US President Donald Trump announced on Tuesday that the United States could end its military campaign against Iran within two to three weeks, stating that a formal agreement with Tehran is not required to conclude hostilities. Trump emphasized that Iran 'doesn't have to make a deal,' suggesting a preference for ending the conflict based on military outcomes rather than diplomatic negotiations [1][2]. This announcement has fueled hopes for de-escalation in Middle East tensions, leading to a notable improvement in global risk sentiment [2].
The EUR/USD pair extended its gains for the second consecutive day, trading around 1.1560 during Asian hours on Wednesday, as the US Dollar softened amid fading safe-haven demand. The moderation in geopolitical risks has contributed to the pair's advance, with Eurozone inflation data showing the Harmonized Index of Consumer Prices (HICP) rising 2.5% year-over-year in March, below market expectations of 2.7%. Core HICP increased 2.3% year-over-year, also slightly below forecasts and the previous reading of 2.4%. Despite coming in below expectations, these figures indicate persistent price pressures, partly attributed to elevated energy costs from the conflict [1]. European Central Bank (ECB) President Christine Lagarde and Chief Economist Philip Lane suggested that recent developments could justify a more hawkish monetary policy stance, though any response would depend on the severity and persistence of the energy shock [1].
Similarly, the AUD/USD pair built on its recovery, reaching a fresh weekly high around 0.6925-0.6930 during the Asian session. The Australian Dollar benefited from improved risk sentiment following Trump's remarks, as well as support from the Reserve Bank of Australia's (RBA) hawkish outlook. Minutes from the March RBA meeting indicated that most members judged further rate hikes likely necessary to return inflation to target. Additionally, China's upbeat PMIs signaled modest stabilization in the wider economy, further supporting the AUD/USD pair [2].
Easing geopolitical risks led to a pullback in crude oil prices overnight, helping to ease inflationary concerns and prompting investors to trim bets for a US Federal Reserve interest rate hike in 2026. This repricing kept US Treasury bond yields depressed and weakened the US Dollar, supporting both EUR/USD and AUD/USD pairs [2]. Market participants are now looking ahead to key US macro releases, including the ADP report, Retail Sales, ISM Manufacturing PMI, and speeches by influential FOMC members, with the focus remaining on geopolitical developments as a driver of risk sentiment and market volatility [2].
On the Iranian side, President Masoud Pezeshkian expressed willingness to de-escalate tensions if specific guarantees are met, while Foreign Minister Abbas Araghchi insisted on binding assurances against future aggression and compensation for damages, highlighting ongoing uncertainty regarding the conflict's resolution [1].
CONCLUSION
Trump's signal of a swift US withdrawal from the Iran war has boosted global risk sentiment, leading to gains in EUR/USD and AUD/USD as the US Dollar weakened. Easing geopolitical tensions have also contributed to lower crude oil prices and reduced inflationary concerns, with central banks and investors closely monitoring further developments. The market remains highly sensitive to geopolitical news, which will continue to drive volatility and influence currency movements in the near term.