USD Weakens as Market Sentiment Lifts on Oil Decline, Central Bank Focus

Broad market sentiment has improved at the start of the new trading week, driven by declining crude oil prices and a rally in global equity markets, placing downward pressure on safe-haven currencies including the US dollar and Japanese yen. The decline in oil prices is linked to easing tensions around the Strait of Hormuz, reducing geopolitical risk premiums across energy and currency markets. CAD may face headwinds from the oil price drop given Canada's energy export dependency, while commodity-linked currencies such as AUD and NZD could benefit from the improved risk appetite. Traders are now shifting focus to a packed week of central bank decisions, which will be critical in shaping monetary policy expectations and forex direction. The combination of lower oil prices, rising equities, and pending rate decisions creates a complex environment where positioning ahead of central bank outcomes will be key. Near-term, risk-on flows may continue to favor higher-yielding currencies over traditional safe havens.