USD Sheds War Premium; EUR/USD, USD/JPY React to Oil Risks

The US dollar has lost a portion of its geopolitical risk premium as war-end optimism dampens safe-haven demand, but analysts warn that oil-related risks remain a significant wildcard for the greenback's trajectory. EUR/USD is benefiting from the dollar's retreat, with the euro gaining ground as reduced energy costs ease the eurozone's terms-of-trade deficit. USD/JPY is under pressure as the yen regains some safe-haven flows amid mixed signals, while exotic pairs including USD/KRW and USD/CNY are seeing notable moves reflecting shifting risk perceptions in Asian markets. The key concern is that oil supply disruption risks have not fully dissipated — any escalation could rapidly restore the dollar's war premium and reverse current trends. Central bank divergence remains a factor, with the Fed maintaining a data-dependent stance while the ECB and BOJ navigate their own policy paths. Traders should remain cautious, as the 'oil fuse' metaphor suggests potential for sudden volatility spikes that could whipsaw positioning across major and emerging market pairs.