TLDR
- President Trump’s two-week ceasefire agreement with Iran sparked widespread market gains
- Dollar Index plummeted approximately 1% to its weakest level since March 11
- Major currencies including euro, yen, pound, and antipodean dollars strengthened versus the dollar
- Bitcoin jumped 3.2% to reach $71,514 while Ethereum surged 5.7% to $2,235
- Oil prices declined on expectations of Strait of Hormuz reopening, reducing inflation concerns
The greenback experienced a significant decline on Wednesday following President Donald Trump’s announcement of a two-week ceasefire agreement with Iran. The development propelled global currencies and digital assets higher as market participants shifted away from defensive positions.
Prior to the agreement, Trump had issued threats of extensive strikes on Iranian civilian targets. His warning that “a whole civilization will die tonight” unless his conditions were satisfied sparked widespread international criticism.
The ceasefire declaration came with under two hours remaining before Trump’s ultimatum for Iran to reopen the Strait of Hormuz expired. This announcement rapidly transformed market dynamics toward risk-seeking behavior.
The Dollar Index, measuring the U.S. currency’s performance against a basket of six major peers, declined roughly 1% to 98.943. This represents its weakest reading since March 11 and positions it for its largest single-session decline since April 21, 2025.
The greenback typically draws capital flows during periods of geopolitical turbulence. As tensions subsided, the dollar’s appeal as a protective asset diminished.
The euro advanced 0.7% to reach $1.1677. Sterling climbed 0.8% to hit $1.3403. The Japanese yen appreciated 0.7% versus the dollar, settling at 158.50 per dollar.
The Australian dollar surged 1.2% to $0.7063. The New Zealand dollar rallied 1.1% to $0.5795. These commodity-linked currencies typically benefit when market optimism increases.
Crypto Joins the Rally
Bitcoin climbed 3.2% to $71,514.03. Ethereum rose 5.7% to $2,235.35. These gains aligned with broader market rotation into higher-risk investment categories.
Digital asset markets have shown growing correlation with global risk sentiment patterns, and Wednesday’s trading session demonstrated this relationship.
Oil Prices and Inflation Outlook
Expectations surrounding the Strait of Hormuz reopening also pressured oil prices. This waterway serves as a vital conduit for international petroleum shipments.
Declining crude prices help alleviate inflation concerns. As inflation expectations moderate, the rationale for central banks pursuing rate increases weakens. Reduced interest rates typically pressure the dollar downward, as international bonds become more appealing to foreign capital seeking enhanced returns.
Ray Attrill, head of FX strategy at National Australia Bank in Sydney, noted the ceasefire could sustain the risk-positive momentum if the Strait reopens. However, he cautioned that currencies remain susceptible to sudden reversals throughout the 14-day truce period.
“Markets still need to proceed with a degree of scepticism,” Attrill said.
The Dollar Index has now declined for three consecutive sessions. While the ceasefire has delivered a near-term market lift, strategists emphasize that outcomes over the coming fortnight will prove critical.
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