Global FX Sentiment Improves as Crude Oil Retreat Eases Inflation Fears

Global market sentiment improved on Friday as crude oil prices eased, allowing equity markets to trim earlier losses and shifting risk appetite across forex markets. The decline in energy costs provided relief to currencies of oil-importing nations, with the euro and Japanese yen both finding a degree of support against the US dollar. Lower oil prices reduce the pass-through effect on consumer inflation, a key consideration for central banks including the ECB and Bank of Japan as they calibrate monetary policy responses. The risk-on mood saw traders rotate out of safe-haven positions in the US dollar and Swiss franc, while commodity-linked currencies such as the Australian and Canadian dollars showed mixed performance depending on their net energy export status. EUR/USD stabilized above key near-term support, while USD/JPY pulled back slightly from recent highs. Traders should remain cautious, as oil price volatility could resume on any escalation in geopolitical tensions. Near-term direction will depend on energy market developments and upcoming central bank communications.