Hedge funds are becoming more pessimistic about the dollar as expectations of US–Iran peace talks erode the currency’s recent gains driven by geopolitical tensions, according to Morgan Stanley data.
By April 10, investors had expanded their bearish positions on the dollar, reversing March’s trend when the Bloomberg Dollar Index climbed 2.4%—its strongest monthly performance since July—on safe-haven demand during the Middle East conflict.
In April, however, the index has dropped 1.8%, including a seven-day losing streak through Tuesday, as the US and Iran initiated talks to end the six-week standoff.
Analysts Molly Nickolin, David Adams, and Andrew Watrous noted that “the path to a weaker dollar is widening rather than narrowing.”
They added that while a ceasefire could boost risk-sensitive currencies in the short term, the dollar’s medium-term decline is likely to be more pronounced against major currencies like the euro, yen, and Swiss franc.
The U.S. dollar remained near a six-week low on Wednesday as growing optimism about a sustained ceasefire in the Iran conflict boosted investors’ appetite for risk.
In recent weeks, investors have increasingly shifted toward riskier assets like equities, putting pressure on the dollar, which had served as a preferred safe-haven during tensions in the Middle East.
As of 16:57 ET (20:57 GMT), the U.S. Dollar Index—measuring the greenback against a basket of six major currencies—edged down 0.1% to 98.06.
Trump signals possible end to war despite ongoing U.S. blockade
The U.S. dollar surged in March as investors sought safety during the Middle East crisis, supported by the view that the U.S.—as a net energy exporter—would be less affected by disruptions such as the closure of the Strait of Hormuz.
However, the currency has since slipped back toward pre-war levels, as expectations of a lasting ceasefire reduce its safe-haven appeal. Analysts at ING noted that markets are increasingly pricing in a positive outcome from upcoming U.S.-Iran talks, though they caution that risks for the dollar may still tilt upward.
President Donald Trump indicated the conflict with Iran could soon end, even as U.S. forces maintain a fully enforced naval blockade restricting Iranian shipping. He suggested a permanent ceasefire might be reached before King Charles’ upcoming visit and described the conflict as nearing its conclusion.
Reports also indicate that ceasefire negotiations may resume shortly after earlier talks failed to yield results. The White House said discussions remain active and constructive, expressing optimism about a potential agreement while denying any request to extend the current truce.
The U.S. and Iran are observing a fragile two-week ceasefire through April 21. Meanwhile, broader regional tensions persist, with Israel continuing strikes in Lebanon despite rare direct talks with Lebanese officials—raising concerns that the fragile de-escalation could unravel.
Inflation and central banks in a potential “peace trade”
Oil prices have been volatile but stayed below $100 per barrel, as traders closely monitor supply through the Strait of Hormuz—a key route for roughly a fifth of global oil shipments. Despite fluctuations, crude remains higher than pre-conflict levels, sustaining concerns about rising global inflation.
Recent U.S. data for March showed that higher oil prices significantly lifted headline inflation, while core inflation was less affected.
According to Thierry Wizman of Macquarie, a peace scenario would likely push oil and gas prices lower. This would trigger a “peace trade,” particularly impacting inflation expectations and central bank policy. Central banks that turned more hawkish due to rising energy costs could shift back to their pre-war outlooks if prices ease.
Wizman noted that the Bank of England—and possibly the European Central Bank—have the most room to soften their stance, as they had become notably more aggressive on rate hikes after the conflict began. A drop in energy prices could therefore lead to a less hawkish policy outlook.
He added that one of the most attractive trades in such a scenario would be positioning for lower interest rates over the next 9 to 12 months, particularly in instruments like GBP OIS or Libor, even as markets have yet to fully price out the possibility of rate hikes this year.
Euro and pound steady; yen weakens despite Katayama’s remarks.
The euro remained largely flat at $1.1799, while the British pound slipped 0.1% to $1.3560.
The Japanese yen also weakened slightly, with USD/JPY rising 0.1% to 158.96, despite comments from Finance Minister Satsuki Katayama indicating that authorities stand ready to take “bold” measures if necessary.
After bilateral talks at the U.S. Treasury in Washington, Katayama noted that both sides had extensive discussions on currency matters and agreed to strengthen coordination going forward.
The U.S. dollar declined on Tuesday as investors moved away from the safe-haven currency and shifted toward riskier equities, supported by optimism over potential ceasefire progress between the U.S. and Iran, despite the ongoing naval blockade in the Persian Gulf.
Risk sentiment was further strengthened by a much weaker-than-expected U.S. producer inflation report, easing concerns that the Iran-related energy shock could fuel inflation—especially after a recent surge in consumer prices.
By 17:20 ET (21:20 GMT), the U.S. Dollar Index, which measures the greenback against six major currencies, had dropped 0.3% to 98.12.
The Hormuz blockade continued into its second day, even as Donald Trump signaled that potential negotiations could be on the horizon.
The blockade of the Strait of Hormuz entered its second day even as President Donald Trump highlighted the possibility of renewed negotiations.
The U.S. dollar, which had initially strengthened as a safe-haven asset following the outbreak of the Iran conflict in late February, has recently weakened amid growing optimism that tensions could ease.
This optimism increased on Tuesday after Trump told the New York Post that additional talks “could take place within the next two days” in Pakistan. According to earlier reports, the U.S. and Iran have remained in contact and made some progress toward a lasting ceasefire agreement.
Trump also stated that Iranian officials had reached out to the White House expressing interest in striking a deal, while reiterating that Iran would not be allowed to develop nuclear weapons. The U.S. is reportedly insisting that Iran halt uranium enrichment for 20 years, a key step in nuclear weapons development.
At the same time, the U.S. naval blockade of vessels entering and leaving Iranian ports continued into its second day. The U.S. Central Command said the operation involves over 10,000 personnel, more than a dozen warships, and dozens of aircraft to enforce the restrictions.
CENTCOM reported that within the first 24 hours, no ships managed to pass through the blockade, and six commercial vessels complied with U.S. directives to turn back toward ports in the Gulf of Oman.
British maritime authorities also confirmed that access has been limited for ships attempting to enter or exit Iranian ports, as well as in nearby waters including the Persian Gulf, Gulf of Oman, and parts of the Arabian Sea.
Trump noted that the blockade began on Monday after weekend ceasefire negotiations failed to produce immediate results. The move risks further disrupting already reduced oil flows through the Strait of Hormuz, a critical route that carries about one-fifth of the world’s oil supply.
U.S. producer inflation came in weaker than expected.
U.S. producer inflation came in less severe than expected, drawing significant market attention on Tuesday. The March producer price index (PPI) rose 0.5% month-on-month and 4.0% year-on-year, falling short of forecasts of 1.1% and 4.6%. Meanwhile, core PPI increased by 0.1% over the month and 3.8% compared to a year earlier.
Despite the softer-than-expected overall figures, the annual rise in headline PPI marked the largest increase since February 2023, largely driven by a sharp 8.5% monthly surge in energy prices for final demand.
Even so, the weaker headline data helped ease investor concerns.
Guy LeBas, chief fixed income strategist at Janney, noted on X that expectations had been elevated due to fears of rising energy input costs, which were not fully reflected in the data.
He added that although gas prices are clearly higher, these cost increases may take several months to filter through the economy rather than appearing all at once. This gradual pass-through could complicate monetary policy, as it may delay the Federal Reserve’s confidence that inflation pressures are not spreading beyond the energy sector.
The euro and British pound strengthened, while the yen also gained despite weak economic data.
Among major currencies, both the euro (EUR/USD) and the British pound (GBP/USD) moved higher, supported by the softer U.S. dollar. The euro rose 0.2% to $1.1795, while the pound gained 0.4% to $1.3567.
The Japanese yen also strengthened, with USD/JPY slipping 0.3% to 158.80, despite data showing Japan’s industrial production fell 2% month-on-month in February after a 4.3% increase in January.
In other markets, the Australian dollar (AUD/USD) increased 0.3% to $0.7122, even though economic indicators were weak. According to National Australia Bank, business confidence dropped sharply in March following the Iran conflict, while the Westpac–Melbourne Institute survey showed a steep decline in consumer sentiment in April.
Asian currencies posted modest gains on Tuesday, while the U.S. dollar weakened as Washington initiated a blockade on Iranian ships in an effort to push Tehran toward a more durable ceasefire agreement.
Investors also turned their attention to upcoming U.S. producer price index (PPI) data for further signals on the interest rate outlook in the world’s largest economy.
The Chinese yuan strengthened despite disappointing March trade data, which showed exports and the overall trade balance falling short of expectations, even as imports surged well beyond forecasts. Meanwhile, the Singapore dollar remained largely unchanged after first-quarter GDP growth came in below estimates, although the country’s central bank slightly tightened its monetary policy.
Market sentiment was somewhat supported by reports that several Asian and Middle Eastern nations were working to facilitate renewed ceasefire negotiations between the U.S. and Iran.
The dollar index and its futures slipped around 0.1% during Asian trading hours, putting the greenback on track for losses in seven of the past eight sessions. Although the dollar had previously gained on safe-haven demand during the escalation of the Iran conflict, it has since pulled back as investors anticipate possible de-escalation.
The U.S. officially began blockading Iranian ports and vessels on Monday. However, President Donald Trump indicated that Tehran had reached out to Washington expressing interest in a ceasefire. Vice President JD Vance also noted signs of progress, despite limited outcomes from recent peace talks held in Pakistan.
Inflation remains a key concern tied to the conflict, particularly after last week’s data showed a sharp rise in U.S. consumer prices for March. Markets are now awaiting the latest PPI figures for further direction.
In China, the yuan gained as data revealed a sharper-than-expected drop in the trade surplus. Export growth slowed, partly due to disruptions caused by the Iran conflict and rising global shipping costs, while imports surged on stronger domestic demand, particularly for semiconductors and server-related equipment from South Korea.
Overall, the data suggested underlying resilience in China’s domestic economy, raising expectations that stronger import activity and price pressures could help boost inflation.
Elsewhere in Asia, currencies generally strengthened. The Singapore dollar held steady after weaker-than-expected economic growth, even as the Monetary Authority of Singapore tightened policy by adjusting the upper range of its exchange rate band.
The Japanese yen also appreciated, with USD/JPY falling 0.3%, after Finance Minister Satsuki Katayama urged caution in commenting on the Bank of Japan’s policies. Meanwhile, the South Korean won edged up 0.1%, and the Australian dollar gained 0.2%.
WTI surges about 8% toward $100 after the U.S. blocks the Strait of Hormuz Strait of Hormuz.
West Texas Intermediate (WTI) – the US crude benchmark – started the week with a bullish gap, rising around 8% as it moves back toward the $100 level.
The rally follows renewed escalation in tensions between the United States and Iran after weekend peace talks lasting 21 hours collapsed.
US President Donald Trump responded by pledging a blockade of Iranian ports and maritime traffic through the Strait of Hormuz.
The US Central Command (CENTCOM) also stated that forces will begin restricting all vessel movement in and out of Iranian ports from Monday at 10:00 AM ET (14:00 GMT).
According to a Wall Street Journal report, Trump and his advisers are also considering limited military strikes on Iran alongside the blockade to increase pressure in stalled negotiations.
Market attention now shifts to further details on the blockade and its potential impact on the already fragile US–Iran ceasefire.
EUR/USD extends its gains as bullish momentum builds, with traders targeting further upside.
EUR/USD has extended its upside momentum, breaking higher after a decisive technical breakout.
The pair began a fresh rally above 1.1650 and moved beyond a key contracting triangle resistance at 1.1610 on the 4-hour chart.
Price action is now trading above 1.1665 as well as both the 100-period (red) and 200-period (green) simple moving averages, confirming a stronger bullish structure. The breakout has already driven the pair toward the 1.1740 area.
If buyers maintain control, the next upside targets are seen at 1.1780, with initial major resistance at 1.1800. A sustained break above this level could open the path toward 1.1840, and a further close above it would expose potential gains toward 1.1920 and even the 1.2000 psychological level.
On the downside, immediate support lies near 1.1685, aligning with the 23.6% Fibonacci retracement of the recent move from 1.1505 to 1.1739. Key support follows at 1.1620 and the 1.1600 region, which also aligns with the 200-SMA. A breakdown below 1.1600 could shift momentum lower toward the 100-SMA, with deeper losses potentially reopening the 1.1500 area.
One of the most compelling charts this week is Bitcoin. Despite widespread hesitation and global risk aversion, it has remained relatively resilient instead of breaking down. In addition, Wall Street–based ETFs tied to Bitcoin continue to attract inflows, even as overall market sentiment stays cautious.
That said, this suggests a level of resilience in the Bitcoin market that shouldn’t be overlooked. At some point, the market will need to make a longer-term move, and based on current signals, it appears to be leaning toward a bullish outcome.
This outlook is somewhat logical, considering Bitcoin has already dropped around 50% from its highs. For long-term holders, that kind of correction often signals a potential buying opportunity. While I’m not strongly bullish on Bitcoin overall, the technical picture indicates that a move above $76,000 could quickly become significant.
NASDAQ 100
The Nasdaq 100 moved higher over the week, largely driven by the ceasefire announcement, which boosted overall risk appetite. By the end of the week, the index was hovering around the 25,000 level. However, with key talks taking place in Pakistan over the weekend, market sentiment could shift quickly as early as Monday. For this reason, I remain optimistic about equities—but only with a strong sense of caution.
USD/MXN
The US dollar declined sharply against the Mexican peso over the week as risk appetite returned. It’s also important to note the significant interest rate gap between the two economies, which encourages traders to short this pair, as holding Mexican pesos allows them to earn daily carry.
It now appears that the pair is on the verge of breaking down toward the 17 peso level. However, that level may not matter much at this stage due to the upcoming meeting in Pakistan over the weekend. If the outcome is negative, the US dollar is likely to strengthen; if not, the current downward trend should continue.
DAX
Germany’s DAX ended the week in positive territory, although it closed on a weak note on Friday. This likely reflects caution ahead of the weekend meeting, as Germany remains highly sensitive to energy supply risks—particularly LNG from Qatar and crude shipments through the Strait of Hormuz. Any disruption there could create significant challenges for its industrial sector. As a result, many traders appear to be locking in profits and reducing exposure ahead of potentially impactful developments from the talks in Pakistan.
USD/CAD
The US dollar has declined against the Canadian dollar and is now hovering around both the 50-week EMA and the 200-day EMA, making a pause at this level quite reasonable. As with other markets, Monday’s open will likely be influenced by developments in Islamabad. Overall, this appears to be a market attempting to establish support before potentially moving higher. The 1.3750 level stands out as a key area to watch for a possible bounce if the pair continues to pull back, while the 1.40 level remains a significant resistance to the upside.
EUR/USD
The euro posted a solid rally over the week, largely supported by improving risk appetite. It has now climbed above the 1.17 level for the first time in about five weeks. If this momentum holds, the next target to watch would be the 1.18 level.
The 1.18 level represents a major resistance zone. However, if the talks between Iran and the United States produce positive outcomes, it could trigger a broad relief rally—potentially pushing this market higher along with others.
Silver
Silver has been volatile but clearly positive over the week as it continues to search for a bottom. The market is likely to remain choppy, and while a larger move will eventually take shape, it may not be the ideal time to take on significant positions.
Interest rates will remain a key driver here, so it’s important to watch the US 10-year yield closely. Generally, a move above 4.30% tends to be negative for this market—though it’s not a definitive rule, just one of several influencing factors. Additionally, developments coming out of Islamabad and the ongoing talks are likely to have a significant impact on interest rate expectations, which will in turn affect price action here.
Gold
The gold market has also moved higher, but this seems to have caught many traders off guard, as the main driver has been interest rates rather than geopolitical fear. Many people are puzzled by gold’s weakness during times of conflict, but the explanation lies in the bond market—yields are now significantly higher than before, prompting portfolio managers to shift allocations toward interest-bearing assets instead of gold.
I remain bullish on gold over the longer term, but I also recognize that a renewed spike in yields—possibly triggered by disappointing outcomes from the talks in Islamabad—could push the market down toward the $4,600 level. On the upside, the $5,000 mark stands out as the first major resistance zone.
