Currency Market Update: USD slips as risk sentiment improves

Currency Market Update: USD slips as markets look past recent risk shock

Currency markets have started May with a softer US dollar, firmer risk sentiment and renewed focus on central banks. Reports of progress toward a possible US–Iran agreement have reduced safe-haven demand for the dollar, while also easing some of the pressure on oil-sensitive inflation expectations. Reuters reported that the dollar eased as hopes of a deal grew, with the yen also supported by speculation around Japanese intervention. 

For BER users planning international money transfers, business payments or travel money purchases, the key message is simple: exchange rates remain sensitive to headlines, but the margin charged by your provider can still make a bigger difference than trying to perfectly time the market.

• 🇺🇸 USD: The US dollar has slipped as safe-haven demand fades, although the outlook remains highly dependent on geopolitical risk and US rate expectations. USD/EUR USD/GBP USD/AUD

• 🇦🇺 AUD: The Australian dollar has some support after the RBA raised rates by 25 basis points to 4.35%, signalling a more restrictive policy stance. AUD/USD AUD/EUR AUD/GBP

• 🇬🇧 GBP: Sterling has held up reasonably well, but UK political risk and shifting Bank of England expectations remain important drivers. GBP/USD GBP/EUR GBP/AUD

• 🇯🇵 JPY: The yen remains volatile, with Japan suspected of further intervention to support the currency. USD/JPY AUD/JPY GBP/JPY

• 🇪🇺 EUR: The euro has benefited from improved global sentiment and a softer dollar, although the next move will depend on inflation and central bank signals. EUR/USD EUR/GBP EUR/AUD

What is driving exchange rates now?

The dominant theme is a shift away from emergency safe-haven positioning. During periods of geopolitical stress, investors often buy the US dollar, Swiss franc or yen. When those risks ease, funds can move back into higher-yielding or more growth-sensitive currencies such as the Australian dollar, New Zealand dollar and some emerging-market currencies.

Interest rates remain the second major driver. The US Federal Reserve’s room to cut rates appears narrower if inflation remains sticky, while the RBA has moved in the opposite direction by hiking again. Reuters reported that the RBA lifted its cash rate to 4.35% after earlier rate cuts in 2025, with Governor Michele Bullock describing policy as slightly restrictive. 

The Bank of England is also balancing inflation risk against weaker growth. It recently held rates at 3.75%, while warning that an oil shock could push inflation materially higher if energy prices stay elevated. 

Currency outlook

The US dollar may remain range-bound unless markets get a clearer signal from the Fed or geopolitical risk moves sharply again. A Reuters poll noted that the dollar outlook remains closely tied to developments around the Strait of Hormuz and broader risk sentiment. 

The Australian dollar could stay better supported if markets believe the RBA will keep rates higher for longer. However, AUD is still exposed to global growth fears, commodity prices and risk appetite.

The British pound has been helped by shifting rate expectations, but local election uncertainty and UK bond-market sensitivity are worth watching. Reuters reported that sterling edged higher against the US dollar on improved risk sentiment, while analysts warned markets may be underestimating UK political risks. 

The Japanese yen remains one of the more unpredictable major currencies. Suspected Japanese intervention may slow yen weakness, but interest-rate gaps and global risk sentiment will continue to drive sharp moves. 

What this means for transfers and travel money

For large transfers, SMEs and expats, the market rate is only one part of the final cost. Bank margins can still be several times higher than specialist FX providers, especially on larger international transfers.

Tip: If you are moving a large amount, compare the live provider rate rather than relying only on the headline interbank rate. A small difference in margin can be worth hundreds or thousands of dollars.

For travel money, avoid leaving the exchange decision until the airport or last-minute card conversion. Rates can move, but the biggest saving usually comes from choosing a competitive card, transfer provider or travel money service before you go.

BER view

Currency markets look less defensive than they did during the recent geopolitical shock, but the outlook is still fragile. The US dollar is no longer a one-way safe-haven trade, the Australian dollar has gained some rate support, and sterling remains caught between inflation, politics and Bank of England expectations.

For BER users, the practical approach is to:

• compare live exchange rates before sending money
• check both the exchange rate and transfer fee
• consider splitting very large transfers if timing risk is a concern
• watch central bank dates and inflation releases
• use specialist FX providers where they offer a tighter margin than banks

Rates are indicative only – compare live rates here.

---

This currency market update is reviewed monthly and refreshed more often when major central bank decisions, inflation data or market moves materially affect exchange rates.

For smarter international money transfers and up-to-date exchange rate comparisons, follow the latest trends on BestExchangeRates.com.

Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.