Forex Today: Risk flows dominate markets on US-Iran deal hopes

Here is what you need to know on Monday, May 25:

Risk flows dominate the action in financial markets at the begining of the week as the latest headlines suggest that the United States (US) and Iran are looking to reach an agreement to reopen the Strait of Hormuz. The economic calendar will not feature any high-impact data releases on Monday and stock and bond markets in the US will remain closed in observance of the Memorial Day holiday.

Citing a US official, Axios reported late Saturday that the US and Iran are close to signing an agreement that involves a 60-day ceasefire extension during which the Strait of Hormuz would be reopened. In this deal, Iran would reportedly clear mines it deployed in the waterway and allow ships to pass freely inn exchange for the US would lifting its blockade on Iranian ports.

US Secretary of State Marco Rubio said early Monday said that there is a "fairly strong proposal on the table regarding their capacity to open the straits." Meanwhile, Iranian news outloet ISNA reported that a senior Iranian diplomat said that the nuclear issue and highly enriched uranium reserves will be discussed with the US in 60-day negotiations in exchange for the lifting of sanctions and unfreezing of assets. On a more cautious note, Iran's foreign ministry spokesperson said that the framework deal has no specific details about the management of the Strait of Hormuz, adding that even though they have reached conlusions on many topics, that doesn't mean they are close to signing an agreement.

After starting the week with a bearish gap, the US Dollar (USD) Index stays in negative territory at around 99.00 in the European session on Monday. In the meantime, the barrel of West Texas Intermediate is trading at around $91.00, down about 5% on a daily basis.

Gold gathers bullish momentum and trades above $4,560, rising more than 1% on the day.

EUR/USD stays in positive territory slightly below 1.1650 after opening with a bullish gap.

USD/JPY closed the previous week marginally higher but corrected lower in the Asian session on Monday. At the time of press, the pair was fluctuating at around 159.00.

GBP/USD rises toward 1.3500 in the European session on Monday and trades at its highest level in 10 days.

NZD/USD trades above 0.5870 and gains nearly 0.4% on the day. In the Asian session on Wednesday, the Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions.

AUD/USD rises about 0.5% on the day above 0.7150 after ending the previous week in the red. April Consumer Price Index (CPI) data will be featured in the Australian economic docket on Wednesday.