Market sentiment improved slightly early Wednesday as US officials signaled support for a US–Iran peace deal by easing strict measures that Tehran had opposed. Still, the optimism remained limited due to strong US data and caution ahead of key US employment figures due Friday.
The shift began Tuesday, when the Trump administration softened its tone, driving a risk-on mood across Asia-Pacific markets. Hopes of a US–Iran agreement pushed oil prices lower, lifted equities, and sent the Australian dollar to a four-year high.
Notably, the U.S. Defence Secretary Pete Hegseth confirmed the Iran ceasefire was holding, Secretary of State Marco Rubio announced Operation Epic Fury had successfully concluded, and General Dan Caine, Chairman of the Joint Chiefs of Staff (JCS), said Iran’s Gulf attacks did not meet the level needed to restart major conflict, despite strikes on the United Arab Emirates (UAE).
Donald Trump reinforced this by announcing that Project Freedom, a US mission to guide stranded vessels in the Strait of Hormuz, was paused to support ongoing negotiations. This pause was widely seen as a trust-building step toward Iran, where distrust of the US remains a key barrier.
On the data side, the US trade deficit widened to -$60.1B from -$57.3B but was better than the -$60.9B estimate. The increase was mainly due to a wider goods deficit of -$88.7B (up $4.1B), while the services surplus improved to $28.4B (up $1.6B). US New Home Sales (NHS) rose to 0.682M in March, beating the 0.650M estimate and the previous 0.587M.
The Institute for Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) came in at 53.6, close to the 53.7 estimate, showing steady growth but weaker demand underneath. The Services PMI remained above its 12-month average of 52.5%, which has now increased for four consecutive months, signaling ongoing expansion.
The S&P Global (Standard and Poor’s Global) Services PMI for April stood at 51.0, versus 51.3 expected and 49.8 prior. Job Openings and Labor Turnover Survey (JOLTS) reported 6.866M job openings, slightly above the 6.835M estimate but below the previous 6.882M.
The Federal Reserve Bank of Atlanta (Atlanta Fed) GDPNow (Gross Domestic Product Nowcast) raised its Q2 (second quarter) growth estimate to 3.7% from 3.5%, indicating stronger economic momentum.
That said, the US Dollar Index (DXY) ended its three-day rally and moved lower, allowing EURUSD and GBPUSD to extend gains. USDJPY dropped over 1.0% in its first decline in four days despite holidays in Japan. AUDUSD reached its highest level since June 2022, NZDUSD hit a two-month high, and USDCAD remained under pressure for a second day as oil prices declined.
Gold moved toward its biggest daily gain in five weeks, approaching its 100-day Exponential Moving Average (EMA). Bitcoin reached its highest level since January 31, while Ethereum (ETH) extended its rally to seven straight days. Overall, US equities closed strong at record highs, and Asia-Pacific markets also advanced despite Japan holiday.
As cautious optimism in the market pressured the US Dollar (USD), EURUSD and GBPUSD extended their rebound from weekly lows. The recovery gained further support from hawkish comments by Christine Lagarde of the European Central Bank (ECB), despite ongoing trade concerns with the US.
In the UK, the lack of major negative developments, combined with a softer USD, helped GBPUSD move slightly higher.
Despite Japanese markets being closed, USDJPY fell sharply, marking its first decline in four days and dropping to a 10-week low. The move was driven by a weaker US Dollar (USD) and growing concerns about possible intervention by Japan to support the Japanese Yen (JPY), especially after the currency recently touched a multi-year high and liquidity remained thin during Tokyo holidays.
At the same time, rising expectations of a rate hike by the Bank of Japan (BoJ) and hopes of increased spending during the Japanese holiday period added further pressure on USDJPY.
A positive market mood, a weaker US Dollar (USD), strong China Services PMI, and a rate hike by the Reserve Bank of Australia (RBA) pushed AUDUSD to its highest level since June 2022. NZDUSD followed the same upward move even without major triggers.
USDCAD declined for a second straight day despite softer crude oil prices, as strong Canadian data added pressure. Canada reported a trade surplus of $1.8B versus an expected deficit of -$2.88B, while its S&P Global (Standard and Poor’s Global) Services PMI (Purchasing Managers’ Index) improved to 49.2 from 47.2.
In China, the RatingDog Services PMI beat expectations, reinforcing confidence in domestic demand and supporting the recent strong performance of Chinese assets.
Gold is set for its biggest daily gain in five weeks, rising for a second straight day as a softer US Dollar (USD), technical rebound, and hopes of a US–Iran peace deal support prices.
At the same time, crude oil prices fall for a second consecutive day as expectations grow for a quicker resolution to the global oil supply crunch. West Texas Intermediate (WTI) crude oil continues to decline despite data from the American Petroleum Institute (API) showing a strong weekly build in US oil inventories.
Improved risk appetite, a softer US Dollar (USD), and a technical breakout supported strong gains in Bitcoin (BTC) and Ethereum (ETH). BTC rose for the third straight day to its highest level since late January, while ETH extended its rally into a seven-day uptrend.
US equity futures moved higher, led by the Nasdaq, after Advanced Micro Devices (AMD) surged in after-hours trading on strong earnings. Japanese markets remained closed due to holidays, but other Asia-Pacific indices moved higher.
Major US indices closed at record highs, with the Nasdaq up 1.03%, the S&P 500 gaining 0.81%, and the Dow Jones Industrial Average (DJIA) rising 0.73%.
On earnings, Super Micro Computer (SMCI) beat Q3 (third quarter) adjusted Earnings Per Share (EPS) at $0.84 versus $0.63 but missed revenue at $10.24B compared to the $12.45B forecast, while guiding stronger Q4 EPS. Advanced Micro Devices (AMD) reported Q1 (first quarter) adjusted EPS of $1.37 versus $1.28 estimate, revenue of $10.25B versus $9.89B, and guided Q2 revenue between $10.9B and $11.5B.
In fixed income, bond yields eased slightly, with the 2-year Treasury at 3.944% and the 10-year at 4.426%, both down 2 basis points, reflecting steady demand for bonds.
The final April PMIs (Purchasing Managers’ Index) from Germany, the Eurozone, and the UK, along with the EU PPI (Producer Price Index) and the US ADP (Automatic Data Processing) Employment Change, will shape Wednesday’s economic calendar. Speeches from mid-level European Central Bank (ECB) and Federal Reserve (Fed) officials will also be in focus. At the same time, updates on the US–Iran peace deal will remain important, as recent signals from Washington have increased hopes of improving relations with Tehran.
If upcoming US data continues to show strength and doubts around the US–Iran deal return, which is more likely, the US Dollar (USD) may regain upward momentum. This, combined with potentially weaker data from Germany, the Eurozone, and the UK, could pressure EURUSD and GBPUSD. However, USDJPY may not follow this trend and could stay weak due to holidays in Japan and mixed market sentiment.
Elsewhere, AUDUSD and NZDUSD may face difficulty extending gains, while USDCAD could continue falling despite any recovery in crude oil prices, Canada’s key export.
Gold buyers need a clear break above the $4,650 level for further strength, while cryptocurrencies may continue to attract buyers. Equities are likely to stay range-bound until stronger positive signals emerge from the Middle East.
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