GBP/USD slipped slightly after four consecutive sessions of gains, remaining under pressure below the 1.3450 level during Friday’s European trading hours. The pair weakened as the US Dollar held steady amid cautious market sentiment, driven by concerns ahead of the US-Iran peace negotiations. Investors are now focused on the US Consumer Price Index report scheduled for release later in the North American session.
Technical Outlook for GBP/USD
The short-term outlook for GBP/USD has shifted slightly bullish, with the pair maintaining its position just above the 38.2% Fibonacci retracement of the January–March decline. Price action is currently challenging the downward-sloping 200-day Simple Moving Average around 1.3415 from below, indicating early signs of buying interest near this key long-term level. Momentum indicators are also improving, as the MACD line has crossed above its signal line and is moving back toward the zero line, while the RSI at 55 reflects moderate bullish momentum without overbought pressure.
On the upside, immediate resistance is seen at the 50% retracement level of 1.3505. A daily close above this level would reinforce the bullish bias and pave the way toward the 61.8% Fibonacci retracement at 1.3588. On the downside, initial support lies at the 38.2% retracement near 1.3422, closely aligned with the 200-day SMA at 1.3415; a break below this zone would expose the next support at the 23.6% retracement around 1.3319. Overall, as long as GBP/USD remains above the 1.3415–1.3422 support area, the near-term bias continues to favor further recovery toward the mid-1.3500 region.
Fundamental Analysis Summary
Market sentiment remains fragile and risk-averse as geopolitical tensions persist. Israel continues military operations against Hezbollah, although Prime Minister Benjamin Netanyahu indicated that direct negotiations with Lebanon are expected to begin soon. At the same time, US President Donald Trump stated that American forces will remain stationed near Iran until full compliance with the agreement is achieved.
On the diplomatic front, US Vice President JD Vance, along with senior envoys Steve Witkoff and Jared Kushner, is scheduled to hold talks in Pakistan this weekend regarding a potential long-term arrangement with Iran. Meanwhile, Iranian Foreign Ministry spokesperson Esmaeil Baghaei said that any negotiations to end the conflict depend on US adherence to its ceasefire obligations. He further argued that these commitments include a ceasefire in Lebanon, a condition the US and Israel dispute.
Separately, Bank of England Governor Andrew Bailey warned that the Iran conflict could trigger risks reminiscent of the 2008 financial crisis, pointing to potential contagion from stress in the largely opaque $3 trillion private credit market. He cautioned that such vulnerabilities could spill over into already fragile global markets strained by energy shocks and rising debt pressures, according to The Telegraph.
EUR/USD climbed to 1.1667 on Thursday, while the US dollar recovered part of its previous losses as market sentiment stayed cautious amid a fragile US–Iran truce.
Tensions in the Strait of Hormuz remain elevated, with Iranian media reporting continued restrictions on tanker passage following renewed strikes in the region. Iranian officials have also accused the opposing side of breaching several ceasefire terms.
The dollar had fallen sharply in the prior session after news of a two-week truce, which triggered a decline in oil prices and briefly eased inflation concerns.
Additional pressure came from the Federal Reserve’s latest meeting minutes. Some policymakers signaled openness to rate hikes to curb inflation, although most still expect policy easing to follow later.
Looking ahead, investors are focusing on key US macroeconomic data, including consumer spending figures, the PCE price index, and the upcoming CPI report, all of which are likely to shape expectations for the Fed’s next policy moves and near-term market direction.
EUR/USD Technical Analysis
On the H4 timeframe of EUR/USD, price action is consolidating around the 1.1683 level. A corrective downside move is anticipated, with 1.1606 seen as the initial target, followed by a potential rebound back toward 1.1683. From a technical perspective, this outlook is supported by the MACD, where the signal line remains above the zero line but is trending decisively downward, indicating sustained bearish momentum and the likelihood that the downward pressure may continue in the near term.
On the H1 timeframe, EUR/USD is developing the structure for a potential next downside move toward the 1.1616 area. Once this level is reached, a rebound toward 1.1666 is anticipated, followed by a subsequent decline toward 1.1494. From a technical standpoint, this outlook is supported by the Stochastic oscillator, as its signal line remains below the 50 level and continues to slope downward toward 20, indicating sustained bearish pressure.
Summary
EUR/USD remains supported, although the US dollar has recovered some losses as tensions in the US-Iran truce begin to resurface. Ongoing reports of restricted tanker traffic through the Strait of Hormuz and claims of ceasefire violations have brought renewed caution to the markets. The latest Fed minutes showed a split committee, with some policymakers considering rate hikes while others favor future easing, further adding to policy uncertainty. Ahead of upcoming US inflation and consumer data releases, the pair’s short-term outlook remains unclear. From a technical perspective, a near-term decline looks more likely, while the broader trend will largely depend on whether the fragile truce holds or geopolitical risks escalate again.
Currency markets were relatively calm on Thursday, though traders remained cautious, closely watching whether the ceasefire between the U.S. and Iran would last. The announcement of the truce the previous day had already caused the dollar to fall sharply.
However, the situation remained uncertain. Israel continued its attacks in Lebanon, while Iran had yet to reopen the Strait of Hormuz, a key route for global energy supplies, leading to severe disruptions.
Iranian officials were expected to travel to Pakistan for initial peace negotiations, but Tehran stated that no agreement would be possible as long as Israel’s strikes continued.
U.S. President Donald Trump emphasized that American military forces would remain deployed in and around Iran until the country fully adhered to any agreement.
This ongoing uncertainty kept currency markets tense. The euro rose slightly to $1.1683 after gaining earlier but pulling back from a one-month high. Similarly, the British pound increased modestly to $1.342, though it also retreated from earlier highs.
In contrast, the Japanese yen weakened, with the dollar rising against it after briefly falling the previous day.
Analysts noted that the ceasefire remained fragile, especially with the Strait of Hormuz still closed, though movements in the dollar were relatively limited. Continued plans for peace talks in Pakistan helped prevent larger market reversals.
Meanwhile, new U.S. data showed inflation rising in line with expectations, with further increases likely due to the conflict. This could delay any interest rate cuts by the Federal Reserve.
In Japan, consumer confidence declined in March, reflecting concerns about the economic impact of the Middle East conflict, though the yen showed little response. The Bank of Japan indicated that financial conditions remained supportive due to negative real interest rates.
Other currencies remained fairly stable, with the Australian and New Zealand dollars edging higher. In the cryptocurrency market, bitcoin fell slightly to around $70,680.
The dollar stayed fragile on Thursday following broad losses, as investors closely watched whether the uneasy ceasefire between the U.S. and Iran would hold. The truce appeared uncertain, with Israel continuing its conflict with Hezbollah in Lebanon and Tehran accusing both Washington and Tel Aviv of breaching the agreement, calling further peace talks unreasonable. Meanwhile, the Strait of Hormuz remained restricted, with ships requiring permits to pass, prompting higher oil prices as traders awaited clearer conditions.
U.S. President Donald Trump said American military forces would remain deployed around Iran until the terms of the deal were fully met. Analysts noted growing skepticism over whether the ceasefire could last or even be finalized. The dollar index was largely unchanged at 99.07, while the euro dipped slightly, sterling edged higher, and the yen weakened after giving back earlier gains.
The prolonged Middle East tensions have fueled expectations of more expansionary fiscal policy, contributing to yen weakness. Markets are currently pricing in a moderate chance of a Bank of Japan rate hike later this month, though this outlook could shift if the ceasefire collapses. Japan’s weakening consumer confidence and ongoing economic concerns tied to the conflict further complicate the central bank’s decision.
BOJ Governor Kazuo Ueda reiterated that real interest rates remain negative, keeping financial conditions loose. The dollar has benefited overall from the conflict, partly because the U.S. is a net energy exporter, unlike many oil-importing economies such as Japan and parts of Europe.
The five-week conflict has disrupted global energy supplies significantly, and despite the ceasefire, Iran retains increased influence over shipping through the Strait of Hormuz. Upcoming U.S. economic data, including personal spending and inflation measures, could influence the dollar’s direction, with strong figures potentially supporting a rebound.
Elsewhere, the Australian dollar edged lower, the New Zealand dollar gained slightly, and cryptocurrencies declined, with bitcoin and Ethereum both posting losses.
The U.S. dollar fell to a one-month low in Wednesday’s Asian session, while major currencies such as the euro, yen, Australian dollar, and British pound surged after President Donald Trump announced a two-week ceasefire agreement with Iran.
The yen gained 0.8% to 158.36 per dollar, the euro rose 0.7% to $1.1674, sterling advanced 0.8% to $1.34, and the Aussie jumped 1.1% to $0.7054. Earlier, Trump had issued strong threats against Iran’s civilian infrastructure, warning of severe consequences if his demands were ignored, drawing global criticism.
Market sentiment quickly shifted toward risk-taking following the ceasefire news, which came shortly before a U.S. deadline for Iran to reopen the Strait of Hormuz. Analysts noted that reopening the key shipping route could further support the current rally, though uncertainty remains over the coming two weeks, leaving currencies exposed to potential pullbacks.
Attention then moved to central bank policy outlooks as oil prices plunged. Brent crude dropped 13.4% to $94.68 per barrel, though it stayed elevated compared to pre-conflict levels.
The New Zealand dollar rose 1.5% to $0.5819 after the country’s central bank held its policy rate at 2.25% for a second consecutive meeting, while signaling readiness to act if inflation rises. Meanwhile, Fed funds futures suggested a roughly even chance of a 25-basis-point rate cut by the Federal Reserve in December, a shift from the previous day’s stronger expectation that rates would remain unchanged.
The dollar index slipped for a third straight session to 98.838, its lowest since March 11. Elsewhere, the South Korean won climbed 1.6% despite renewed tensions on the Korean Peninsula, where North Korea launched additional ballistic missiles.
Cryptocurrencies also advanced, with bitcoin rising 2.9% to $71,327.07 and ether gaining 5.6% to $2,233.90.
Sterling fell on Tuesday, trading around $1.3234 at 03:50 ET, as the U.S. dollar held firm ahead of a White House deadline linked to the U.S.–Iran conflict.
The decline extended recent losses, with GBP/USD briefly dipping to an intraday low of $1.3211, while the 52-week low remains at $1.2721.
The dollar gained support from heightened geopolitical uncertainty as investors awaited clarity on a potential ceasefire. A failure to reach an agreement could lead to U.S. and Israeli strikes on Iranian civilian infrastructure, increasing the risk of retaliatory action across the Gulf region.
Rising energy prices have also bolstered the greenback. Further gains in oil and gas amid escalating tensions would be “unambiguously dollar-positive,” according to ING strategist Chris Turner.
Stronger U.S. domestic data has added to dollar strength. The March jobs report surprised to the upside, while markets now largely expect the Federal Reserve’s policy stance to remain unchanged this year, contrasting with expectations for additional rate hikes among other major central banks.
ING noted that stronger activity data and higher energy costs could shift expectations toward Fed tightening. Investors are now focused on Wednesday’s Federal Open Market Committee minutes and Friday’s March CPI report for further guidance.
Headline U.S. inflation is forecast to rise to 3.4% year-on-year from 2.4%. Comments from New York Fed President John Williams will also be closely watched for any change in tone.
ING expects the dollar index (DXY) to stay supported within a 100–100.50 range.
Elsewhere, the euro remained under pressure, with EUR/USD at $1.1544 and trading within a 1.1420–1.1640 band. Markets have reduced expectations of an April ECB rate hike to just below 50%, though around 75 basis points of tightening is still priced in for the year.
ING warned that if the ECB holds off on an April move despite elevated energy prices, the euro could face additional downside pressure.
In Central and Eastern Europe, markets followed global trends. Czech inflation is expected to rise due to higher fuel costs, while Romania’s central bank is projected to keep rates at 6.50% despite persistent double-digit inflation. Poland’s central bank is also expected to maintain its 3.75% rate, with forward guidance later in the week in focus.
In Asia-Pacific, the Reserve Bank of New Zealand is widely expected to keep rates unchanged at 2.25% on Wednesday. The New Zealand dollar has underperformed the Australian dollar this year, and without a hawkish surprise, that divergence may continue.
Thinner liquidity later in the week due to holidays could amplify price swings driven by geopolitical developments.
Asian currencies moved without a clear trend on Monday, while the dollar remained steady as investors weighed escalating geopolitical tensions in the Middle East against signs of renewed ceasefire efforts.
The US Dollar Index inched up 0.1% following recent gains, with its futures also rising 0.1% as of 02:52 ET (06:52 GMT).
Trump issues ultimatum to Iran; Axios reports ongoing ceasefire negotiations
Trump issued a deadline for Iran to reopen the Strait of Hormuz, while reports from Axios pointed to ongoing ceasefire discussions. Traders closely watched the situation as he warned Tehran to resume tanker traffic by 8 p.m. Eastern Time on Tuesday or risk strikes on key infrastructure such as power plants and bridges.
Market sentiment improved slightly after Axios reported that the U.S., Iran, and regional mediators were negotiating a potential 45-day ceasefire, although no deal had been finalized.
In currency markets, USD/JPY remained largely unchanged, while USD/KRW slipped 0.3%. Regional currencies were also shaped by persistently high oil prices following a recent surge, which typically weigh on major importers like Japan, South Korea, and India by worsening their trade balances.
Meanwhile, USD/CNY fell 0.1%, USD/SGD was steady, and AUD/USD rose 0.3%.
Indian rupee weakens; RBI policy decision expected later this week
The Indian rupee weakened, with the USD/INR pair rising 0.6% to 93.281 on Monday, after touching a more than two-week low of 92.585 in the previous session.
The currency had strengthened over the past five sessions, supported by measures from the central bank.
Attention now turns to the Reserve Bank of India’s policy decision on Wednesday, where rates are widely expected to remain unchanged despite the rupee’s decline.
Meanwhile, investors are also reacting to stronger-than-expected U.S. payroll data released on Friday, which has reinforced expectations that the Federal Reserve could keep interest rates higher for longer.
Currencies moved within narrow ranges on Friday as investors stayed cautious amid ongoing Middle East tensions, while reduced liquidity from the Good Friday holiday kept market activity subdued.
The U.S. dollar was largely steady after gaining 0.4% in the prior session, supported by safe-haven demand following remarks from U.S. President Donald Trump regarding Iran.
Tensions surrounding Iran remained elevated, with Trump signaling the possibility of expanded military action in the coming weeks and warning that key infrastructure—such as bridges and power facilities—could be targeted.
However, sentiment showed slight improvement on Thursday after Iran indicated it was working with Oman on a framework to manage shipping through the Strait of Hormuz, easing fears of disruptions along a critical oil route.
In Asia, the Japanese yen held flat, with USD/JPY trading near the closely watched 160 level. Japan’s finance minister also cautioned that authorities were prepared to intervene against speculative currency moves amid rising volatility.
Other regional currencies, including the South Korean won and Singapore dollar, saw limited movement.
Meanwhile, the Indian rupee weakened slightly to 92.71 per dollar but remained on track for a weekly gain of over 2%, recovering from earlier losses after support measures from the Reserve Bank of India helped stabilize the currency.
The RBI imposed limits on banks’ foreign exchange positions and restricted non-deliverable forward trades, prompting the unwinding of speculative bets and increased dollar selling in the domestic market.
Elsewhere, the Chinese yuan edged lower. Data released earlier showed China’s services sector growth slowed in March, with the Ratingdog Services PMI declining from February’s recent peak.
Investors are now focusing on the upcoming U.S. nonfarm payrolls report, which may offer further insight into the Federal Reserve’s interest rate outlook.
The U.S. dollar fell on Wednesday, touching a one-week low, as expectations of a possible de-escalation in the Middle East conflict reduced demand for the currency’s safe-haven appeal.
At 17:10 ET (21:10 GMT), the U.S. Dollar Index—which measures the dollar against a basket of six major currencies—was down 0.4% at 99.65.
Trump says Iran has requested a cease-fire and hints at a possible U.S. withdrawal, but ties any pause in fighting to conditions on the ground.
