Global financial markets rallied on Tuesday and Wednesday as reassurances from US officials and President Donald Trump confirmed that the US-Iran ceasefire remains in place, with negotiations for a peace deal reportedly making 'great progress' [1][2][4]. President Trump announced a pause in 'Project Freedom,' the US operation escorting commercial ships through the Strait of Hormuz, citing progress toward an agreement with Iran [2][4]. Defense Secretary Pete Hegseth and Secretary of State Marco Rubio emphasized that the US was not seeking to re-escalate tensions, and that combat operations against Iran had concluded, shifting focus to defensive measures [1][2][4].
This de-escalation triggered a decisive shift to risk-on sentiment, lifting the S&P 500 to fresh all-time highs and sending crude oil prices sharply lower, reversing most of the prior session's war-premium gains [1][4]. The US Dollar Index (DXY) softened below 98.50, trading near 98.30 during Asian hours, as investors rotated out of safe-haven assets [2][3][4]. The USD weakened against most major currencies, with the Australian Dollar (AUD/USD) rallying to its highest level since June 2022, approaching the mid-0.7200s, and the US Dollar losing 0.69% against the AUD and 0.20% against the EUR on the day [3]. Gold (XAU/USD) also surged, refreshing its weekly top and approaching the mid-$4,600s, as the weaker dollar and lower oil prices boosted demand for the non-yielding metal [4].
Key US economic data released included the ISM Services PMI, which declined to 53.6 in April from 54.0 in March but beat the forecast of 53.7 [1][2]. The US ISM Services Employment Index rose to 48.0 (45.0 forecast), while New Orders fell to 53.5 (60.0 forecast) [1]. The Federal Reserve left its benchmark rate unchanged at 3.50%-3.75% for a third consecutive meeting, citing persistent inflation and energy costs, but Chair Jerome Powell signaled the Fed could drop its easing bias as soon as June [2]. Meanwhile, the CME FedWatch Tool indicated a 35% probability of a rate hike by year-end, tempering aggressive bearish bets on the USD [4].
Looking ahead, markets are focused on upcoming US labor market data, including the ADP Employment Change and Nonfarm Payrolls (NFP) report, which are expected to influence the near-term trajectory of the US Dollar and risk assets [2][4]. Analysts noted that the risk-on rally could persist if geopolitical tensions continue to ease, but caution remains as traders await confirmation of a finalized US-Iran peace deal and further economic data [3][4].
CONCLUSION
Markets responded positively to signals of de-escalation in the Middle East, with equities and risk assets rallying while the US Dollar weakened. The prospect of a US-Iran peace deal and lower oil prices eased inflation concerns and reduced safe-haven demand. However, traders remain attentive to upcoming US jobs data and further geopolitical developments for confirmation of sustained trends.