Eastern Time (ET), with Iran warning of a possible surprise move, suspecting US intentions.
Markets briefly found relief after the ceasefire extension, but Trump’s remarks emphasised divisions within Iran, suggesting a broader strategic approach rather than a temporary delay. This also marks the fifth time Trump has extended his own deadline regarding potential action on Iran’s infrastructure.
On the data side, US retail sales rose 1.7% month-on-month (m/m), beating the 1.4% forecast and the prior 0.6%, highlighting strong consumer demand. The control group also increased by 0.7% m/m, the highest level since last June. Meanwhile, the Weekly Automatic Data Processing (ADP) employment pulse climbed to 54.75 thousand (K) from 39.25K prior, with the four-week average reaching its highest level since the survey began.
Amid these developments, the US Dollar Index (DXY) struggles to hold onto the previous session’s strong gains and trades slightly lower at the time of writing. This allows EUR/USD and GBPUSD to post modest rebounds, while USD/JPY edges lower without strong momentum.
At the same time, AUDUSD and NZDUSD recover from the previous day’s losses, while USDCAD declines again after failing to sustain a bounce from a six-week low, largely ignoring the pullback in crude oil prices, a key export for Canada.
Elsewhere, gold ends its two-day losing streak, while Bitcoin (BTC) and Ethereum (ETH) extend gains for a third straight session. Meanwhile, Asia-Pacific equities move slightly higher, following two consecutive weeks of sessions on Wall Street.
A softer US Dollar, supported by a slight improvement in sentiment despite overall cautious markets, helped EUR/USD recover part of its previous losses and pushed USD/JPY lower. At the same time, cautious optimism from a European Central Bank (ECB) official and positive signals from Japan added support to these currency moves.
ECB policymaker Mārtiņš Kazāks told the Financial Times that there is no urgent need to change monetary policy. He highlighted that uncertainty from the Middle East conflict remains high, but current data does not justify raising interest rates, giving policymakers room to wait for a clearer picture.
Japan’s March trade data showed exports rising 11.7% year-on-year (y/y), beating expectations. However, a smaller-than-expected trade surplus and stronger import growth indicated increasing cost pressures, especially from energy, and pointed to possible risks going forward.
GBPUSD posts mild gains above 1.3500 while reversing the previous day’s losses, despite lacking upside momentum, as it benefits from upbeat UK inflation data and a pullback in the U.S. Dollar.
The UK March inflation data showed Consumer Price Index (CPI) at 3.3% year-on-year (y/y), in line with expectations and up from 3.0% previously. Core CPI came in at 3.1% y/y versus 3.2% expected and prior. On a monthly basis, headline inflation rose 0.7%, driven mainly by transport and energy costs.
AUDUSD and NZDUSD gain from cautious market optimism and a softer USD, even as they overlook mixed domestic signals. Similarly, USDCAD continues to move lower, ignoring the drop in crude oil prices, a key export for Canada, as the weaker USD and mostly positive updates from Canada help restart the earlier downtrend that had paused.
Australia’s economic momentum has slowed, with the Westpac–Melbourne Institute Leading Index falling below trend in March. The six-month annualised growth rate declined to -0.13% from +0.05% in February, marking the first below-trend reading since August and signalling slower growth into the second half of 2026.
Canada’s chief trade negotiator, Janice Charette, said a full resolution of trade issues by the July 1 United States-Mexico-Canada Agreement (USMCA) review deadline is unlikely, but added that any delay will not affect the agreement itself.
Oil prices remain volatile but mostly rangebound, recently softer, as ongoing geopolitical risks are offset by the lack of any new supply disruptions. At the same time, market indecision combined with a weaker USD supports gold, helping it extend gains for a third straight day.
The market’s slightly positive bias and the softer USD allow Bitcoin (BTC) and Ethereum (ETH) to rise for the third consecutive day. The same also helps the Asia-Pacific shares to edge higher even if Wall Street closed on a negative note for the second straight day.
US equities ended lower on Tuesday, following late-session selling triggered by headlines confirming that talks were cancelled. Earlier reassurance from U.S. President Trump and comments from incoming Fed Chair Kevin Warsh did not move markets. Sentiment weakened through the day as Iran-related risks increased, with heavier selling after reports from Tasnim and the Associated Press (AP) confirmed the breakdown in talks and JD Vance's cancellation of his Pakistan visit. The S&P 500 declined 0.6%, the Nasdaq Composite fell 0.6%, the Dow Jones Industrial Average (DJIA) dropped 0.6%, the Russell 2000 lost 1.0%, and the Toronto Stock Exchange (TSX) Composite decreased by 1.5%.
Canada housing figures and US crude oil inventories will be in focus on Wednesday, alongside speeches from European Central Bank (ECB), Bank of England (BoE), and Federal Reserve (Fed) officials. However, the main attention will remain on developments around US–Iran peace deal talks, despite the cancellation of discussions in Islamabad.
Given recent doubts over the US–Iran peace process and stronger US economic data supporting a hawkish Fed outlook, the USD could extend its gains. This may continue the recent pullback in EUR/USD, GBP/USD, AUD/USD, and NZD/USD, while USD/CAD may also post modest gains.
Gold is likely to remain rangebound with a slight upside bias, while crude oil could edge higher. At the same time, cryptocurrencies and equity markets may drift lower.
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