On Wednesday, Trump stated on Truth Social that Iran’s newly installed president had requested a ceasefire, describing him as “less radical and more intelligent” than his predecessors. He claimed the United States would only consider the request once the Strait of Hormuz is fully reopened and secure, adding that U.S. forces would continue striking Iran until then.
He also said that if Iran’s request is confirmed, it could signal a further step toward de-escalation, though uncertainty remains over the status of the Strait of Hormuz, a key global energy route that carries roughly one-fifth of the world’s oil and gas supply and has reportedly been disrupted since the conflict began, contributing to higher oil prices.
In earlier remarks from the Oval Office, Trump suggested the U.S. could begin withdrawing forces within two to three weeks, arguing that the objective of eliminating Iran’s nuclear threat had already been achieved and that no formal agreement would be necessary to end the conflict.
The White House also announced that Trump is scheduled to address the nation at 21:00 ET (01:00 GMT) with an “important update on Iran.”
The dollar posts its strongest monthly performance since July 2025.
The greenback ended Tuesday, closing out March with its strongest monthly performance since July last year.
Rising oil prices, driven by supply disruptions following the closure of the Strait of Hormuz, have raised concerns about a potential inflation shock. This has prompted investors to reassess expectations for central bank rate cuts and, in some cases, price in a higher likelihood of rate hikes.
A “higher-for-longer” interest rate outlook typically supports the U.S. dollar, enhancing its appeal as a safe-haven asset amid ongoing Middle East tensions. The currency has also benefited from the U.S. position as a net energy exporter, as well as a broader shift toward cash holdings.
According to David Morrison, senior market analyst at Trade Nation, the Dollar Index has been a key beneficiary of regional instability. He noted that the dollar surged last month as investors moved into the currency in a classic flight to safety, at the expense of traditional havens such as precious metals, U.S. Treasuries, and currencies like the Japanese yen and Swiss franc.
Morrison added that the index appeared to have broken above long-term resistance near the 100 level, suggesting a potential bottom after a weak year. However, he cautioned that momentum may now be stalling, implying that dollar bulls may need to wait for clearer signals before expecting further sustained gains.
Euro, yen, and sterling end the month lower.
The euro (EUR/USD), sterling (GBP/USD), and Japanese yen (USD/JPY) were largely unchanged on Wednesday.
However, developed market currencies underperformed the U.S. dollar over March. The euro and British pound recorded their weakest monthly results since July and October 2025, respectively, while the yen also posted its worst month since October.
Europe and Japan, both heavily dependent on Middle Eastern supplies of liquefied natural gas and fuel, have been more exposed to the impact of rising oil prices than the United States.
The inflationary pressure from higher oil costs linked to the Iran conflict is already beginning to appear in economic data. Preliminary Eurostat figures showed eurozone inflation is expected to rise to 2.5% in March from 1.9% in February. Energy prices are projected to be the main driver, with annual energy inflation accelerating to 4.9% after a 3.1% decline in the previous month.
In the UK, which is experiencing its fifth oil supply shock in roughly a decade, concerns are growing that rising energy costs could tip the economy toward recession, according to Deutsche Bank economist Sanjay Raja.
The dollar slipped Tuesday as hopes grew that the U.S.–Israel conflict with Iran might be shorter than feared. Still, it remained on track for its strongest quarter since late 2024, supported by safe-haven demand amid ongoing uncertainty. The dollar index fell 0.59% to 99.96 but was headed for a 2.35% monthly gain and a 1.7% rise for the quarter.
Since the conflict began in late February, the greenback has been buoyed by its safe-haven appeal and the U.S.’s relative resilience to oil disruptions as a net energy exporter. Reports suggested President Donald Trump may be open to ending the campaign even if the Strait of Hormuz remains largely closed, though officials including Pete Hegseth warned the situation could escalate without a deal.
Uncertainty remains high, with Iran threatening retaliation against major U.S. companies such as Microsoft, Google, and Apple. Analysts say the dollar may stay supported as long as geopolitical risks and market volatility persist.
Meanwhile, China and Pakistan called for an immediate ceasefire and renewed negotiations. Markets were also influenced by positioning ahead of key U.S. labor data, after job openings and hiring came in weaker than expected. Attention now turns to the upcoming March jobs report, which could shape expectations for Federal Reserve policy.
Among other currencies, the euro and pound rebounded modestly, while the Japanese yen strengthened for a second day amid intervention warnings from Japanese officials. In crypto markets, Bitcoin rose 1.75% to $67,757.
The U.S. dollar is on track for its strongest monthly performance since July, solidifying its position as the dominant safe-haven asset as escalating conflict in the Middle East drives oil prices higher and fuels concerns about a global economic slowdown.
The greenback extended its broad rally overnight, with the notable exception of the Japanese yen, where renewed intervention warnings from Tokyo have made traders cautious about pushing the currency much beyond the 160-per-dollar level.
After hitting its weakest level since July 2024 a day earlier, the yen traded at 159.81 in Tuesday’s Asian session, marking a roughly 2.4% monthly decline, largely due to Japan’s heavy reliance on imported energy. It showed little reaction to data indicating a slight easing in Tokyo inflation.
Meanwhile, the euro dropped 0.3% overnight and is set for a monthly loss of around 3%, while both the Australian and New Zealand dollars fell to multi-month lows. The Australian dollar, which had remained relatively resilient for most of the month, has recently come under pressure as market concerns shift from inflation toward slowing global growth. It slipped to a two-month low of $0.6834 before stabilizing slightly, while the New Zealand dollar hit a four-month low near $0.5716.
Elsewhere, South Korea’s won weakened to its lowest level since 2009. The U.S. dollar index climbed to 100.61 on Monday—its highest since last May—and is up 2.9% in March, marking its sharpest monthly gain since July.
Geopolitical tensions intensified after U.S. President Donald Trump warned that the U.S. could target Iran’s energy infrastructure if Tehran fails to reopen the Strait of Hormuz, following Iran’s dismissal of U.S. peace proposals and continued missile strikes on Israel. Reports of an Iranian attack on a Kuwaiti oil tanker near Dubai further lifted oil prices.
According to ING’s global head of markets, Chris Turner, the dollar is unlikely to give up its gains without clear signs of de-escalation from Iran.
On the monetary policy front, Federal Reserve Chair Jerome Powell signaled a cautious stance, downplaying the likelihood of near-term rate hikes and emphasizing a wait-and-see approach as inflation expectations remain stable in the longer term. Although this pushed short-term bond yields lower and reduced expectations for rate hikes this year, it did little to weaken the dollar, which continues to benefit from safe-haven demand amid global uncertainty.
Other traditional safe havens have underperformed since the conflict began. Bonds and gold have struggled, while the yen has remained weak and the Swiss franc has been pressured by signals from the Swiss National Bank that it may act to curb currency strength. The dollar has gained nearly 4% against the franc this month, reaching around 0.80 francs.
Looking ahead, investors are watching for upcoming European inflation data and China’s PMI figures later in the session.
GBP/USD edges up after four consecutive days of declines, trading near 1.3270 during Monday’s Asian session. However, the daily chart still points to a sustained bearish outlook, with the pair continuing to move within a descending channel pattern.
GBP/USD Market Technical Outlook
On the daily timeframe, GBP/USD retains a mildly bearish bias as price remains below a flattening 100-day exponential moving average and trades under the Bollinger Band midpoint, keeping action confined to the lower half of the volatility range. The RSI near 45 suggests fading bullish momentum rather than strong selling pressure, indicating sellers still have a slight advantage while pullbacks remain orderly.
Key support is seen around the recent low at 1.3230, which previously aligned with the lower Bollinger Band; a break below this level would likely expose further downside toward 1.3160. On the upside, resistance is located at 1.3430, where the 100-day EMA and Bollinger midline converge, and a sustained daily close above this zone would be needed to ease bearish pressure and shift focus toward 1.3560.
Fundamental Analysis
A mixed fundamental backdrop calls for caution before taking strong directional positions.
Market reports indicate ongoing diplomatic efforts to establish a one-month ceasefire framework aimed at enabling US–Iran negotiations on ending the conflict. This follows President Donald Trump’s decision to postpone planned strikes on Iran’s energy infrastructure by five days, raising hopes for potential de-escalation in the Middle East. However, tensions remain elevated as hostilities continue, with Israel maintaining strikes on Iran and the US deploying additional forces, including elements of the 82nd Airborne Division, to the region.
At the same time, Iran has launched fresh missile attacks on Israel, while Gulf states report ongoing interceptions of drones and missiles amid escalating fighting across Lebanon and Iraq. These developments keep geopolitical risk elevated and support crude oil prices, adding to inflation concerns and reinforcing expectations that the US Federal Reserve may remain hawkish. Markets have largely priced out further Fed rate cuts and are increasingly factoring in the possibility of a rate hike later this year, which supports the US dollar and limits upside potential for GBP/USD.
On the UK side, data from the Office for National Statistics (ONS) showed headline CPI holding at 3.0% year-on-year in February, in line with expectations. However, core inflation surprised to the upside, rising to 3.2% from 3.1% previously. Combined with a hawkish Bank of England (BoE) outlook—hinting at possible rate hikes as early as April—this provides some underlying support for the British pound and helps cushion downside pressure on GBP/USD.
EUR/USD trades sideways near a one-week low and appears prone to further downside.
Rising geopolitical tensions continue to support the US dollar, likely limiting any upside in the pair.
The technical outlook also leans bearish, reinforcing expectations for deeper declines.
EUR/USD edges slightly higher after revisiting a one-week low earlier Monday, holding near the key 1.1500 level in the Asian session. However, gains appear limited as escalating geopolitical tensions continue to support demand for the safe-haven US dollar, weighing on the pair.
Reports indicate the Pentagon may be gearing up for prolonged ground operations in Iran, while the involvement of Iran-backed Houthi forces in Yemen adds to fears of a broader Middle East conflict. This keeps investor sentiment fragile. At the same time, rising energy prices are stoking inflation concerns and reinforcing expectations of a hawkish Federal Reserve, further underpinning the USD and capping EUR/USD upside.
Technically, the short-term outlook remains slightly bearish, with prices staying below the flat 200-hour EMA near 1.1550. Momentum indicators show indecision, as MACD hovers around neutral levels and RSI sits near 43, indicating a mild seller advantage without strong downside momentum.
On the upside, resistance is seen at 1.1535, followed by 1.1550. A sustained break above this zone could shift sentiment and pave the way toward 1.1580. On the downside, support lies at 1.1490, with further weakness exposing 1.1475. A decisive break below this level would reinforce bearish pressure and open the path toward 1.1450.
The Nasdaq 100 attempted to rally early in the week but ultimately tumbled as market fear intensified. With U.S. interest rates continuing to rise, the index has now broken below the key 23,800 level.
We are also trading below the 50-week EMA, and quite frankly, this is a market being driven almost entirely by the latest headlines out of Washington or Tehran, as they are causing sharp swings in interest rate expectations. As rates climb, they put significant pressure on technology stocks—and that dynamic is clearly playing out now.
USD/MXN
The U.S. dollar initially declined against the Mexican peso but has now formed a hammer pattern for the third consecutive week. This suggests the peso may start to weaken, and with U.S. interest rates rising, the negative swap cost associated with buying this pair becomes less of a burden.
On the upside, the 50-week EMA is near the 18.29 level, with the 18.50 area as the next likely target. If the pair pulls back from here, pay close attention to next week’s candlestick formation, as it would take significant downside pressure on the U.S. dollar to shift the trend. While the interest rate differential makes me hesitant to buy the dollar against the peso, the market still appears to be attempting a rally.
GBP/JPY
The British pound edged higher against the Japanese yen this week, and the key level to watch now is 214 yen, which has acted as a significant barrier. A break above this level would likely open the door for further upside.
Short-term pullbacks should continue to present buying opportunities, but there is always the risk of intervention from the Bank of Japan. That said, it’s likely a challenging task for the central bank to prevent the yen from weakening significantly. The ongoing interest rate differential will keep driving yen-denominated pairs higher, with the British pound standing out as a key beneficiary.
EUR/USD
The euro has been quite volatile this week, ultimately forming something resembling a shooting star. We remain within the same range that’s held for some time, suggesting little has fundamentally changed. However, a breakdown below the 1.14 level could trigger a sharp strengthening in the U.S. dollar.
In that scenario, you’d likely look to buy the U.S. dollar against most currencies—not just the euro—since this pair often acts as a broader signal for how the greenback performs globally. On the other hand, if we break to the upside and clear this past week’s highs, that would be broadly dollar-negative and could pave the way for a move toward the 1.18 level.
Gold (Xau/Usd)
Gold prices dropped sharply over the week but staged a solid recovery. A large weekly hammer is beginning to form, though a break above $4,600 is needed to confirm strong momentum. While there are many factors supporting further gains, rising U.S. interest rates remain a key headwind.
Rising interest rates remain a significant headwind, weighing on gold despite ongoing geopolitical tensions that could otherwise push prices higher. A drop below the $4,000 level would be severely bearish, but for now, the market appears to be attempting a rebound.
BTC/USD
Bitcoin has been a bit weak over the week, but it’s still holding within the same range. Given the ongoing conflict between the U.S. and Iran, that actually counts as relatively strong performance. The price is currently hovering around the 200-week EMA, a key long-term support level.
The $72,000 level continues to act as resistance, while $60,000 below remains a solid support zone. Overall, the market is quite choppy, but it appears to be in the process of building a base for a potential longer-term move.
Natural Gas
Natural gas declined over the week but has shown a modest rebound. However, it’s likely a market retail traders should avoid for now, as demand is dropping sharply.
While Europe may continue to face supply challenges, this is seasonally a weak period for natural gas demand. Many retail traders also overlook that they are trading a U.S.-centric contract. With spring approaching, the typical strategy is to sell into rallies once signs of exhaustion appear.
USD/CHF
The U.S. dollar has gained solid ground against the Swiss franc and is now approaching the key 0.80 level. A breakout above that point could trigger a stronger upward move, but for now, such a scenario seems unlikely.
In this environment, the outlook remains bullish, with interest rate differentials continuing to support further upside. The Swiss central bank also provides a form of downside protection, having signaled it may intervene if the franc strengthens excessively. This creates a favorable “buy on dips” setup, with the added benefit of earning daily swap.
The U.S. dollar rose on Friday, positioning itself for its strongest monthly performance since July, as investors turned to the currency as a safe haven amid uncertainty surrounding the Iran conflict.
By 17:28 ET (21:28 GMT), the U.S. Dollar Index—which measures the greenback against six major currencies—had increased by 0.3% to 100.18.
The U.S. dollar is on track for its strongest monthly performance since July 2025.
The U.S. dollar is on track for its strongest monthly gain since July 2025, with the Dollar Index rising 2.6% in March—its biggest increase since a 3.2% climb last July.
This strength has been driven by growing safe-haven demand amid geopolitical tensions, along with expectations that interest rates will stay higher for longer due to inflation pressures from rising energy prices. Markets have largely abandoned bets on Federal Reserve rate cuts this year, and are even starting to price in potential rate hikes.
At the same time, investors have been selling off bonds, pushing U.S. Treasury yields sharply higher, with the 10-year yield reaching its highest level since July.
According to Macquarie strategist Thierry Wizman, while safe-haven flows have played a role, the dollar’s strength is more fundamentally driven—particularly by the U.S.’s lower reliance on imported oil compared to other regions. He noted that unlike past periods of uncertainty, the current environment may have a less severe impact on U.S. incomes, helping support the dollar despite global economic disruptions.
Trump pushed back a critical deadline, while Iran reported that its infrastructure had been struck.
Risk assets fell sharply on Friday as tensions in the Middle East intensified, while oil prices surged past $110 per barrel. Although President Donald Trump extended a deadline for Iran to reopen the Strait of Hormuz, the move did little to reassure markets.
Iran’s foreign minister, Abbas Araghchi, stated that Israeli strikes had already hit key infrastructure, including steel plants, a power station, and civilian nuclear facilities, calling the attacks inconsistent with Trump’s extended timeline.
