The core event centers on US President Donald Trump's decision to extend the ceasefire with Iran until negotiations yield tangible progress, as reported by both sources [1][2]. This move has improved market sentiment, with risk appetite rising midweek. According to Source 1, the US Dollar weakened against major currencies, with the largest decline against the New Zealand Dollar (-0.39%), and the USD Index remained below 98.50 after a previous rise [1]. US stock index futures advanced between 0.6% and 0.8% in European morning trading, following a negative close on Wall Street the prior day [1].
Source 2 highlights that the AUD/JPY currency pair held gains above 114.00, trading around 114.10 during Asian hours, supported by the improved sentiment after reports that Iran received 'some sign' the US may be willing to ease its naval blockade [2]. However, there is a discrepancy regarding the blockade: Source 1 states President Trump confirmed the US blockade on Iranian ports will remain in place, while Source 2 cites US Treasury Secretary Scott Bessent, who said the Navy will continue enforcing the blockade to restrict Tehran's maritime trade [1][2].
Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) reportedly attacked a container ship earlier in the day, and Iran’s military warned of forceful strikes on preselected targets following repeated threats from Trump [1][2]. The UK Defence Ministry announced that military planners from over 30 countries will meet in London for two days to discuss reopening the Strait of Hormuz and finalize operational details [2].
On the macroeconomic front, Japan’s exports rose by 11.7%, exceeding expectations of 11%, though the trade surplus was JPY 667 billion, below the projected JPY 1,106 billion [2]. The Japanese Yen remained firm amid softer oil prices, with West Texas Intermediate (WTI) crude down nearly 1.5% to around $88.30 per barrel [2]. Reports suggest the Bank of Japan is likely to keep interest rates unchanged this month while possibly signaling a shift toward policy normalization as early as June, and is expected to raise its inflation outlook while trimming growth forecasts due to elevated energy costs and risks from the Iran conflict [2].
Additionally, Kevin Warsh, President Trump's nominee for Federal Reserve chair, testified that he disagrees with attributing inflation overshoot to tariffs and advocated for a smaller Fed balance sheet to help lower rates and inflation [1]. The European economic calendar features Consumer Confidence data and speeches from ECB policymakers, including President Christine Lagarde [1].
CONCLUSION
The extension of the US-Iran ceasefire has improved risk sentiment, supporting gains in risk-sensitive assets like AUD/JPY and boosting US stock index futures. However, uncertainty remains regarding the US blockade on Iranian ports, and geopolitical risks persist. Market participants are closely watching central bank signals and upcoming economic data for further direction.