Risk-on: Dollar slips as US-Iran talks revive; oil falls

Global markets moved into a risk-on stance after reports that US and Iranian negotiation teams will return to Islamabad this week, with some accounts suggesting talks could resume from Thursday. The US dollar weakened against major currencies, equities rose and oil prices retreated. Precious metals extended gains.

Oil benchmarks fell as traders trimmed a wartime premium following the reports. Market participants noted continued shipping activity in the Strait of Hormuz, with three tankers reported to have passed through on the first day of a US-enforced blockade.

Economic releases on the margins had limited market impact. The NFIB small business optimism index for March fell to 95.8, below a 97.9 consensus. Spain’s final March consumer price index was revised up to 3.4% year-on-year, slightly above the 3.3% estimate. Market reaction to both releases was muted amid attention on the diplomatic developments.

Surveys and positioning show caution among some investors. Bank of America client flows recorded the most bearish investor reading in ten months in early April, even as markets moved toward riskier assets following the diplomatic reports. Large FX option expiries in New York on April 14 were flagged as a possible source of short-term volatility, particularly for dollar-yen.

Attention now turns to US data in the American session: weekly ADP private payrolls and the producer price index. ADP has not consistently driven market moves recently but has pointed to a resilient labor market. Forecasts expect PPI to show elevated readings tied to cost pressures, though its impact may be limited while negotiations are underway.

European Central Bank executive board member Olli Rehn said interest rate decisions are not predetermined, a comment that market participants interpreted as a reminder that policy will respond to incoming data.

Traders and investors are awaiting confirmation of the Islamabad meetings and any updates on progress. Market direction will reflect the outcomes of the talks and subsequent developments.