Earlier, Trump had warned Iran to unblock the strategic waterway—through which about 20% of global oil supply passes—or face U.S. strikes on its energy infrastructure. He later delayed potential action until Friday following what he described as “very strong” talks with Iran. However, Tehran has denied that any negotiations with Washington are taking place.
The euro and British pound weakened, while the yen surged to 160 against the dollar.
The euro and British pound weakened against the U.S. dollar, with EUR/USD falling 0.2% to 1.1510 and GBP/USD dropping 0.5% to 1.3259, as Europe continues to face energy supply disruptions—especially in natural gas—linked to the Iran conflict.
G7 diplomats met in France, where U.S. Secretary of State Marco Rubio highlighted the Strait of Hormuz as a key issue, warning that any attempt by Iran to impose tolls on the passage would be unacceptable.
Meanwhile, the Japanese yen slid further, with USD/JPY rising 0.4% to 160.25. Reports suggest that breaching the 160 level could prompt intervention by Japanese authorities. The Australian dollar, often seen as a risk-sensitive currency, remained broadly stable after earlier falling to a two-month low.
Analysts at MUFG expect the U.S.–Iran conflict to be relatively short-lived, with geopolitical risk premiums eventually easing. However, they caution that a prolonged conflict could keep energy prices elevated, putting additional pressure on currencies in Asia that rely heavily on energy imports—particularly the South Korean won and the Japanese yen.
The U.S. dollar climbed on Friday, putting it on track for its strongest monthly performance since July 2025, as investors turned to the currency for safety amid ongoing uncertainty surrounding the Iran conflict. The U.S. Dollar Index rose 0.3% to 100.18 and is up 2.6% so far in March, marking its biggest monthly gain in months.
Demand for the dollar has been supported not only by its safe-haven appeal but also by expectations that interest rates may stay higher for longer, driven by rising energy prices and inflation pressures. Markets have largely abandoned expectations of rate cuts from the Federal Reserve, with some even pricing in potential rate hikes. At the same time, investors have been selling bonds, pushing U.S. Treasury yields higher, with the 10-year yield reaching its highest level since July.
Analysts suggest the dollar’s strength is also rooted in fundamentals, particularly the U.S.’s lower reliance on imported oil compared to other regions, making it more resilient to energy price shocks. In contrast, Europe and parts of Asia remain more vulnerable to disruptions caused by the conflict.
Meanwhile, escalating tensions in the Middle East weighed on risk assets, while oil prices surged above $110 per barrel. Despite extending a deadline for Iran to reopen the Strait of Hormuz, U.S. President Donald Trump’s move did little to calm markets, especially as reports emerged of Israeli strikes on Iranian infrastructure, which Tehran said contradicted ongoing diplomatic timelines.
In currency markets, the euro and British pound weakened against the dollar, while the Japanese yen fell to around 160 per dollar, nearing levels that could prompt government intervention. Analysts expect the conflict may be short-lived, but warn that prolonged tensions could keep energy prices elevated and continue to pressure global markets, particularly currencies of energy-importing economies.
Bank of America expects the U.S. dollar to strengthen further in the second quarter.
Bank of America expects the U.S. dollar to stay strong in the near term, supported by elevated energy prices and shifting expectations around central bank policy. The bank has upgraded its FX outlook, now projecting EUR/USD at 1.14 and USD/JPY at 160 by the end of Q2, reflecting continued short-term dollar strength.
This revision comes as markets reassess the impact of the Middle East energy shock, with high oil prices and ongoing uncertainty boosting demand for the greenback. According to BofA strategists led by John Shin, rising energy costs and increasingly hawkish central banks—particularly the Federal Reserve—have played a key role in lifting the dollar.
The conflict in Iran has also reshaped currency outlooks, with the dollar likely to gain further, especially against currencies of energy-importing economies. BofA’s commodities team now expects Brent crude to average around $80 in 2026, reinforcing inflationary pressures.
Meanwhile, expectations for central bank policy have shifted, with markets pricing in modest Fed tightening and multiple rate hikes from other G10 central banks. Whether these hikes materialize will be crucial for FX movements in the coming months.
BofA now sees dollar strength extending into Q2 rather than being confined to Q1, although it still anticipates a gradual weakening later in 2026 as energy markets stabilize. Longer term, the bank forecasts EUR/USD rising to 1.20 by year-end.
However, risks remain tied to the trajectory of the energy shock—prolonged disruption could drive further dollar gains, while a quicker resolution may lead to a pullback as geopolitical risk premiums fade.
U.S. Treasury plans to place Donald Trump’s signature on new dollar bills, breaking a 165-year tradition.
U.S. paper currency will begin carrying President Donald Trump’s signature this summer, marking the first time a sitting president has signed American banknotes, according to the Treasury Department. The change, tied to the 250th anniversary of U.S. independence, also ends a 165-year tradition by removing the U.S. treasurer’s signature from the bills.
The first redesigned $100 notes—featuring Trump’s signature alongside Treasury Secretary Scott Bessent—are set to be printed in June, with other denominations to follow. Existing notes bearing the signatures of former Treasury Secretary Janet Yellen and Treasurer Lynn Malerba will remain in circulation for now.
Malerba will be the last treasurer to appear on U.S. currency, ending a practice that dates back to 1861. The update is part of broader efforts by the Trump administration to place the president’s name and likeness on national symbols, including a newly approved commemorative coin.
While the signatures will change, the overall design of U.S. banknotes will remain largely the same. Officials noted the Treasury has legal authority to adjust currency features, provided key elements—such as “In God We Trust” and portraits of deceased individuals—are preserved.
The dollar’s strength since the onset of the war is not surprising, but it is often misunderstood. The Dollar Index has climbed about 1.8% this month, following a smaller 0.65% gain in February after a 1.35% drop in January. Since hostilities began, the dollar has risen against all G10 currencies, with most—except the Canadian dollar and sterling—falling more than 1.5%. While this appears to reflect broad strength, it is equally a function of positioning, leverage, and rising US interest rates.
Reassessing Safe-Haven Flows
Two main forces are behind the dollar’s advance. The first is mechanical: short covering. For months, investors had used the dollar as a funding currency, borrowing cheaply in USD to invest in higher-yielding assets like Latin American bonds. When those risk trades reversed, positions were unwound and dollars were bought back, creating the illusion of safe-haven demand.
A similar process occurred among foreign investors in US equities. Many had hedged their dollar exposure while financing the US current account deficit. As US stocks declined, these investors sold equities and unwound dollar hedges—or found themselves over-hedged and adjusted accordingly. In both cases, the resulting demand for dollars was structural rather than discretionary.
The second driver is more traditional safe-haven demand. War reduces risk appetite, and with the US now a major energy producer, some investors view its economy as relatively shielded from oil shocks. While this argument holds some merit, it is likely to be less durable than the effects of positioning adjustments.
The Role of US Interest Rates
What is less widely recognized is how sharply US interest rates have risen, and how central this has been to the dollar’s strength. Since the war began, the two-year Treasury yield has increased by about 53 basis points, while the ten-year yield is up roughly 45 basis points. Although interest rate differentials typically matter, in the near term, the sheer rise in US rates appears to be a more decisive factor—especially as these increases are driven by inflation fears and supply shocks rather than optimism about growth.
Fed Expectations Shift
Expectations for Federal Reserve policy have also changed. Before the conflict, markets had fully priced in two rate cuts this year, with some probability of a third. Even after some repricing, at least one cut was still anticipated. However, while the Fed’s official statement had limited impact, Chair Powell’s press conference reshaped expectations. He downplayed projections showing stronger growth alongside steady unemployment and reiterated a cautious rate outlook.
Powell also acknowledged the Fed’s constraints, noting that missing inflation targets has become common and that the war complicates both inflation control and employment objectives.
Inflation Pressures Build
Meanwhile, rising fuel prices are shifting the political and economic landscape. Gasoline prices have increased daily since the war began, adding about $1 per gallon and pushing the national average close to $4. Grocery prices are also beginning to rise. This type of inflation is immediately felt by consumers and generates political pressure far more quickly than broader economic indicators.
Powell’s description of labor market “stability” also warrants scrutiny, given the loss of 92,000 jobs in February. He acknowledged that immigration policies are constraining labor force growth—adding to the effects of tariffs and war in limiting the Fed’s ability to cut rates as aggressively as desired.
Powell further emphasized his intention to remain Fed Chair until a successor is confirmed and indicated he would not step down from his governor role during any ongoing investigation, framing this as a defense of institutional independence.
Technical Outlook
From a technical perspective, the Dollar Index peaked near 100.50 on March 13 and has since found support just below 99.00, trading around its 20-day moving average. Momentum indicators suggest some consolidation may be ahead. However, positioning is not yet extreme—euro longs have dropped sharply, and yen shorts have increased—indicating the adjustment process may not be complete, especially amid lingering geopolitical uncertainty.
Outlook
The dollar is supported by both war-related demand and higher interest rates, but both factors depend on how the conflict evolves. The recently announced five-day pause is being met with skepticism, and risks of escalation remain, particularly with increased US military presence and speculation around strategic targets like Iran’s Kharg Island.
Until there is greater clarity, the dollar is likely to remain supported. However, once uncertainty fades, any reversal could unfold quickly—as has been seen in similar episodes before.
The U.S. dollar rose slightly on Wednesday, rebounding from earlier losses as hopes for Middle East de-escalation faded after Iran rejected a U.S. ceasefire proposal.
At 17:45 ET (21:45 GMT), the U.S. Dollar Index—tracking the greenback against six major currencies—gained 0.2% to 99.62.
The United States has put forward a ceasefire proposal.
While there is some optimism that Washington and Tehran may be exploring ways to end the conflict, markets remain cautious as both sides continue to offer conflicting accounts of how negotiations are progressing.
Reportedly eager to find an exit from the war, President Donald Trump has backed a U.S. proposal outlining a 15-point peace plan to Iran. The plan not only calls for Tehran to dismantle its primary nuclear facilities but also urges the reopening of the Strait of Hormuz — a critical shipping route south of Iran that has been largely shut to tanker traffic in recent weeks. This disruption has pushed energy prices higher and raised concerns about global inflation.
According to Thierry Wizman, global FX and rates strategist at Macquarie, investor optimism was revived by news that the U.S. had presented concrete terms to Iran. However, he cautioned that a ceasefire is unlikely in the near term. Instead, the U.S. may escalate military pressure over the next couple of weeks to push Iran toward meaningful concessions, with major combat potentially reaching a turning point by mid-April. He described the situation as entering a third phase — one defined by both negotiation and conflict, rather than purely one or the other.
Wizman added that the possibility of renewed negotiations signals a more critical stage in the U.S.-Iran conflict. Initially driven by diplomacy, then by direct confrontation, the situation may now evolve into a blend of both. While this dual-track approach could help stabilize market sentiment compared to outright war, it also carries the risk of sharper downside if it fails to deliver lasting stability and security.
Iran has pushed back against the proposal.
On Wednesday morning, the Fars News Agency reported that Tehran does not accept a ceasefire, emphasizing that it seeks a complete end to the conflict rather than a temporary halt in fighting.
Later, Press TV stated that Iran would not allow the United States to dictate when the war should end, citing a senior political figure. According to the report, the official outlined five key demands from Tehran, including a full cessation of attacks as well as international recognition and guarantees of Iran’s authority over the Strait of Hormuz.
However, Axios later cited a U.S. official saying Washington had not received any formal communication from Iran rejecting the ceasefire plan.
Iranian Foreign Minister Abbas Araghchi also denied that negotiations with the U.S. were taking place, according to Reuters. While acknowledging that messages were being passed through intermediaries, he stressed that such exchanges should not be interpreted as formal talks.
In the energy market, Brent crude — the global benchmark — briefly dipped below $100 per barrel on Wednesday, though it remains significantly higher than the roughly $70 level seen before the conflict began in late February.
Rising concerns over energy-driven inflation have strengthened expectations that central banks worldwide may need to adopt a more hawkish policy stance. In Germany, ECB President Christine Lagarde indicated that further tightening could be justified even if the inflation spike proves temporary.
The euro and yen edged higher on Wednesday, while sterling drew attention following the latest UK inflation figures.
The euro saw a slight uptick, with EUR/USD hovering around 1.1560. At the same time, the Japanese yen strengthened, pushing USD/JPY down to 159.33.
Sterling remained largely flat, trading near 1.3365 against the dollar, but came into focus after the release of new consumer inflation data. The UK’s consumer price index rose 3% year-on-year in March, unchanged from February. Notably, the data does not yet reflect the impact of rising oil prices triggered by the Middle East conflict.
According to Sanjay Raja, chief UK economist at Deutsche Bank, the UK’s disinflation trend may be approaching a pause. He noted that February’s inflation reading is already outdated, as households and businesses are beginning to feel the effects of the Iran conflict, particularly through higher fuel costs. Further increases in fuel prices are expected, and even if the conflict ends quickly, energy bills — including electricity and gas — could still climb by double digits over the summer.
Most currency pairs are expected to trade in a range. The Dollar Index may stay within 98–101, while the Euro has broken above 1.16 and could extend to 1.1650–1.17 before pulling back. EURINR has surged due to Euro strength and Rupee weakness, potentially testing 110 before dipping. EURJPY may hold between 182–185, and USDJPY within 157–160. USDCNY remains stable in the 6.88–6.92 range. The Aussie and Pound may trade in 0.69–0.72 and 1.32–1.35 ranges, respectively. USDINR is likely to decline toward 93.25–93.00, with upside capped near 94.
US Treasury yields remain elevated but stable, with support limiting downside and preserving the broader uptrend. A short-term dip or consolidation is possible before yields resume their upward move. German yields may see a corrective decline before continuing higher. The 10-year GoI yield is trending up, with intermediate resistance suggesting a temporary dip before further rise.
Global equities have rebounded on easing Middle East tensions, though key resistance levels cap gains. The Dow has recovered but remains at risk of falling toward 45,000 while below 47,000. DAX has surpassed 23,000 but needs a break above 23,500 to sustain an uptrend; otherwise, it may slip toward 22,000. Nifty failed near 22,950 and requires a move above 23,000 to target 23,500–24,000, else downside toward 22,000 remains. Nikkei is gaining but stays bearish under 54,000, with potential to drop toward 50,000–48,000. Shanghai may extend gains to 4,000–4,100.
Crude oil is easing on reduced geopolitical tensions. Brent may decline to $90–$85 if it breaks $95, and WTI could fall to $82–$80 if it holds below $90–$88. Precious metals have rebounded: Gold may rise toward $4,800–$5,000 and Silver toward $78–$80. Copper remains weak under $5.70, potentially falling toward $5.00. Natural Gas is nearing support at $2.80, likely trading in a $2.80–$3.30 range if support holds.
The dollar climbed on Tuesday, recovering from the previous session’s decline as uncertainty surrounding U.S.–Iran peace negotiations dampened sentiment and boosted demand for safe-haven assets.
The greenback showed little response to an unverified media report released after the Wall Street close, which suggested a potential ceasefire between the two countries.
As of 17:49 ET (21:49 GMT), the U.S. Dollar Index—measuring the currency against a basket of six major peers—rose 0.3% to 99.23.
Dollar rebounds amid persistent uncertainty
The dollar regained ground as uncertainty continued to dominate market sentiment. On Monday, Donald Trump stated that he would postpone potential strikes on Iran’s energy facilities for five days following what he described as “very positive and productive” discussions aimed at ending the nearly month-long conflict. His remarks initially pressured the dollar, pushing it to its lowest level in almost two weeks.
However, sentiment shifted on Tuesday as conflicting media reports emerged regarding developments in the Middle East. Iran’s parliamentary speaker dismissed Trump’s claims, accusing him of fabricating the talks to calm volatile financial markets.
Later, Trump told reporters that negotiations were still underway and asserted that Iran had agreed to forgo developing nuclear weapons. He also noted that U.S. Secretary of State Marco Rubio and Vice President JD Vance were involved in the discussions.
