FX markets are responding to a more constructive mix of lower energy prices, improving risk appetite and softer US labour data. Reports of progress towards reopening the Strait of Hormuz have driven oil prices sharply lower, easing inflation concerns and reducing demand for defensive currencies. The dollar has lost ground, while the euro and several higher-beta currencies have benefited from renewed confidence in global growth.

Foreign exchange markets are balancing stronger risk appetite against persistent uncertainty over interest rates, growth and geopolitics. Falling oil prices, record equity markets and hopes of progress in the Middle East are supporting sterling and the euro, but the dollar remains resilient as investors continue to price the possibility of further Federal Reserve tightening. With US data, rate expectations and key technical levels all in focus, the next move across major currency pairs may depend on whether the current risk rally can hold.

Currency markets opened the week on a firmer footing for the dollar, while changing interest-rate expectations and bond yield spreads continued to drive moves across the major pairs. Reduced concern over further Japanese intervention has removed one source of pressure on the greenback, while softer oil prices have eased inflation fears and pulled global yields lower. Sterling has been the main underperformer as UK yields fall faster than those of its peers, while the euro remains supported by growing expectations of an ECB rate increase.

FX markets begin the week with the dollar on the defensive, the yen extending its recovery and sterling losing some of its earlier momentum. The euro has also found support, although higher energy prices and geopolitical uncertainty continue to limit conviction across the major currencies. With speculative positioning stretched and central bank expectations shifting, this week’s US data could determine whether recent moves develop into a broader trend or remain a short-term correction.

Currency markets moved decisively as investors reassessed the outlook for global interest rates. The dollar’s decline gathered momentum, prompting a broader rotation across G10 currencies and exposing stretched positioning built around expectations of sustained Federal Reserve tightening. Softer US inflation and growth data reinforced the move, while sharp yen appreciation added to volatility and accelerated the unwinding of dollar longs. Sterling remained comparatively steady following the Bank of England, while the euro benefited from the weaker dollar despite offering limited domestic momentum of its own.

Global currency markets are once again taking their lead from central banks, interest-rate expectations and the credibility of inflation policy. The Federal Reserve’s decision triggered a pullback in the dollar as heavily crowded hawkish positions were unwound, while rising longer-dated Treasury yields highlighted persistent concerns over inflation and fiscal risk. Attention now shifts to the Bank of England and a busy eurozone data calendar, leaving sterling and the euro exposed to fresh volatility. With energy prices, bond markets and incoming inflation figures all pulling in different directions, FX trading is likely to remain highly sensitive to changes in policy expectations.

Currency markets remain cautious as investors assess renewed geopolitical tensions, weaker risk appetite and two major central bank decisions. Most leading pairs are holding within familiar ranges, but positioning suggests traders are preparing for potentially sharper moves. The Federal Reserve will set the tone today, followed by the Bank of England on Thursday, while developments in the Gulf and continued weakness across technology shares remain important drivers of sentiment.

Oil prices have fallen sharply as easing tensions between the US and Iran remove much of last week’s geopolitical premium. Brent has moved well below July’s highs near $100, offering some relief to markets, although energy remains an important inflation risk should supply conditions deteriorate.