Risk-on sentiment driven by AI and Middle East ceasefire hopes is weakening the USD, while JPY remains pressured by structural FDI outflows. Divergent central bank policies are boosting AUD and NOK relative to SEK and CHF.
Key Takeaways
- 1.Optimism regarding a US/Iran ceasefire and a reopening of the Strait of Hormuz is weighing on the US dollar and lowering oil prices.
- 2.Risk appetite, particularly driven by AI sentiment and equity market highs, is currently a more dominant driver of FX than traditional front-end rate spreads.
- 3.JPY weakness is significantly attributed to large foreign direct investment (FDI) outflows, which reached USD 218bn in 2025.
Table of Contents
- US/Iran deal optimism continues to weigh on USD
- FX View
- Trade Ideas
- JPY Flows
- FX Systematic Breakdown
- USD: Strong jobs data secondary for now
- GBP resilience as Starmer set to survive for now
- Gilt market looks for stability
- FX outlook over the short-term
- G10 FX: Are diverging central bank policies impacting FX performance?
- Weekly Calendar
- Key Events
- New Trade Ideas
- Open Trade Ideas
- FX Portfolio
- FX Positioning
- JPY Flows – Foreign Direct Investment
- FX Systematic Breakdown
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Authors
Derek HalpennyLee HardmanAbdul-Ahad Lockhart
Securities
CCMPS&P 500Crude Oil (Brent)AUD/SEKGBPCHF
Themes
Geopolitical De-escalation SentimentCentral Bank Policy DivergenceArtificial Intelligence Driving Equity Risk Appetite
Regions
North AmericaMiddle EastAsia PacificUnited StatesIranJapan