Following the close of Wall Street, Israel’s Channel 12 reported that U.S. Middle East envoy Steve Witkoff and businessman Jared Kushner were working on a framework to establish a ceasefire and initiate negotiations based on a 15-point plan. Meanwhile, The New York Times reported that the U.S. had already delivered a proposal to Iran aimed at ending the conflict.
Despite these developments, hostilities in the Middle East continue, with the Strait of Hormuz—a crucial passage south of Iran through which roughly 20% of global oil supply flows—effectively closed. The strait remains a major flashpoint, as the risk of Iranian attacks on vessels threatens to disrupt vital energy shipments, particularly to key Asian importers.
Analysts at ING noted that the dollar remains highly sensitive to evolving headlines surrounding the conflict. They added that markets are closely watching for signals—especially from Iran—on whether meaningful ceasefire negotiations could begin. Until clearer progress emerges, any sustained rally in risk assets or significant decline in the dollar is likely to remain limited.
Euro and sterling steady; yen in spotlight after Japan inflation data
The euro and British pound remained largely stable on Tuesday, with EUR/USD edging slightly higher to 1.1607 and GBP/USD ticking up to 1.3409.
Meanwhile, the dollar posted modest gains against the Japanese yen after fresh data showed Japan’s inflation slowed more than expected in February. Core inflation dropped below the central bank’s target for the first time in four years, reinforcing expectations that the Bank of Japan may adopt a more cautious approach toward further monetary tightening.
Analysts at ING noted that the central bank is likely to look past the recent slowdown in inflation and instead focus on potential upside risks to prices.
They added that strong wage negotiation outcomes and firmer-than-expected PMI readings could still support the case for an interest rate hike as early as April. However, the exact timing remains uncertain and may depend on evolving geopolitical developments, particularly in the Middle East.
The U.S. dollar declined on Monday, giving up earlier gains as investors reacted to President Donald Trump’s remarks about “productive” discussions with Iran. By 17:15 ET (21:15 GMT), the dollar index—measuring the greenback against six major currencies—had dropped 0.5% to 99.13.
Optimism over easing tensions spreads across global markets.
Hopes of easing tensions spread across global markets. Wall Street posted strong gains, while oil prices plunged after Trump decided to delay missile strikes on key Iranian infrastructure, citing progress in talks with Tehran. In a social media update, he said discussions aimed at achieving a “complete and total resolution” to the conflict.
Trump noted that, based on the positive tone of the talks—which are expected to continue—he had ordered the Pentagon to postpone any military action against Iranian energy facilities for five days. However, Iranian state media denied that any direct negotiations had taken place with the U.S. Officials in Tehran maintained their stance on the Strait of Hormuz and reiterated that their conditions for ending the conflict remain unchanged.
Reports from the The Wall Street Journal, citing Iran’s Fars news agency, also indicated there had been no communication between the two sides. According to Fars, the U.S. decision to step back from targeting Iranian energy sites followed warnings from Iran about potential retaliation across West Asia.
Speaking to reporters, Trump said the talks had gone “very well” and suggested there was a serious chance of reaching an agreement, though he stopped short of making any guarantees.
Market analysts expressed uncertainty over how to interpret the situation. David Morrison from Trade Nation noted that the developments add volatility to trading, especially given the high stakes involved. He also suggested that the lack of clearly defined war objectives may allow the U.S. to step back while claiming success—though Iran has framed the move as a retreat following its warnings.
The euro, pound, and yen showed little movement.
In currency markets, the euro and pound showed little movement, while the yen remained steady. European markets ended higher, supported by optimism that reduced tensions could stabilize energy supplies. This is particularly important for Europe, which depends heavily on oil and gas from the Middle East.
Disruptions to the Strait of Hormuz—through which about 20% of global energy supply passes—as well as attacks on gas infrastructure in Qatar, have recently weighed on the region. Meanwhile, Japan’s currency has also been pressured by rising oil prices, as the country relies on crude imports passing through the same route.
The euro climbed during the week, testing the 1.16 level as both central banks tied to this pair held their meetings. However, the key takeaway is that the Federal Reserve is likely to stay more hawkish than previously expected, increasing the chances that the US dollar will remain stronger for an extended period.
In fact, by Friday, even though the ECB had sounded somewhat more hawkish than expected, there were already signs of a shift in tone, with ECB member Villeroy indicating that a rate cut cannot be ruled out.
Ongoing concerns over energy in the European Union also add downside risk—if energy issues persist, economic growth could slow. As a result, the euro may remain under pressure, with any short-term rallies likely to face selling pressure.
Silver (XAG/USD)
Silver prices dropped sharply over the week as rising U.S. interest rates weighed on the market, and that trend is likely to continue. As the week comes to a close, the focus is on holding above the $70 level—a key round number that carries strong psychological importance and is being closely watched by traders.
If the market breaks below this support level, it could trigger significant selling pressure, potentially driving prices toward $65, and over the longer term, even down to $50.
Overall, this is a market that may be hard to navigate, and it’s unlikely to see consistent upward momentum unless U.S. interest rates begin to stabilize.
Gold (XAU/USD)
The gold market is likely to behave similarly to silver, with the key difference being its safe-haven appeal. Because of that, gold may outperform silver—and frankly, that’s what I expect to happen.
That said, outperformance is relative, and this week’s candlestick looks quite weak. I’d be watching the 4,500 level closely, with the 4,400 area below it acting as additional support.
Any rally from here is likely to face selling pressure sooner or later, with 5,000 serving as a near-term ceiling. It’s only when U.S. interest rates fall meaningfully that gold can resume a stronger upward move. Still, looking at the longer-term charts, gold could drop another 1,000 and remain within a broader uptrend.
BTC/USD
Bitcoin initially attempted a breakout during the week but is having trouble holding above the 72,000 level. Still, it remains within a formation that suggests a possible reversal, although—like other markets—the outcome will largely depend on U.S. interest rates.
If interest rates remain exceptionally high, it’s hard to see Bitcoin—being a high-risk asset—performing strongly in that environment.
That said, I’m not expecting Bitcoin to collapse, but any upward move is likely to be gradual rather than sharp. If the trend is positive, it will probably be more of a slow grind higher than a rapid rally.
GBP/USD
The British pound climbed over the week, reaching up to test the key 1.35 level before pulling back. Overall, the market is likely to remain quite volatile, with the 1.3250 level acting as a support zone.
It seems that traders are continuing to sell the British pound whenever signs of exhaustion appear, especially as ongoing energy concerns in the United Kingdom weigh on sentiment.
There is a strong possibility that the US dollar could strengthen against the pound, pushing this pair lower. If the price falls below the 1.32 level, it may head toward the 200-week EMA, which is currently around 1.30. I have little interest in buying the pound at the moment, even though it may still perform better than several of its peers against the US dollar.
USD/CHF
The US dollar is trading choppily against the Swiss franc, hovering around the 0.79 level. If the price manages to break above this week’s high, it could pave the way for a move toward the 0.81 level.
If the price breaks below this week’s low, the market could decline toward the 0.77 level. Overall, this is likely to remain a choppy and noisy environment.
With US interest rates rising, the market tends to favor safe-haven flows, while the Swiss National Bank may step in if the franc strengthens excessively. Given these opposing forces, I expect the pair to eventually move higher.
NASDAQ 100
The Nasdaq 100 attempted to move higher during the week but encountered resistance around the 25,000 level. After reversing and showing weakness, the market now appears to be testing the 23,800 level.
Given this situation, the market appears vulnerable to a deeper downside move. The 50-week EMA sits near the 23,800 level, and a break below that could trigger significant selling pressure. While short-term bounces may occur, a sustained move above 25,000 would be needed for buyers to regain control and target higher levels. For now, elevated interest rates continue to weigh on overall risk sentiment.
DAX
In Germany, the DAX initially attempted to rally but has since broken down decisively, appearing to lose key support. Rising German interest rates, combined with a broader risk-off environment and ongoing energy challenges across Europe, continue to heavily influence the market’s direction.
With liquefied natural gas and oil continuing to pose challenges, this market will likely need time to establish support at lower levels. Before that happens, however, it could potentially decline toward the 20,000 mark.
The US dollar weakened over the week, with the US Dollar Index (DXY) falling back below the 100 mark to around 99.60 by Friday, after a midweek boost following the Federal Reserve’s decision to keep interest rates unchanged at 3.50%–3.75%. Meanwhile, the conflict in Iran has entered its third week, and the Strait of Hormuz remains effectively shut, keeping oil prices elevated. Reports of the Pentagon sending thousands more Marines to the region point to a prolonged standoff. At the same time, Fed Chair Jerome Powell warned that inflationary pressures may still build further.
EUR/USD is hovering around the 1.1550 level after hitting new lows for 2026 earlier in the week, despite the European Central Bank’s hawkish stance, with markets now assigning an 85% chance of a rate hike this year.
GBP/USD is trading near 1.3330 after the Bank of England kept rates unchanged on Thursday but hinted that further tightening could be necessary if energy-led inflation continues.
USD/JPY is holding close to 159.30, with the yen gaining support as the Bank of Japan signaled a return to policy normalization.
AUD/USD is sitting around 0.7010 following a second straight rate hike from the Reserve Bank of Australia, though broader risk-off sentiment is still weighing on the currency.
West Texas Intermediate (WTI) crude is near $98 per barrel, close to weekly highs, after Israeli Prime Minister Benjamin Netanyahu indicated efforts to reopen the Strait of Hormuz.
Gold dropped sharply to $4,583 amid a heavy selloff driven by rising Treasury yields and forced liquidations of leveraged positions, overwhelming any safe-haven demand linked to the conflict.
Upcoming economic outlook: Key voices to watch
Monday, March 23:
ECB’s Escrivá
ECB’s Cipollone
ECB’s Lane.
Tuesday, March 24:
RBNZ’s Breman
ECB’s Kocher
ECB’s Sleijpen
ECB’s Cipollone
ECB’s Nagel
ECB’s Lane
Fed’s Barr
Wednesday, March 25:
ECB’s President Lagarde
ECB’s Lane
BoE’s Greene
Fed’s Miran
Thursday, March 26:
ECB’s De Guindos
BoE’s Breeden
BoE’s Greene
BoE’s Taylor
Fed’s Cook
Fed’s Miran
Fed’s Jefferson
Fed’s Logan
Fed’s Barr
Friday, March 27:
Fed’s Daly
Fed’s Paulson
ECB’s Schnabel
Saturday, March 28:
ECB’s Cipollone
These scheduled speeches and appearances from central bank officials across the European Central Bank, Federal Reserve, Bank of England, and Reserve Bank of New Zealand will be closely watched for signals on inflation, interest rates, and policy direction amid ongoing global uncertainty.
Key economic data and central bank signals shaping policy outlook
Monday, March 23:
Eurozone March Consumer Confidence (Preliminary)
Australia March S&P Global PMIs (Preliminary)
Japan February Consumer Price Index
Tuesday, March 24:
Eurozone March HCOB PMIs (Preliminary)
UK March S&P Global PMIs (Preliminary)
US ADP Employment Change
US Q4 Nonfarm Productivity & Unit Labor Costs
US March S&P Global PMIs (Preliminary)
Bank of Japan Monetary Policy Meeting Minutes
Wednesday, March 25:
Australia February Consumer Price Index
United Kingdom Inflation Data (CPI, PPI, RPI)
Switzerland March ZEW Expectations Survey
Germany March IFO Business Climate
Swiss National Bank Quarterly Bulletin (Q1)
Thursday, March 26:
Germany April GfK Consumer Confidence
Eurozone Q4 Gross Domestic Product
Deutsche Bundesbank Monthly Report
US Initial Jobless Claims
New Zealand March ANZ–Roy Morgan Consumer Confidence
Friday, March 27:
UK March Consumer Confidence
UK February Retail Sales
Eurozone March Harmonized Index of Consumer Prices (Preliminary)
US March Michigan Consumer Sentiment & Inflation Expectations
This packed calendar of releases across major economies—alongside guidance from institutions like the European Central Bank, Federal Reserve, and Bank of England—will play a crucial role in shaping expectations for interest rates, inflation trends, and overall monetary policy direction in the near term.
Dollar posts a weekly drop as policymakers adopt a cautious stance due to the ongoing Iran war.
The U.S. dollar held steady on Friday but remained below multi-month highs and was set for a weekly decline, as investors weighed the future of U.S. interest rates amid the ongoing war in Iran. The US Dollar Index, tracking the greenback against six major currencies, rose 0.3% to 99.50 but fell 0.9% for the week.
EUR/USD slipped 0.2% to 1.1570 and GBP/USD dropped 0.7% to 1.3338, both aiming for weekly gains, while USD/JPY gained 0.9% to 159.21. Rising oil prices, driven by attacks on Middle East energy infrastructure and disruption of key shipping routes, have fueled expectations that global central banks may tighten monetary policy to counter renewed inflation risks, boosting demand for the dollar since the conflict began in late February.
The Federal Reserve left interest rates unchanged this week, citing uncertainty around U.S.-Israeli actions in Iran, though it maintained projections for potential rate cuts later this year. This positions the Fed as the only major central bank not expected to hike rates in 2026, in contrast to the European Central Bank’s more hawkish stance. JPMorgan analysts noted the stark difference, highlighting that early hikes could risk repeating past policy errors, though market expectations still tilt toward some rate increases this year.
Brent crude prices fell from a recent $119 per barrel spike after President Donald Trump sought to calm markets, pledging to resolve the crisis without deploying ground troops—though Pentagon planning and additional troop deployments suggest contingency preparations. The White House is also exploring measures to ease energy market pressures, including potentially lifting sanctions on Iranian oil, while requesting $200 billion in funding for the conflict.
The pound falls as rising oil prices counteract a hawkish signal from the Bank of England.
Sterling fell on Friday as higher oil prices pressured sentiment, but the pound remained on track for a weekly gain following a hawkish surprise from the Bank of England that revised UK rate expectations. At 12:52 GMT, GBP/USD was down 0.3% at $1.34, partially reversing Thursday’s 1.31% jump, with the currency up 1.2% for the week.
EUR/GBP was largely unchanged, as hawkish signals from both the ECB and BoE offset each other. EUR/USD slipped 0.2% to 1.15, pulling back from Thursday’s 1.2% rally, as the dollar found tentative support despite the ECB’s April rate hike guidance.
On Thursday, the BoE voted unanimously 9-0 to keep rates on hold, surprising markets that had expected some members to favour a cut. Dovish MPC member Swati Dhingra even discussed possible hikes to manage inflation. Traders quickly repriced expectations, now anticipating around 80 basis points of tightening by year-end, though ING cautioned this may be excessive given weaker conditions for second-round inflation than in 2022.
Oil continued to drive markets, with Brent volatile amid the Iran conflict and Strait of Hormuz concerns. ING strategist Francesco Pesole noted that while the hawkish BoE stance provided some support for sterling, commodity prices and geopolitical developments remained the dominant market influences. ING retains a bullish view on EUR/GBP, targeting 0.88 by end-Q2, factoring in May local elections and potential future BoE cuts.
The Dollar Index eased alongside falling crude prices as the U.S. indicated it may allow Iranian oil shipments to ease pressure on prices. The index remains volatile in the 99–101 range. EUR/USD is trending toward 1.16 but could retreat to 1.14. EUR/INR has moved higher as anticipated and may test 108 before pausing. EUR/JPY is likely to stay within 182–185, while USD/JPY has declined below 160 and may trade between 157–160 in the near term. USDCNY remains bullish above 6.85, targeting 6.90–6.95. AUD/USD and GBP/USD can trade within 0.69–0.72 and 1.3250–1.35, respectively. USD/INR may open higher, though surpassing 93 today is uncertain; yesterday’s NDF spike to 93.35 has corrected to 92.89–92.90.
U.S. Treasury yields have pulled back sharply from recent highs, with further near-term dips possible before resuming an upward trend. German yields also fell, maintaining the expected corrective dip, after which a rebound may follow. The ECB kept rates unchanged, citing high inflation and a slowing economy amid ongoing conflict. India’s 10-year G-Sec closed bullishly, with more upside possible if immediate resistance is broken.
