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The and strengthened on Wednesday as global trade sentiment improved and investors adjusted positions ahead of key U.S. economic data. The Japanese yen rose to 155.70 against the , recovering from earlier lows, while the euro advanced to $1.0853, nearing a two-week high.
This rebound was fueled by investor optimism that international trade frictions, particularly between the U.S. and China, are showing signs of easing. As reported by Yahoo Finance, improving diplomatic tone and increased collaboration on key trade and climate issues have lifted global risk appetite, encouraging a shift out of safe-haven currencies like the U.S. dollar.
Similarly, The Economic Times highlighted that the euro’s rise was also supported by signs of resilience in the Eurozone’s economic outlook, despite sticky .
Dollar Dips as Traders Eye U.S. Data
The U.S. dollar edged lower, with the slipping to 105.63, as traders braced for fresh economic indicators including Q2 and the —the Federal Reserve’s preferred inflation gauge. Expectations of fewer in 2025 have tempered recent dollar gains, but any signs of economic slowdown could pressure the greenback further.
Market participants are especially alert to potential shifts in tone from the Fed. Dovish remarks in recent weeks, combined with slowing price pressures, have raised hopes of an earlier pivot. This environment has proven supportive for risk-sensitive currencies such as the yen and euro.
As noted on Forex Factory, a weaker U.S. dollar and easing geopolitical tensions are combining to create favorable conditions for FX rebalancing, with EUR/USD and USD/JPY now key currency pairs to watch.
Central Bank Signals Add to Momentum
In addition to trade developments, the latest signals from the Bank of Japan (BoJ) and the European Central Bank (ECB) are shaping forex market expectations.
BoJ Governor Kazuo Ueda reiterated the central bank’s cautious stance toward tightening, though recent inflation data has prompted speculation about a shift later this year. If the BoJ begins raising rates or intervening in FX markets due to volatility, the yen could strengthen considerably.
Meanwhile, the ECB is walking a tightrope—having begun cutting rates but still keeping a close eye on inflation, especially in services and energy sectors. Analysts suggest that further action will depend on upcoming inflation prints and labor market trends in the Eurozone.
These policy cues, combined with macroeconomic risks, are giving both the yen and euro renewed strategic importance in short-term FX positioning.
Technical Outlook and Sentiment Trends
Technically, the euro is testing resistance around $1.0860, while the yen’s key levels hover near 155.00 support and 156.20 resistance. Volatility remains a factor as traders react to macro headlines and any indication of central bank intervention.
Sentiment has also improved after recent reports of U.S.–China trade cooperation, which may positively influence global growth forecasts. A Bing News search reveals consensus among analysts that improving diplomacy and softening economic risks are at the core of this FX market rebound.
Some traders are now speculating on a potential multi-week rally for the euro and yen if U.S. inflation continues to cool and central bank policies remain dovish into Q4 2025.
Outlook: FX Markets Remain Data-Driven
In the short term, foreign exchange markets remain highly data-dependent. The next few sessions will be crucial, with U.S. GDP and core inflation readings expected to either confirm or challenge the Fed’s current stance.
For the yen and euro, much depends on how well their respective central banks manage policy amid evolving trade dynamics and inflation trends. Should trade progress accelerate further, and U.S. data falter, the current rebound could gather pace.
With global markets recalibrating, FX traders are advised to stay alert to shifts in tone from policymakers and data surprises that could reprice risk assets rapidly.
Stay tuned with Dupoin for expert updates, strategy insights, and live forex coverage as markets digest this high-impact economic event
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