Market sentiment remains slightly positive for the second straight day early Wednesday, as traders expect either a quicker end to the US–Iran conflict or at least an extended ceasefire. Even without strong signals from Iran, U.S. President Donald Trump and Vice President JD Vance continue to support hopes of a peace deal. At the same time, mixed economic data and expectations that inflation may ease faster due to improving energy supply are keeping sentiment upbeat ahead of key events.
This positive tone continued in the Asia session, supported by encouraging updates from US officials on Iran talks. JD Vance said negotiations are progressing, with the ceasefire holding for seven days and discussions expanding toward a “grand bargain”. While differences remain, ongoing talks are helping maintain stable market confidence. Reports suggest Vance may lead another round of discussions before next week’s ceasefire deadline, along with Steve Witkoff (Special Envoy) and Jared Kushner (Senior Advisor). He also added that if Iran abandons nuclear weapons, the US would support its return to the global economy.
Donald Trump (President) gave mixed signals. A media clip suggested he sees the war as “over,” which initially lifted sentiment. Later, he clarified that it is “very close to over” but not complete, and that the coming days are crucial. This shows that uncertainty still exists despite improving headlines, and markets are reacting quickly to such signals, often called “vibe trading” (sentiment-based trading).
Peace-driven trading remained strong, pushing oil prices lower again. Signals continue to point toward a deal, with Trump mentioning a possible second meeting in Pakistan and staying optimistic. News on Lebanon is limited but slightly positive and not seen as a deal breaker. Iran is also reportedly not testing the Strait of Hormuz situation, indicating easing tensions. However, risks remain due to Trump’s unpredictable approach, though progress so far has pushed US stocks above pre-war levels. Even if oil does not fully return to earlier levels, markets believe the improvement is enough to support the broader economy.
The US Dollar stayed broadly weaker. Economic data showed a softer Producer Price Index (PPI), supporting the view that inflation could return to pre-2020 low levels, especially with Artificial Intelligence (AI) impacting the labor market. If government spending reduces, this trend of lower inflation could strengthen further.
For March, PPI (Producer Price Index) final demand rose 4.0% year-on-year (y/y) versus 4.7% expected, compared to 3.4% prior. Core PPI (excluding food and energy) increased 3.8% y/y versus 4.2% expected, revised from 3.9% to 3.8%. Janet Yellen (Former Fed Chair) said one rate cut by the Federal Reserve (Fed) is possible, but Iran-related inflation risks still create uncertainty.
Meanwhile, U.S. Treasury Secretary Scott Bessent said Trump has chosen not to raise tariffs (import taxes) from 10% to 15% for now. After a 6–3 Supreme Court decision removed earlier tariffs, a new 10% global tariff was introduced under Section 122, which allows up to 15% for 150 days. This suggests that keeping it at 10% helps control inflation and may also be used as leverage later.
The International Monetary Fund (IMF) lowered its 2026 global growth forecast to 3.1% from 3.3%. Chief Economist Pierre-Olivier Gourinchas (Chief Economist) said that without the Iran conflict, growth could have been raised to 3.4%. The current estimate already includes higher oil prices and short disruptions. In worse scenarios, growth may fall to 2.5% with $100 oil and to 2.0% with $110 oil plus financial stress, which is close to a global recession. Country-wise, US growth is slightly reduced to 2.3%, Europe drops to 1.1%, and China is trimmed to 4.4%, with further risks if oil rises or exports weaken.
In currency markets, the US Dollar Index (DXY) rebounded from a six-week low but remains generally weak. EURUSD and GBPUSD stay near multi-week highs. USDJPY recovered after ending a three-day rise, while AUDUSD and NZDUSD remain strong near recent highs. USDCAD bounced from a three-week low but lacks strong momentum despite falling oil prices. Gold pulled back from a one-month high, while Bitcoin (BTC) and Ethereum (ETH) extended small losses after recent highs. Asia-Pacific markets also moved higher, following positive signals from Wall Street.
A corrective rebound in the US Dollar pushed EURUSD down from its seven-week high and lifted USDJPY from its weekly low. However, both currency pairs failed to gain strong momentum as overall market sentiment stayed mixed. At the same time, positive updates from the Eurozone and Japan limited further weakness in the Euro and Japanese Yen, challenging the Dollar’s recovery.