Global equities remain under pressure. The Dow is falling toward 46,000, as expected. DAX rebounded from support near 22,700 and could reach 23,500–23,700 while holding this level. Nifty turned sharply bearish with a gap down; a break below 23,000 may push it toward 22,750–22,500. Nikkei continues to decline and may fall to 50,000–48,000 below 56,000. Shanghai is testing 4,000 support, with a potential drop to 3,950–3,900 in the coming weeks.
Crude remains volatile but supported above key levels. Brent may rebound to $110–$120 if it stays above $100, while WTI could rise toward $100–$104 above $90. Precious metals remain weak: gold may fall to $4,400–$4,200 after breaking below $4,800, and silver could slide to $65–$60 below $70. Copper continues to weaken toward $5.25–$5.00. Natural gas is inching higher, potentially reaching $3.50 in the coming weeks.
The U.S. dollar has remained a favored safe-haven asset since late February, when the U.S. and Israel launched attacks on Iran. Investors have priced in the expectation of prolonged higher interest rates due to inflationary pressures from surging oil prices, which typically strengthen the dollar.
Market sentiment was largely negative on Thursday after oil and gas prices jumped again following attacks on energy facilities in the Middle East. Iran’s South Pars gas field—the world’s largest natural gas deposit—was targeted, prompting Tehran to retaliate against sites in Gulf countries, including Qatar and Saudi Arabia.
Israeli Prime Minister Benjamin Netanyahu told reporters that Israel acted alone in the South Pars strike and that U.S. President Donald Trump had requested no similar actions in the future. Netanyahu added that Iran no longer possesses the capacity to enrich uranium or produce ballistic missiles, which caused oil prices to retreat.
“We are winning, and Iran is being decimated,” Netanyahu stated.
Federal Reserve holds rates steady
On Wednesday, the Federal Reserve kept its key policy rate unchanged, as expected. The Fed’s updated projections raised the 2026 inflation forecast, partly due to rising oil prices. Fed Chair Jerome Powell emphasized uncertainty over the war’s impact on inflation and the U.S. economy, noting repeatedly, “I’m not certain. I’m uncertain.”
JPMorgan economist Michael Feroli observed that Powell seems to be giving little weight to current forecasts and mentioned that this would have been a round where the Summary of Economic Projections could have been skipped, similar to March 2020. Regarding future rate hikes, Powell reiterated that no option is off the table, though it is not expected to be the baseline for most of the monetary policy committee.
Euro, pound, and yen rise after central bank decisions
On Thursday, both the European Central Bank (ECB) and the Bank of England (BoE) held policy rates steady, mirroring the Fed. The ECB described the Middle East conflict’s impact on inflation and growth as “uncertain,” while the BoE warned that higher oil prices would push up household fuel and utility costs and indirectly affect business expenses.
EUR/USD rose 1.2% to 1.1586, and GBP/USD climbed 1.3% to 1.3429. Deutsche Bank’s Sanjay Raja noted that the BoE’s Monetary Policy Committee voted unanimously 9-0 to pause, reflecting the scale of the energy shock and potential inflationary pressures.
The Bank of Japan also kept rates unchanged, as expected. USD/JPY fell 1.3% to 157.67. Only one board member, Hajime Takata, opposed the decision, advocating a 25-basis-point hike. Japan relies heavily on Middle Eastern energy imports, and although slowing rice price increases have helped the BoJ manage inflation, the war-driven oil surge could intensify price pressures, according to José Torres of Interactive Brokers.
The U.S. dollar rose against major currencies on Wednesday, recovering losses from the previous two sessions after the Federal Reserve decided to keep interest rates unchanged.
The Fed signaled expectations of higher inflation and projected just one rate cut this year, as policymakers assessed the economic effects of the ongoing conflict involving the U.S., Israel, and Iran.
Since tensions in the Middle East escalated nearly three weeks ago, the dollar has generally strengthened, hitting a 10-month high late last week as investors sought safety in U.S. assets amid rising oil prices.
Karl Schamotta of Corpay noted that the Fed’s latest outlook—featuring slower growth, weaker employment, and higher inflation—suggests that rising energy costs may temporarily weigh on economic demand.
In currency markets, the dollar climbed 0.92% against the Swiss franc, while the euro fell 0.5% to $1.148. Analysts say the Fed’s decision reinforced a “hawkish hold,” supporting the dollar as Treasury yields remain elevated despite unchanged rate projections.
The dollar index gained 0.51% to 100.0. Fed Chair Jerome Powell added that the central bank may look past oil-driven inflation pressures if progress continues in reducing core inflation.
Earlier data showed U.S. producer prices rose 0.7%, surprising expectations.
Meanwhile, attention is turning to upcoming decisions from other major central banks, including the ECB, Bank of England, and Bank of Japan, all expected to keep rates steady while monitoring inflation risks linked to the Middle East conflict.
The Japanese yen weakened toward levels that could trigger intervention, while the British pound also declined. The dollar also edged higher against the offshore Chinese yuan.
The U.S. dollar paused on Wednesday as softer crude oil prices helped revive some risk appetite ahead of a series of major central bank decisions.
The yen remained fragile near levels that have previously raised concerns about possible intervention by Tokyo, especially with Japanese Prime Minister Sanae Takaichi set to meet U.S. President Donald Trump in Washington. Meanwhile, the euro slipped slightly after two sessions of gains, as the European Central Bank prepared to kick off its two-day policy meeting.
Amid the ongoing Middle East crisis, now in its third week, the dollar has strengthened as the primary safe-haven currency. However, oil prices edged lower after data from the American Petroleum Institute indicated a rise in U.S. crude inventories.
According to Hirofumi Suzuki, chief FX strategist at Sumitomo Mitsui Banking Corporation, while the pause in oil’s rally hasn’t dramatically improved conditions, markets are showing signs of stabilization. He noted that USD/JPY has moved modestly in favor of yen strength.
The dollar index rose slightly by 0.06% to 99.61 following a two-day decline, while the euro dipped 0.05% to $1.1532. The yen weakened marginally to 159 per dollar, and sterling remained steady at $1.3355.
The greenback had surged to a 10-month high late last week, driven by geopolitical tensions and rising oil prices that pushed investors toward safer U.S. assets.
Highlighting the broader impact of the crisis, Trump announced he would delay a planned trip to Beijing to meet Chinese President Xi Jinping. Takaichi is expected to leave for Washington later Wednesday.
Analysts at Mizuho Securities noted that even if the conflict drags on, equities could rebound, supporting commodity-linked currencies like the Australian dollar, as well as currencies of oil-importing nations such as the yen and euro. However, they expect limited downside for USD/JPY, partly due to the Japanese government’s preference for a weaker yen.
Attention now turns to central banks, with the Federal Reserve set to announce its decision Wednesday, followed by the ECB, Bank of England, and Bank of Japan a day later. All are widely expected to hold rates steady, though markets will closely watch their outlooks on inflation and growth amid geopolitical uncertainty.
Expectations for Fed rate cuts have been trimmed to around 25 basis points this year. Meanwhile, traders are now pricing in more than one ECB rate hike in 2026—a notable shift from earlier expectations of potential cuts.
Elsewhere, the Australian dollar gained 0.1% to $0.7109, and the New Zealand dollar rose 0.05% to $0.586. In crypto markets, bitcoin slipped 0.40% to $74,257.80, while Ethereum edged up 0.22% to $2,333.60.
USD/JPY’s recent dip has left it caught between firm uptrend support and growing concerns about potential intervention as it approaches the 160 mark. Traders now face a key question: does this bearish signal point to a deeper correction, or is it merely a temporary pause in the broader rally?
Pullback brings USD/JPY toward key support around 159
Intervention fears resurface near the 160 threshold
Attention shifts to the RBA decision and upcoming JGB auction
Reversal Highlights Tension Within the Uptrend
USD/JPY fell sharply on Monday, though the drivers behind the move were not particularly compelling.
The decline coincided with a sudden pullback in the US dollar and a drop in Treasury yields, despite a lack of meaningful new macro developments. At the same time, crude oil prices reversed earlier gains even as no additional countries committed to joining the United States in protecting tanker routes through the Strait of Hormuz. Given how energy supply concerns have recently underpinned the dollar, this suggests the move was more about positioning adjustments than a shift in the broader macro outlook.
For USD/JPY, the timing stands out. Japan’s finance minister, Satsuki Katayama, signaled readiness to take “decisive action” to curb excessive currency volatility as the pair neared 160. Considering Japan’s track record of intervening or conducting rate checks around this level, such remarks likely prompted traders to scale back long positions, accelerating the pullback.
A single bearish reversal candle is rarely enough to shift the narrative—especially when it appears without a clear fundamental catalyst. Without follow-through selling, Monday’s move in USD/JPY is more likely to be seen as a pause rather than confirmation of a broader trend reversal.
Technically, the pair is at a crossroads.
USD/JPY is now testing uptrend support drawn from the January lows, while hovering just above the 159.00 zone—a level that previously acted as strong resistance before being broken last week.
At the same time, momentum is starting to fade. The RSI (14) has broken its upward trajectory, and the MACD is flattening and drifting back toward its signal line after a prolonged climb. When this kind of momentum deterioration shows up at key support, it typically forces a decisive move.
So the setup boils down to two scenarios:
A continuation of selling that breaks trend support, opening the door for a deeper pullback toward 157.88
Or a defense of the uptrend, despite rising risks of Japanese intervention as price nears the psychologically important 160 level
Recent price action has largely been driven by sentiment around energy supply disruptions. The United States benefits from relative energy independence, while Japan—heavily reliant on imports—tends to see its currency weaken when oil prices surge. However, Monday’s reversal in crude oil hints that this geopolitical tailwind for the dollar may be fading.
Macro catalysts could now take the lead.
The upcoming policy decision from the Reserve Bank of Australia (RBA) may influence broader G10 currency flows. Markets are pricing only about a 62% chance of a 25bps hike, but if delivered, it would reinforce the divergence between a potentially easing Federal Reserve and other central banks that may still tighten—potentially pressuring the US dollar.
On the flip side, if the RBA holds rates steady, it could signal broader caution among central banks, which may end up supporting the dollar instead.
Bond markets also matter here.
20-year government bond auctions in both Japan and the US could offer additional clues. Demand for Japanese government bonds is particularly important—weak demand may reignite yen weakness, while strong bidding could stabilize sentiment and lend support to the currency.
In short, USD/JPY is no longer just a technical story. It’s sitting at the intersection of fading momentum, intervention risk, and shifting macro drivers—making the next move especially pivotal.
The U.S. dollar remained highly volatile over the past week as markets continued to assess the broader risk appetite outlook. The 18 MXN level still stands as a major resistance barrier, while the weekly candlestick formed a hammer pattern, signaling the potential for continued volatility. However, it is important to remember that holding long positions may carry costs due to interest rate differentials. A move lower would likely indicate a return of risk appetite in the market.
NASDAQ 100
The NASDAQ 100 experienced significant volatility over the past week, driven largely by rising U.S. interest rates and ongoing war-related headlines. Surging energy costs could also pose challenges for many AI-related companies, creating a lingering overhang that may weigh on the market. That said, a major sell-off does not appear likely at this stage. Instead, the market is likely to remain choppy, with pullbacks continuing to attract buyers.
EUR/USD
The euro has declined sharply over the past week and has now slipped below the key 1.15 level, an area closely monitored by many traders. As a result, investors appear to be moving toward the US dollar in search of safety. At the same time, inflation in the United States remains persistent, leading traders to believe the Federal Reserve may have to keep interest rates higher for longer. Meanwhile, the European Central Bank must contend with potential energy shortages that could pose challenges for the continent.
USD/CAD
The US dollar strengthened for most of the week, with the market continuing to encounter significant resistance around this area. The 1.3750 level remains a key obstacle, having acted as a strong barrier on several occasions. While higher oil prices typically support the Canadian dollar, this pair may behave differently as the United States keeps boosting its oil output, currently around 14 million barrels per day. As a result, the pair is likely to be driven largely by shifts in risk sentiment, with traders turning to the greenback during periods of uncertainty.
GBP/USD
The British pound attempted to rally over the past week but was sharply pushed lower as risk appetite deteriorated. GBP is now threatening a breakdown below the 1.3250 level. If it falls through that support, the next potential target could be around 1.30. Any rallies at this stage may present selling opportunities, as several factors continue to drive traders toward the US dollar. For now, buying interest remains limited, especially with ongoing war-related headlines that could continue to influence market sentiment.
USD/ZAR
The US dollar started the week on the back foot but then rebounded sharply as traders navigated the ongoing risk aversion dominating the market. South Africa sits on the higher end of the risk spectrum, and concerns about the country’s ability to secure sufficient energy supplies are prompting capital outflows. As a result, the pair is now approaching the 17 ZAR level, a significant round and psychological threshold that many traders monitor closely. A break above this level could trigger a stronger move higher, suggesting the market is nearing a key turning point.
DAX
The German index has remained highly volatile, much like other markets, but it has so far managed to hold relatively steady, with the 23,000-euro level acting as a potential floor. From here, the market may attempt to recover. However, a closer look at the daily chart shows considerable choppiness, suggesting the index may be trying to form a base before any broader turnaround. If the market were to break below the 23,000-euro level, it could trigger a much sharper decline.
The U.S. dollar strengthened on Friday and remained on course for a solid two-week winning streak, supported by its status as a preferred safe-haven asset amid the ongoing conflict involving Iran.
By 15:46 ET (19:46 GMT), the U.S. Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.7% to 100.36 and was set for a weekly gain of around 1.4%. Meanwhile, EUR/USD fell 0.8% to 1.1423 and GBP/USD dropped 0.9% to 1.3228. USD/JPY edged 0.2% higher to 159.65.
Analysts at ING noted that the dollar has climbed to fresh monthly highs as markets struggle to see a clear resolution to the escalating Middle East crisis.
The joint U.S.–Israeli military campaign against Iran has now lasted more than a week and shows little sign of easing. President Donald Trump stated that Washington is “totally destroying” Iran’s military and economic capacity.
However, Tehran has signaled it will continue resisting. Iran’s new Supreme Leader, Mojtaba Khamenei, emphasized that the strategic Strait of Hormuz — a crucial shipping lane responsible for roughly one-fifth of global oil supply — will remain closed.
The possibility of a prolonged shutdown of the strait has triggered significant volatility in global oil markets. Brent crude prices surged to nearly $120 per barrel earlier in the week before briefly dropping below $90. On Friday, Brent futures were trading above $100 per barrel.
Because much of the oil and gas transported through the Strait of Hormuz is used to produce key goods such as fertilizers and plastics, rising energy prices could intensify inflationary pressures worldwide.
These inflation risks could lead central banks, including the Federal Reserve, to reconsider plans for near-term interest rate cuts. Higher interest rates typically attract foreign capital, which could further strengthen the U.S. dollar.
PCE inflation data in focus
Investors are also closely watching U.S. inflation data due on Friday, when the personal consumption expenditures (PCE) price index for January will be released.
The core PCE index — which excludes volatile categories like food and energy — is expected to rise 3.1% year-on-year, slightly above the 3.0% reading in December. This indicator is closely followed by financial markets because it is one of the Federal Reserve’s preferred gauges when setting monetary policy.
According to ING analysts, the core PCE index has been drifting further away from the Fed’s 2% target since reaching a low of 2.6% last summer.
They suggested that this trend may limit the Fed’s ability to lower interest rates this year and that policymakers will likely address the issue during next Wednesday’s Federal Open Market Committee (FOMC) meeting.
Interestingly, recent PCE data has shown stronger inflation than the Consumer Price Index (CPI) reported by the Labor Department. This difference largely reflects variations in weighting methods, particularly for housing and healthcare costs, as well as differences in coverage and consumer substitution patterns. Lower weighting for cooling shelter costs and higher exposure to rising medical expenses have kept PCE inflation relatively elevated compared with CPI.
In contrast, February’s CPI data released on Wednesday showed relatively moderate inflation of 2.4% year-on-year.
However, these figures mostly reflect a period before the Iran conflict escalated in late February with a wave of U.S. and Israeli airstrikes. Since then, the inflation outlook has become more uncertain.
