US FX WRAP: Dollar weakens on oil slump due to US-Iran diplomacy hopes

USD was broadly weaker against G10 peers following a drop in oil prices on a couple of developments. Trump said the US is in the final stages of talks with Iran, and Al Hadath reported that the Pakistani Army Chief may visit Iran tomorrow to announce the achievement of the final draft of the agreement text. Oil prices settled around USD 6/bbl lower, allowing US Treasuries to erase losses seen on Tuesday, acting as a drag on USD. Elsewhere, the FOMC Minutes had a hawkish element, yet a fleeting impact on the USD. The two main takeaways were that many policymakers preferred to remove the easing bias from the policy statement (some non-voters also dissented), and the majority of participants saw a hike likely warranted if inflation persists. Next up is the AI theme, as to whether Nvidia earnings confirm the strong capex forecasts in 2026.

Antipodes outperformed as risk sentiment shifted towards optimism on hopes of a US-Iran resolution. CAD and NOK lagged their peers on strength against the US as the slump in oil prices pressured growth prospects.

GBP was firmer on the day as lower energy prices and hopes of continued diplomacy regarding the Middle East offset the lower-than-expected UK CPI reading for April. CPI slowed to 2.8% from 3.3% in March and below the consensus of 3.0%. ONS said, "The annual cost of both raw materials and goods leaving factories continued to rise, driven again by higher crude oil and petrol prices." Cable erased weakness seen on Tuesday, reaching a new WTD high of 1.3464.