From the Eurozone, European Central Bank President Christine Lagarde said the economy is currently positioned between baseline and adverse scenarios, highlighting the importance of focusing on the medium-term outlook while closely monitoring incoming data. Gabriel Makhlouf added that the Federal Reserve and the ECB could take different short-term policy paths, and any reaction to inflation should remain measured if price pressures are temporary. He also noted that there is no clear change in consumer behavior so far.
In Japan, manufacturing sentiment saw a sharp drop in April, marking the steepest decline in more than three years. The fall was mainly driven by rising energy costs and supply disruptions linked to the Iran conflict. The Reuters Tankan survey showed sentiment falling by 11 points to +7, the largest decline since January 2023 and the first contraction in three months, reflecting the strong impact of higher oil prices and disruptions around the Strait of Hormuz.
Unlike EURUSD, GBPUSD continues to hold firm near its two-month high, although the upward momentum appears to be fading after a seven-day winning streak. The pair is drawing support from optimistic remarks by Bank of England officials, while weak confidence among US Dollar buyers is also helping it stay elevated.
At the same time, recent economic data from the UK, including retail sales and Purchasing Managers’ Index (PMI), have mostly been weak and do not fully support the recent strength in the Pound, suggesting that the current rise is driven more by sentiment than fundamentals.
Despite a corrective bounce in the US Dollar, AUDUSD and NZDUSD continue to trade strongly at their one-month highs, mainly supported by cautious optimism around a possible Iran deal.
In contrast, USDCAD has reversed direction from its three-week low, as crude oil prices—Canada’s key export—remain under pressure. The weakness in oil is driven by easing concerns over energy supply disruptions linked to the Strait of Hormuz, which is weighing on the Canadian Dollar.
Crude oil prices stayed under pressure, reflecting easing geopolitical risks, although recent lows continue to act as important technical support levels. A private inventory report showed an unexpected build in crude stocks instead of a draw, adding further downside pressure on West Texas Intermediate (WTI) prices. Still, caution ahead of Thursday’s US–Iran talks helped limit deeper losses, keeping prices supported near a three-week low.
In the metals space, gold prices remained weak, weighed down by the US Dollar’s rebound and fading concerns over the US–Iran conflict. At the same time, a hawkish stance from major central banks also added pressure, as expectations of tighter monetary policy reduced the appeal of non-yielding assets like gold.
Early Wednesday, Asia-Pacific shares followed the positive lead from US markets and posted small gains for the second consecutive session, supported by easing concerns over Iran. On Tuesday, US stock markets continued their strong upward move as traders increasingly priced in a possible peace deal, with probability estimates now above 90%, which also raised the risk of a “sell the fact” move where prices fall after the expected event actually happens. Major indices, including the S&P 500, the Nasdaq Composite, the Russell 2000, the Dow Jones Industrial Average, and the Toronto Stock Exchange Composite, all closed higher. Sector-wise, travel and memory-related stocks led the gains, supported by strong performance from major technology companies, while oil-linked stocks underperformed.
In the digital asset space, cryptocurrencies declined for the second straight day, extending the previous session’s pullback from an eight-week high in Bitcoin and Ethereum. The weakness was driven by a US Dollar rebound along with mixed overall market sentiment, which kept pressure on crypto traders and reduced follow-through buying.
Speeches from Federal Reserve (Fed), European Central Bank (ECB), and Bank of England (BoE) officials will be closely watched alongside key data releases, including Eurozone Industrial Production, Canada Manufacturing Sales, and the US NY Empire State Manufacturing Index, all shaping Wednesday’s economic calendar. Attention will also remain on updates from the International Monetary Fund (IMF) meetings and developments ahead of the US–Iran talks scheduled for Thursday.
The US Dollar is showing a corrective bounce from a six-week low, and this is keeping buyers active. If there is any disappointment around the Iran peace progress or if US economic data comes in stronger than expected, the Dollar could extend its recovery further. In such a case, major currencies, commodities, and cryptocurrencies may see a pullback.
Under this scenario, EURUSD and GBPUSD could see profit-taking pressure, while gold may extend its decline, and crude oil could rebound from its three-week low as geopolitical risk expectations adjust. Antipodean currencies (AUDUSD and NZDUSD) may also drift lower.
Meanwhile, Bitcoin (BTC) and broader equity markets are likely to remain mixed, unless corporate earnings surprise strongly on the upside. Overall, market direction will remain sensitive to both macro data and geopolitical headlines.
May the trading luck be with you!
