Global markets lost momentum on Wednesday after two sessions of strong risk appetite, with traders turning cautious ahead of fresh US economic data and a heavy schedule of central bank speeches.
The US calendar features March import and export price index data and April’s Empire State manufacturing index, alongside remarks from officials at the Federal Reserve, European Central Bank and Bank of England later in the day.
US stock futures were little changed in early trade, holding near flat after Tuesday’s advance on Wall Street. The US dollar index steadied around 98.00, but remained more than 0.5% lower for the week by the European morning.
Dollar under pressure, led by commodity currencies
The US currency has weakened broadly this week, with the sharpest move against the Australian dollar. The greenback is down 2.18% versus the Aussie, with smaller declines registered against the euro, pound, yen, Canadian dollar, New Zealand dollar and Swiss franc.
The Australian dollar has gained 2.18% against the greenback, while the New Zealand dollar is up 1.76% and the euro has risen 0.99%.
The moves reflect a mild “risk-on” tone, where traders tend to favor growth-linked and commodity-sensitive currencies over traditional safe havens.
Mixed signals from US–Iran ceasefire talks shape risk sentiment
Risk appetite remained heavily influenced by headlines around US–Iran ceasefire negotiations.
Markets are weighing conflicting reports: some point to progress toward a deal that could end hostilities before a stated deadline, while others suggest talks have collapsed and that Washington is preparing a blockade of the Strait of Hormuz.
Comments from US President Trump and Vice President Vance have highlighted ongoing diplomatic efforts, helping to underpin broader risk sentiment despite the uncertainty.
Euro steadies near six-week high as data cloud outlook
In currency markets, EUR/USD consolidated just below 1.1800 after touching its highest level in six weeks. The pair traded around 1.1790 early on Wednesday.
Fresh Eurostat figures showed industrial producer prices in the euro area fell 0.7% in February, a larger decline than some had expected. The data add to an already complex backdrop for the region, where soft price pressures contrast with pockets of resilient activity.
Traders in Europe are also watching for the release of February industrial production later in the day, which could influence views on the euro area’s growth trajectory and the ECB’s policy stance.
Australian dollar holds gains ahead of jobs data and China GDP
The Australian dollar traded near 0.7150 against the US dollar, with AUD/USD last around 0.7129 as the currency extended its recent advance.
Attention is turning to Thursday’s Australian employment report and China’s first-quarter GDP numbers, both seen as pivotal for the Aussie’s next move.
Economists expect Australia to have added around 20,000 jobs in March. In China, a Reuters poll suggests the economy grew 4.8% year-on-year in the first quarter, an acceleration from the 4.5% expansion recorded at the end of 2025. Those readings will help shape expectations for regional growth and demand for commodity-linked assets.
Sterling, yen trade in tight ranges
GBP/USD slipped slightly after approaching 1.3600 on Tuesday, with the pair confined to a narrow band above 1.3550 in early trade.
The yen was broadly steady. USD/JPY inched higher to around 158.93 after the Japanese currency weakened 0.4% in the previous session. The pair’s elevated level continues to draw attention amid ongoing debate over the prospects of any further policy shifts by the Bank of Japan.
Gold eases after strong rally, tracks dollar and geopolitics
Gold prices edged 0.6% lower to just above $4,800 per ounce in early European dealings, with spot bullion quoted around $4,820.46. The dip followed a 2% rally on Tuesday, driven by renewed demand amid geopolitical optimism and a softer dollar.
The metal remains sensitive to shifts in both risk sentiment and the US currency. A further decline in the dollar could offer fresh support to bullion, while any renewed flight to safety on geopolitical developments would likely boost demand.
Risk-on versus risk-off: positioning and volatility
The current pause across major asset classes comes after two days of clear “risk-on” behavior, where traders favored equities and commodity-linked currencies.
In contrast, “risk-off” periods typically see flows into bonds, gold and safe-haven currencies such as the US dollar, Japanese yen and Swiss franc.
This consolidation phase often coincides with higher volatility in assets most exposed to shifts in global capital flows, particularly fast-moving, technology-linked names. Many market participants are treating the current pause as a potential staging point for a more decisive move once new data and policy signals emerge.
Dollar index seen as key barometer for next market move
Upcoming US inflation data are viewed as a clear inflection point. A reading that significantly diverges from expectations could rapidly reshape assumptions about the Federal Reserve’s policy path and, in turn, the dollar’s valuation.
A stronger dollar would likely cap or reverse recent gains in growth-sensitive assets, while a softer inflation print could extend the recent rally in risk-linked instruments.
Against this backdrop, the behavior of the dollar index is central to near-term sentiment. A break below current support levels or a sharp rebound is likely to be amplified in currencies, commodities and equities priced off the greenback.
Bank of England Governor Andrew Bailey recently underscored the fragility of financial stability, stressing that central banks are operating in a challenging environment where each policy step has wide-ranging market consequences.
Geopolitics in the Middle East remains the main wild card
Uncertainty around events in the Middle East, particularly US–Iran dynamics and potential disruptions around the Strait of Hormuz, remains a major wild card.
Any sudden de-escalation could reinforce risk-taking and support growth-focused assets, while an escalation or supply disruption would threaten to overshadow the economic data calendar. Such a shift would likely spark rapid reallocation into traditional safe havens and away from assets that rely on a clear, supportive risk-on backdrop.
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