I recently noticed an interesting phenomenon. The Australian dollar against the US dollar and the euro against the US dollar have both risen significantly these days, with the AUD/USD briefly reaching around 0.7148, and the euro hovering above 1.18. At first glance, it seems to reflect a rebound in risk sentiment, but behind it is actually the brewing expectation of the resumption of US-Iran negotiations.

Here's what happened. Recently, U.S. Eastern Time, Trump stated that he might hold a new round of talks with Iran within two days. As soon as this news broke, market risk appetite immediately improved. Crude oil prices fell sharply, and risk aversion sentiment also diminished. This directly reduced the attractiveness of the dollar, instead allowing risk assets like AUD/USD to start rebounding.

From a fundamental perspective, inflation in Australia remains relatively stubborn, and the market now expects the Reserve Bank of Australia to possibly raise interest rates for the third time in May, with a probability close to 70%. Strategists at Westpac Bank are optimistic that AUD/USD could reach 0.75 in the second half of the year, reasoning that after the easing of Middle East tensions, Australia's yield advantage will become even more prominent.

Views on the euro are more divided. Societe Generale is more optimistic, believing that if the Iran situation truly de-escalates and the Strait of Hormuz reopens, EUR/USD could even push toward 1.20. They expect the European Central Bank to raise interest rates in June and September. However, ING Group is relatively cautious, thinking that the euro's gains may be limited in the short term, and unless there is a substantial breakthrough in US-Iran negotiations, EUR/USD will find it difficult to break above 1.18 further.

But there is one voice worth listening to. Lee Hardman, a forex strategist at MUFG, warned that the market currently seems overly optimistic, believing the worst is over. But he thinks it is still too early to say that the dollar's safe-haven appeal has disappeared. The risk of energy price shocks may be underestimated, and such shocks could ultimately harm the global economy. Therefore, the upside potential for AUD/USD still depends on ongoing negotiations, and continued attention is needed to assess the progress.