Major central bank decisions ahead
Next week will be a crucial period for global monetary policy watchers, as several major central banks — including the Federal Reserve, the European Central Bank (ECB), and the Bank of England — are set to announce interest rate decisions.
Investors will pay close attention to how policymakers address the economic implications of the Iran conflict.
According to JPMorgan economist Michael Feroli, markets widely expect the Fed to leave its benchmark interest rate unchanged at a target range of 3.5%–3.75%.
However, the Middle East conflict may complicate the outlook. Feroli said the Fed’s post-meeting statement is likely to mention the crisis as an additional source of uncertainty affecting both employment and inflation objectives.
The ECB is also expected to keep rates unchanged, although policymakers are likely to comment on the severe oil and gas shock Europe is experiencing due to the conflict.
JPMorgan economists Bruce Kasman and Nora Szentivanyi noted that central banks often face difficult policy choices during periods of volatile energy prices. Energy costs frequently fluctuate by around 25% annually, pushing up energy inflation while making it difficult to determine whether changes stem from supply disruptions or shifts in demand.
While oil prices are expected to remain elevated, a prolonged closure of the Strait of Hormuz could drive prices well beyond current market expectations. A sustained rise to $125 per barrel or higher would likely increase inflation while simultaneously weakening economic growth.
They warned that such a scenario could trigger different policy responses from major central banks. The Federal Reserve typically prioritizes mitigating recession risks and could adopt a more dovish stance if oil shocks intensify. In contrast, the ECB has historically been more sensitive to rising inflation and could tighten monetary policy if oil prices climb significantly.
EUR/USD was trading near 1.1546 on March 12, extending a sharp three-day decline that has wiped out weeks of recovery efforts within just a few sessions. The pair reached a high of 1.2082 on January 27—its strongest level since June 2021—but has since formed a clear sequence of lower highs and lower lows, a classic signal of a sustained downtrend. From the January peak to current levels, the pair has fallen by roughly 536 pips, suggesting more than a simple correction. Instead, the shift points to a broader change in market dynamics: the dollar has regained control while the euro has moved firmly onto the defensive.
The decline has been structured enough to resemble a steady trend, yet sharp reversals around key turning points have repeatedly caught bullish traders off guard. After the initial breakdown in late January, EUR/USD briefly stabilized around the 1.1700 region before rolling over again. The pair later touched a low near 1.1507, followed by a modest rebound that quickly lost momentum. That bounce failed to convincingly retake 1.1600, leaving the market once again testing the psychologically important 1.1500 level, a threshold closely monitored by technical analysts in recent weeks.
A major catalyst behind this move has been the conflict involving Iran that erupted on February 28, which has widened the economic divergence between the United States and the Eurozone. The surge in energy prices has played a particularly significant role. Brent crude has climbed to around $97 per barrel, while West Texas Intermediate is trading near $93.
In response to the supply shock, the International Energy Agency authorized the release of more than 400 million barrels from strategic reserves, with the United States contributing over 172 million barrels. Even with these emergency measures, oil prices continued to rise, underscoring the severity of the supply disruption currently being priced into global energy markets.
Iraq announced it would suspend port operations at key oil export terminals after two tankers were attacked in the Persian Gulf. As a result, the risk of disruption to the Strait of Hormuz is no longer theoretical—it is actively being priced into global energy markets.
For Europe, the implications are particularly severe. Unlike the United States, the continent lacks sufficient domestic energy production to offset supply shocks. Its energy system has already been strained by the sharp reduction in Russian gas flows following the Russia–Ukraine War. Now, policymakers are confronting another potential surge in energy costs, with analysts warning that European inflation could climb above 3% in the coming months. Meanwhile, Iran has openly stated its goal of pushing oil prices toward $200 per barrel, leaving European economic planners with few credible short-term countermeasures.
The situation looks very different for the United States. As the world’s largest oil producer, higher crude prices translate into stronger revenues for domestic energy companies. While rising oil prices complicate the Federal Reserve’s path toward monetary easing, they do not represent the kind of systemic import shock faced by Europe. In addition, the global oil trade is largely settled in U.S. dollars, meaning elevated energy prices tend to reinforce structural demand for the currency. The same oil shock that weighs on the euro therefore provides underlying support for the dollar. This imbalance lies at the heart of the current bearish outlook for EUR/USD and is unlikely to shift unless geopolitical tensions ease or Europe secures alternative energy supplies at scale—neither of which appears imminent.
Recent inflation data has done little to alter this outlook. February headline Consumer Price Index (CPI) rose 0.3% month-over-month and 2.4% year-over-year, while core CPI increased 0.2% on the month and 2.5% annually. The readings were not alarming, but they also failed to give markets a clear signal that the Federal Reserve is ready to pivot toward easier policy.
The 2.5% core inflation rate, although near recent lows, remains above the Fed’s 2.0% target. More importantly, the forward-looking risks are intensifying. With crude oil trading near $97 per barrel and the conflict involving Iran showing little sign of resolution, higher energy costs are likely to filter through to consumer prices over the next two to three CPI releases, reinforcing concerns that inflation pressures could reaccelerate.
The market’s expectations have shifted dramatically. Earlier in 2026, investors widely anticipated multiple Federal Reserve rate cuts during the first half of the year. That outlook has since been completely overturned. Futures markets now price in only a single 25-basis-point cut in September, meaning the first potential easing step would arrive nine months into the year—far later and far smaller than previously expected.
This sharp repricing has provided strong support for the U.S. dollar. Elevated yields on U.S. Treasury securities relative to their European counterparts have widened the interest-rate differential that typically drives capital flows. As returns on dollar-denominated assets increase compared with euro assets, funds tend to move from EUR into USD holdings. When that spread widens, EUR/USD usually declines—and it has been expanding steadily since January.
The U.S. Dollar Index (DXY) is currently trading near 99.39, just below a key resistance level around 99.68, after touching a 15-week high of 99.70 earlier in the week. The index has now posted three consecutive sessions of gains, supported by rising oil prices and renewed safe-haven demand for the dollar.
Technically, the outlook for the dollar remains constructive. DXY is trading comfortably above both its 50-day and 200-day exponential moving averages, a configuration that typically signals underlying strength. Momentum indicators are also supportive: the Relative Strength Index (RSI) is climbing toward the 60–65 range, suggesting there is still room for further upside before conditions become overbought.
From a technical perspective, the 0.236 Fibonacci retracement near 99.18 is acting as immediate support. Below that, the channel midpoint and the 0.382 Fibonacci level around 98.87 represent a deeper support zone. A confirmed break above 99.68 would likely open the door to a move toward 100.00 and potentially 100.32.
If such a rally unfolds, it would likely intensify pressure on EUR/USD. Historically, each incremental advance in the dollar index toward the 100 level tends to translate into further compression in the euro pair, potentially pushing it toward 1.1450 and even 1.1391.
In the near term, only two developments appear capable of interrupting the dollar’s upward momentum: a shift toward a more dovish tone from the Federal Reserve during its March 18 policy communication, or a sudden de-escalation in Middle East tensions that triggers a sharp decline in crude oil prices. Until one of those catalysts emerges, the macro and technical backdrop continues to favor dollar strength.
EUR/USD broke below its 200-day Simple Moving Average (SMA) at 1.1672 on March 3, marking a key structural shift in the pair’s trend. Before that breakdown, the 200-day average had acted as a heavily contested level between buyers and sellers. Once the pair decisively moved below it, the level flipped into resistance—a classic technical reversal. Since then, every attempt to reclaim the 1.1672 area has failed. The pair’s earlier peak at 1.2082 on January 27 was followed by a steady decline that has carried EUR/USD down to its current levels.
The 100-day SMA, located near 1.1696, is now flattening, a development that often precedes a bearish crossover with the 200-day average. Meanwhile, on shorter time frames, the 50-day EMA has already crossed below the 200-day EMA on the 2-hour chart, forming a Death Cross—a signal that reinforces the prevailing bearish bias among short-term traders. Price action remains below the 50-day EMA, which is now functioning as dynamic resistance during intraday rebounds.
Momentum indicators also lean bearish. The 14-day Relative Strength Index (RSI) has fallen toward 33, approaching but not yet reaching the oversold threshold near 30. This suggests the pair still has room to move lower before a technical rebound becomes more likely.
The Moving Average Convergence Divergence (MACD) indicator remains below both its signal line and the zero level, confirming ongoing downward momentum. Although the histogram bars have begun to contract slightly—hinting at a potential slowdown in momentum—the broader directional bias remains negative.
Finally, the Average Directional Index (ADX) sits near 29, indicating that the current downtrend is strengthening rather than fading. Since ADX measures the strength of a trend rather than its direction, this reading suggests that bearish momentum in EUR/USD is continuing to build.
The 1.1500 level has become the immediate battleground for EUR/USD. This area aligns with Monday’s intraday low and represents one of the strongest psychological support levels on the chart. During Monday’s session, the pair briefly dipped to 1.1507 before staging a modest rebound. However, that bounce quickly faded and now appears to have been little more than a temporary dead-cat bounce, leaving the pair once again approaching the 1.1500 threshold, this time from a technically weaker position.
A decisive daily close below 1.1500—not merely an intraday dip—would significantly shift the technical outlook. The next clear support lies at the November 5, 2025 low of 1.1468, followed closely by 1.1450. If selling momentum continues through those levels, attention would likely turn to the August 1, 2025 low at 1.1391, which becomes the next major downside target. From current levels, that would represent roughly a 155-pip decline, adding to a move that has already erased more than 500 pips since the January peak.
On the upside, 1.1600 serves as the first hurdle bulls must reclaim before any meaningful recovery attempt can develop. Even then, the pair would still need to challenge the 200-day Simple Moving Average near 1.1672. Beyond that, 1.1700 stands as the critical structural level: a daily close above it would effectively undermine the current bearish framework and potentially open the door toward the 1.1800–1.1825 resistance zone.
However, achieving such a recovery would likely require a significant shift in the macro backdrop—something that currently appears absent. In the meantime, the broader Fibonacci retracement band between 1.1644 and 1.1714 continues to act as a strong ceiling for any rallies, making upward progress difficult while leaving the downside path comparatively clearer.
GBP/USD trading near 1.3378 and extending losses for a third straight session is not simply a U.K.-specific issue. Instead, it reinforces the idea that the dollar strength pushing EUR/USD lower reflects a broader, systemic move rather than a euro-only story. Sterling was rejected from the 1.3480–1.3500 resistance zone and has since reversed sharply, with price now sitting below both the 200-day EMA and the 50-day EMA, which have shifted from support to overhead resistance.
Technically, the pair did form a modest higher low near 1.3280, but momentum indicators are weakening. The Relative Strength Index (RSI) is rolling over around the mid-50 region, a pattern that often signals fading bullish momentum and can precede another leg lower. If GBP/USD breaks decisively below 1.3300, the next downside targets appear near 1.3215 and then 1.3150.
For sterling to stage a more meaningful recovery, bulls would first need to reclaim 1.3480 and break above the descending trendline that has capped price action since late January. That trendline has remained intact since it formed, reinforcing the broader bearish structure. Until it is convincingly broken, rallies are likely to face selling pressure, while dips continue to look for the next support level below.
The parallel weakness in GBP/USD alongside EUR/USD suggests that the current market dynamic is not limited to euro fundamentals. Instead, it reflects a broader U.S. dollar appreciation cycle, driven by rising energy prices, inflation concerns, and the repricing of expectations around Federal Reserve policy. Those forces are exerting pressure across major currency pairs simultaneously.
Analysts at Deutsche Bank have noted that the European Central Bank is likely to maintain a cautious policy stance while inflation risks remain unresolved. Although this approach resembles the position of the Federal Reserve, the euro area faces a more fragile economic backdrop. Europe is more directly exposed to energy price shocks than the United States, relies more heavily on export demand that is weakening amid global trade uncertainty, and has less flexibility to sustain high interest rates given the debt burdens of several peripheral Eurozone sovereign economies.
The Federal Reserve, with policy rates in the 3.50%–3.75% range, is operating from a position that remains relatively strong despite restrictive conditions. U.S. economic fundamentals continue to show resilience: GDP growth has remained positive, the labor market has held firm, and the domestic energy sector actually benefits from elevated oil prices.
The situation is very different for the European Central Bank. The ECB must manage monetary policy for a 20-nation bloc, where consensus decision-making can slow policy responses. At the same time, Germany—the largest economy in the euro area—is dealing with an ongoing industrial slowdown. This leaves the ECB with less room to project a convincingly hawkish stance. As the yield spread between U.S. and European government bonds widens, capital continues to flow toward dollar-denominated assets. For EUR/USD to stage a meaningful recovery, either the ECB would need to raise rates or the Fed would need to cut—scenarios that appear unlikely over the next couple of months.
The geopolitical backdrop has further complicated matters. When Iraq announced the closure of its oil export ports after tanker attacks in the Persian Gulf, it removed an important marginal supply source from an already tight energy market. In response, the International Energy Agency authorized the release of 400 million barrels from strategic reserves, including 172 million barrels from the United States. Yet oil prices continued climbing, signaling that traders believe the supply disruption linked to the Strait of Hormuz is more significant than emergency reserves can offset in the near term.
Iran has openly discussed pushing crude prices toward $200 per barrel, a target that highlights the asymmetric risk facing global markets. Even if prices fall short of that level, the implications remain serious. At around $120 oil, European inflation could move above 3%, forcing the ECB to confront stagflation risks that would limit its ability to ease policy. If crude were to approach $150, energy-intensive industries in Europe could face severe demand destruction, threatening eurozone growth. In a scenario where oil reached $200, the strain on the European economy could be profound, potentially pushing EUR/USD toward levels not seen since the early 2000s. Importantly, the bearish outlook for the euro does not require such extreme outcomes—simply keeping oil above $90, which is already the case, maintains pressure on the currency.
From a trading perspective, EUR/USD near 1.1546 remains vulnerable within a well-defined descending channel that began after the January 27 peak at 1.2082. The technical structure is reinforced by a sequence of lower highs and lower lows. Several key indicators now act as resistance: the 200-day SMA around 1.1672, the 50-day EMA, and the 100-day SMA near 1.1696. Meanwhile, the Average Directional Index (ADX) near 29 suggests the downtrend is strengthening rather than fading, while the RSI near 33 indicates there is still room for further downside before oversold conditions prompt a technical rebound.
In this context, rallies toward the 1.1600–1.1640 resistance zone are likely to face selling pressure. The immediate technical pivot remains 1.1500. A decisive daily close below that level would expose further downside targets around 1.1446, followed by the November 2025 low near 1.1391.
A bullish scenario would likely require a strong rejection from below 1.1500, ideally accompanied by a sharp reversal candle and increased trading volume, which could support a short-term rebound toward 1.1600. Outside of that narrow tactical setup, however, the broader picture remains bearish. With crude oil trading near $97, the U.S. Dollar Index hovering around 99.39, the Fed maintaining a steady policy stance, and the ECB constrained by weaker regional fundamentals, the macro environment currently offers little reason to expect a sustained EUR/USD recovery.
The US Dollar Index (DXY) eased to around 99.70 during Friday’s Asian session. Rising geopolitical tensions in the Middle East may increase demand for safe-haven assets, which could lend support to the dollar. Meanwhile, the US Personal Consumption Expenditures (PCE) inflation report for January will be the key focus later on Friday.
The US Dollar Index (DXY), which measures the US Dollar (USD) against a basket of six major currencies, is trading near 99.70 during Friday’s Asian session. Although the index is slightly lower on the day, it remains on track for a second straight weekly gain and is hovering around its highest level since November 2025, supported by rising geopolitical tensions in the Middle East.
Officials from the Pentagon and the National Security Council (NSC) acknowledged that they had underestimated Iran’s willingness to shut the Strait of Hormuz following recent US military strikes while planning the current operation. Meanwhile, Iran’s new supreme leader, Mojtaba Khamenei, stated that the strategic waterway should remain closed and warned that Tehran would continue attacks on its Persian Gulf neighbors. The ongoing conflict involving the US, Israel, and Iran could continue to support the US Dollar as investors seek safe-haven assets.
