On Tuesday, the US Dollar experienced notable weakness across major currency pairs, driven by renewed optimism for a resolution in the US-Iran conflict. GBP/USD snapped a five-day losing streak, rising 0.32% and closing around 1.3230 after trading between a session low near 1.3160 and a high close to 1.3260. This rebound was attributed to increased risk appetite following reports that President Donald Trump is willing to end military hostilities with Iran, even if the Strait of Hormuz remains largely shut, and that other nations may take the lead in reopening the Strait. Comments from the Iranian President about openness to peace also contributed, though his remarks were noted as largely out of context given his limited control over military operations and unchanged demands from Iran [1].
Meanwhile, USD/JPY fell 0.62%, marking its second consecutive decline and closing around 158.70 after an early push toward 160.00 was rejected. The pair dropped below 159.00 for the first time in over a week, with sustained selling pressure evident throughout the session. The decline was similarly driven by risk-on sentiment as the White House signaled readiness to halt military operations against Iran, undermining the safe-haven appeal of the US Dollar. The S&P 500 posted its best single-session gain since the conflict began, and Treasury yields eased as the flight-to-safety trade unwound [2].
Both articles highlight upcoming US economic data releases as key market drivers, including Wednesday's ADP Employment Change (40K consensus), February retail sales (0.5% MoM consensus), and ISM Manufacturing PMI (52.5 consensus). Friday's Non-Farm Payrolls (NFP) report (60K consensus) is expected to be the week's marquee release, though thin liquidity due to Good Friday may mute or amplify reactions [1][2]. The Federal Reserve held the federal funds rate at 3.50% to 3.75% in March, while the Bank of England also maintained its Bank Rate at 3.75% [1][2].
On the Japanese side, the Bank of Japan's March Summary of Opinions struck a hawkish tone, with one board member suggesting a larger-than-usual rate hike if conditions persist. Tokyo CPI for March cooled to 1.4% YoY from 1.5%, and the core reading eased to 1.7% versus 1.8% expected. The unemployment rate came in tighter than expected at 2.6% versus 2.7% consensus, supporting the Yen [2]. Technical analysis for GBP/USD shows mild bullish bias above the 200-period EMA at 1.3221, while USD/JPY maintains a bearish bias below the descending 200-period EMA at 159.20, though short-term corrective bounces are possible [1][2].
CONCLUSION
The US Dollar's weakness on Tuesday was largely driven by increased risk appetite amid hopes for a peaceful resolution to the US-Iran conflict, benefiting GBP/USD and pressuring USD/JPY. Upcoming US economic data releases and central bank decisions remain key market drivers, with thin holiday liquidity expected to influence reactions. The market's focus is now on whether risk sentiment persists and how upcoming data will shape currency moves.