Market sentiment improved midweek as oil prices pulled back, shifting attention away from Middle East tensions and toward key central bank decisions. Investors are now closely watching upcoming policy announcements from the Federal Reserve and the Bank of Canada, along with fresh US inflation data.
Geopolitical risks remain in the background. Iran confirmed that senior official Ali Larijani was killed in an Israeli strike. Meanwhile, Israel launched fresh attacks on Beirut and issued evacuation warnings, while US forces targeted Iranian missile sites near the Strait of Hormuz. Despite these developments, markets showed signs of stabilizing.
A key factor behind the improved mood was the drop in oil prices. Reports of an agreement between Baghdad and the Kurdistan Regional Government to resume exports from Kirkuk to Turkey’s Ceyhan port helped ease supply concerns. As a result, West Texas Intermediate (WTI) crude fell around 2.5%, trading near $93 after gaining more than 2% the previous day.
In currency markets, the US Dollar lost some ground on Tuesday as risk appetite improved. The USD Index slipped for a second straight session before stabilizing above the 99.50 level early Wednesday. US stock futures also pointed higher, rising around 0.5% to 0.6%.
Attention is now firmly on the Federal Reserve’s policy decision. While no rate change is expected, investors will look closely at updated economic projections and comments from Fed Chair Jerome Powell during his press conference.
The Canadian Dollar remains steady ahead of the Bank of Canada’s decision, with USD/CAD trading slightly above 1.3700. The BoC is also expected to keep rates unchanged at 2.25%.
Gold prices continue to move sideways, trading just below the $5,000 mark as the metal struggles to find clear direction.
In Europe, EUR/USD is holding within a tight range near 1.1500. Investors are awaiting revised inflation data from Eurostat, while the European Central Bank is set to announce its policy decision on Thursday.
The British Pound has gained some support from improved market sentiment, with GBP/USD hovering around 1.3350. The Bank of England is also expected to leave interest rates unchanged in its upcoming meeting.
Meanwhile, USD/JPY remains under slight pressure, trading below 159.00. The Bank of Japan will deliver its rate decision during Thursday’s Asian session.