At the same time, expectations for interest rate cuts by the Federal Reserve have eased, as surging oil prices raise concerns that inflation could remain elevated and complicate the central bank’s policy outlook.
Market participants will look to the January US Personal Consumption Expenditures (PCE) Price Index, due later on Friday, for further direction. The headline PCE is expected to rise 2.9% year-on-year, while core PCE—the Fed’s preferred inflation gauge—is forecast to increase 3.1% over the same period. A softer-than-expected inflation reading could put downward pressure on the US Dollar in the near term.
The U.S. dollar maintained its strength on Friday and is on course for a second consecutive weekly gain since the outbreak of the conflict involving Iran, as global market volatility has reinforced its role as the primary safe-haven asset.
The euro hovered close to its lowest level since November, while the Japanese yen remained weak enough to raise concerns among traders about possible intervention by Japanese authorities.
As oil prices surged, the United States allowed limited sales of certain Russian petroleum products that had previously been sanctioned due to Russia’s war in Ukraine. Meanwhile, Iran intensified strikes on oil and transportation infrastructure across the Middle East. The country’s new Supreme Leader, Mojtaba Khamenei, also pledged to keep the vital Strait of Hormuz shipping route closed.
“For now, markets are focused less on diversification and more on inflation and slowing growth,” said Gavin Friend, senior markets strategist at National Australia Bank in London, during a podcast. “The longer this crisis continues, the more we face a dangerous combination of rising inflation and weaker economic growth.”
The dollar index, which tracks the U.S. currency against a basket of major currencies, climbed to its highest level since November. The rise reflects both its safe-haven demand and the fact that the United States is a net exporter of energy.
In early Asian trading, the index slipped slightly by 0.04% to 99.63, though it remained on track for a weekly gain of about 0.8%. The euro edged up 0.13% to $1.1525.
The yen strengthened by 0.17% to 159.08 per dollar after hitting 159.43 on Thursday—its weakest level since January 14. The British pound also rose 0.11% to $1.3356.
On Thursday, the U.S. Treasury issued a new Russia-related general license allowing the sale of Russian crude oil and petroleum products that were loaded onto ships through April 11.
According to a report by the Financial Times, the Trump administration has used up “years” worth of key munitions since the conflict began. Meanwhile, U.S. forces are conducting rescue operations in western Iraq after a military refueling aircraft crashed—an incident that U.S. Central Command said was not caused by hostile or friendly fire.
Earlier this week, the International Energy Agency agreed to release a record 400 million barrels of oil from strategic reserves. However, this would cover only around 20 days of supply lost from disruptions around the Strait of Hormuz and could take weeks or months to reach the market.
Investors are also turning their attention to next week’s policy meetings at the Federal Reserve and the European Central Bank to assess how central bankers might respond to a potential shock in energy prices.
Data from LSEG showed that the swaps market now expects the European Central Bank to potentially begin raising interest rates as early as June. In contrast, the U.S. Federal Reserve is expected to delay any rate cuts until September, later than earlier expectations of July.
The Australian dollar gained 0.14% against the U.S. dollar to reach $0.7084, while New Zealand’s kiwi rose slightly by 0.05% to $0.5858.
In the cryptocurrency market, bitcoin climbed 1.81% to $71,464.23, and ether increased 2.48% to $2,114.22.
The U.S. dollar strengthened on Wednesday as rising oil prices reignited inflation concerns, while an in-line and backward-looking U.S. consumer inflation reading did little to reinforce expectations for Federal Reserve rate cuts.
By 16:03 ET (20:03 GMT), the U.S. Dollar Index—tracking the greenback against a basket of six major currencies—had climbed 0.4% to 99.22. The euro slipped 0.3% to 1.1570, while the British pound was largely unchanged at 1.3416.
Oil prices climb despite record release from strategic reserves
Oil prices rose on Wednesday as the conflict with Iran showed little sign of easing, with a record release of 400 million barrels from emergency reserves by the International Energy Agency (IEA) doing little to calm concerns about rising inflation.
In a note, analysts at ING said the foreign-exchange market remains “strongly driven” by the recent sharp swings in oil prices.
Market attention remains focused on the Strait of Hormuz, the narrow passage south of Iran through which roughly one-fifth of the world’s oil supply passes, much of it headed to Asia. Concerns over potential Iranian attacks have caused a buildup of vessels on both sides of the strait, as shipping companies seek to ensure crew safety and face difficulties securing insurance for voyages.
Brent crude, the global benchmark, is now trading near $90 per barrel after surging to $120 earlier in the week. U.S. gasoline prices have also climbed, raising the risk of renewed inflationary pressure that could prompt the Federal Reserve to adopt a more hawkish monetary policy stance. Higher interest rates may in turn attract foreign capital, providing additional support for the U.S. dollar.
Oil prices have remained highly sensitive to developments in the Middle East. Comments from the U.S. Energy Secretary that the military had escorted a tanker through the Strait of Hormuz sent Brent prices swinging between $81 and $92 per barrel.
President Donald Trump has also threatened to intensify U.S. attacks on Iran following reports that Tehran had deployed naval mines in the Strait of Hormuz. After a CNN report suggested that mines had been placed in the bottleneck—though not yet extensively—Trump warned on Tuesday that Iran would face retaliation “at a level never seen before” if the mines were not removed.
The IEA’s coordinated release announced on Wednesday far exceeds the 182 million barrels made available by member countries after Russia’s invasion of Ukraine in 2022.
ING analysts described the move as a “temporary measure,” arguing that only military de-escalation would be capable of pushing crude prices sustainably lower. They added that the large reserve release could also signal that markets should not expect an immediate ceasefire.
“In our view, these mixed signals could prevent the dollar from falling much further today unless there are encouraging headlines on de-escalation,” the ING analysts said.
U.S. consumer inflation comes in line with forecasts
The February Consumer Price Index (CPI) report drew attention on Wednesday, although the data does not reflect the impact of the Iran conflict or the resulting surge in oil prices, making it more backward-looking than usual.
According to the U.S. Bureau of Labor Statistics, headline CPI rose 0.3% month-on-month and 2.4% year-on-year in February, both in line with market expectations. Core CPI increased 0.2% from the previous month and 2.5% from a year earlier, also matching forecasts.
Despite meeting estimates, the report is likely to receive limited attention as markets focus on developments in the Middle East. Concerns that higher oil prices could trigger renewed inflationary pressure may prompt the Federal Reserve to keep interest rates on hold.
“The good news is that inflation didn’t come in higher than expected in this morning’s CPI report, but the data is backward-looking and reflects a period before the war in Iran began,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
“It is widely assumed — and we agree — that the Fed will remain on hold for longer as policymakers wait to see whether inflation expectations begin to rise and become entrenched, or if conditions return to where they were before the military operations in the Middle East,” Zaccarelli added.
The U.S. dollar rally paused on Tuesday as investors evaluated signs that the joint U.S.–Israeli military campaign against Iran could be nearing its end.
The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.3% to 98.91 at 15:47 ET (19:47 GMT).
U.S. President Donald Trump suggested that the conflict in Iran—now ongoing for more than a week—could conclude “very soon.” However, he warned that further fighting could occur if Iran attempts to block shipments through the Strait of Hormuz, a crucial passage south of Iran that carries about one-fifth of global oil flows.
Despite these comments, the conflict has shown little sign of easing, with the United States launching its most intense airstrikes on Iran so far on Tuesday.
Concerns that prolonged disruptions in the Strait of Hormuz could drive global inflation higher had supported the dollar in recent days. Iran’s leadership reportedly warned it would not allow “one liter of oil” to pass through the chokepoint if U.S. and Israeli strikes continued. Still, Trump’s remarks appeared to boost market sentiment.
Analysts at ING, including Chris Turner and Francesco Pesole, said in a note that markets reversed course after an initially shaky start to the week.
“After a very shaky start, Monday proved to be a day of reversal for risk assets as President Trump hinted that military operations could end soon,” they wrote. “No one knows whether that will be the case, but Monday’s events show that the U.S. administration is more sensitive to energy than it seemed.”
However, the analysts added that oil supplies—currently stranded near the Strait of Hormuz or rerouted away from the region—would need to begin flowing normally again for the dollar’s pullback to continue.
Elsewhere in currency markets, EUR/USD slipped 0.2% to 1.1609, while GBP/USD declined 0.1% to 1.3414.
Yen remains stable in Asian trading
The Japanese yen remained relatively steady in Asian trading, with the USD/JPY pair edging up 0.2% to 158.07. The currency continued to face pressure from a stronger U.S. dollar and concerns that disruptions to energy supplies could weigh on Japan’s economy. Japan relies heavily on oil imports that pass through the Strait of Hormuz.
Revised gross domestic product data for the fourth quarter showed that Japan’s economy expanded more than previously estimated, supported by robust capital investment and stable consumer spending.
The figures indicated a degree of resilience in the Japanese economy, although exports remained under strain. Private consumption growth was also revised higher but stayed close to its long-term average of roughly 0.3% quarter-on-quarter.
This economic resilience may provide the Bank of Japan with more room to raise interest rates. However, the central bank is unlikely to tighten policy in the near term given heightened uncertainty in global markets.
The U.S. dollar pulled back on Monday after reaching a three-month high, following remarks from Donald Trump suggesting that the conflict with Iran could soon come to an end.
The greenback had earlier strengthened on safe-haven demand as tensions escalated in the U.S.–Israel conflict with Iran, which also drove a surge in oil prices. However, the currency reversed direction and moved sharply lower after Trump’s comments raised hopes of de-escalation.
As of 17:24 ET (21:24 GMT), the U.S. Dollar Index—which measures the dollar against a basket of six major currencies—was down 0.1% at 99.557. Earlier in the session, the index had risen as much as 0.6%, briefly reaching its highest level since late November 2025 before surrendering those gains.
Dollar extends sharp gains in powerful run.
The U.S. dollar has surged in recent sessions, supported by safe-haven demand as a sharp rise in oil prices raised concerns about the outlook for global economic growth. The U.S. Dollar Index recorded its strongest weekly performance since early August 2025 on Friday.
“The Dollar Index has rallied significantly in a short period, so it may need to consolidate before attempting another move higher,” said David Morrison, senior market analyst at Trade Nation. “It tested the 100.00 level several times last year, particularly during November, but failed to break above it on each occasion.”
He added that the index would need to build substantial upward momentum to overcome that resistance. “While the U.S. dollar may have finally found a bottom, if the Dollar Index fails to break above 100.00, a retest of the January lows near 95.25 cannot be ruled out,” Morrison said.
Earlier in the day, crude prices surged to nearly $120 a barrel, approaching levels seen at the start of the Russian invasion of Ukraine. However, prices later trimmed gains and then fell sharply after Donald Trump told CBS that the war was “very complete, pretty much,” and that developments were progressing “very far” ahead of his administration’s initial four-to-five-week timeline.
Over the weekend, Israeli and U.S. airstrikes targeted Iranian oil facilities, while Tehran responded with missile strikes against several oil installations across the Middle East.
Iran also effectively shut down the Strait of Hormuz by attacking vessels passing through the shipping lane, a crucial route for oil supplies to much of Asia.
Even so, oil prices pared earlier gains on Monday after reports that the Group of Seven (G7) would discuss a potential coordinated release of emergency reserves to counter supply disruptions caused by the conflict.
Brent crude oil futures for May delivery initially surged more than 30% to a peak of $119.50 a barrel, while West Texas Intermediate crude futures jumped about 30% to an intraday high of $119.43. Both benchmarks later turned sharply lower following Trump’s comments to CBS.
Euro pressured by worries over economic growth.
In Europe, EUR/USD trimmed earlier losses to trade little changed at 1.1634. The single currency has come under pressure as rising oil prices highlight the eurozone’s reliance on imported energy, dampening expectations for economic growth in the region.
Analysts at ING Group noted that prolonged high energy prices could undermine the narrative of synchronized global growth in 2026 and weaken Europe’s efforts to catch up with the strong economic performance of the United States.
Economic data released earlier on Monday also pointed to weakness. Germany’s factory orders plunged 11.1% in January, far worse than the expected 4.2% decline and a sharp reversal from the 6.4% increase recorded in the previous month.
Meanwhile, German industrial production fell 0.5% in January after dropping 1.0% in the prior month, adding to concerns about the strength of the region’s largest economy.
Elsewhere, GBP/USD recovered slightly, edging up 0.1% to 1.3432. The British pound sterling had also been pressured earlier as surging energy costs prompted traders to shift toward the stronger U.S. dollar.
Yen stabilizes after recent volatility.
In Asia, USD/JPY fell 0.1% to 157.66, although the Japanese yen remained under pressure after heavy losses in the Nikkei 225 as surging oil prices weighed on investor sentiment.
The yen drew limited support from stronger-than-expected wage income data for January, which showed a notable increase in pay levels—a trend that could reinforce medium-term inflation expectations in Japan.
Meanwhile, USD/CNY rose 0.2% to 6.9066, moving above the 6.9 yuan level after a weaker daily midpoint fixing from the People’s Bank of China.
Government data also showed that China’s consumer price index increased 1.3% year-on-year in February, exceeding expectations of 0.9% and marking the fastest pace of inflation in three years.
The stronger reading was largely driven by higher spending during the extended Lunar New Year holiday period, when demand for travel, services, and discretionary goods rose sharply.
However, producer price index inflation remained in contraction, leaving markets looking for further evidence on whether China’s inflation trend can continue beyond the holiday-driven boost. Elsewhere, AUD/USD edged up slightly to 0.7071, while NZD/USD gained 0.6% to 0.5932.
Silver faced a difficult week as the U.S. dollar strengthened for much of the period, though it’s important to remember that its recent collapse wiped out many retail trading accounts.
That said, this is a market worth monitoring closely because the $80 level represents an important support area and sits near the center of the broader consolidation range.
If the price breaks below this week’s candlestick, it could open the door for silver to decline toward the $70 level, where I also expect support to emerge.
Overall, the market has been quite volatile and choppy, and that pattern is likely to persist. Because of this, careful position sizing will be essential.
S&P 500
The S&P market declined quite sharply over the week, testing the 5,000 level. This level is a major round number with strong psychological importance, so it’s an area many investors are watching closely.
If the market breaks below 5,000, it could pave the way for a drop toward 4,800, with the possibility of quickly moving further down to around 4,600.
From a longer-term perspective, the 5,000 level may continue to act as a price magnet for the market.
If that remains the case, we could see extended sideways movement around this zone, although my broader outlook still leans bullish over the long run.
USD/CAD
The US dollar first strengthened against the Canadian dollar, rising to test the 1.3750 level, but then reversed and began showing signs of weakness. Meanwhile, the 1.35 level below stands as an important support area that many market participants are closely monitoring.
It is also worth noting that the Canadian dollar has been gaining some strength on the back of rising oil prices. Whether that trend will continue is uncertain, but if oil fails to maintain its momentum, a reversal could follow.
For now, the market remains within the same consolidation range that it has revisited repeatedly.
USD/MXN
The US dollar surged sharply against the Mexican peso during the week, but in reality a pullback had been due. The key question now is whether the 18-peso level will act as strong enough resistance to reverse the move.
If it does, it could present a solid opportunity to take short positions. However, if the market manages a daily close above the 18-peso level, it may signal that the recent trend is coming to an end.
All things considered, this is a market where traders may look for signs of exhaustion to sell into, as the interest rate differential still generally favors Mexico.
Bitcoin
The Bitcoin market has been quite volatile during the week, but it did manage to break above the $72,000 level. This is notable given the overwhelmingly negative headlines around the world at the moment, and it’s a market I’ll be monitoring very closely.
If the market can close above the weekly high and continue moving higher, Bitcoin could begin to rally strongly. There may still be debate about what Bitcoin truly represents, but one thing seems clear—it appears to be heavily oversold.
The key question now is whether buyers will step back in. On the other hand, if the price drops below the $60,000 level, it could trigger a sharp and widespread sell-off.
Nasdaq 100
The Nasdaq 100 has been volatile but has continued to show resilience. This is a pattern that appears repeatedly in the US stock market, even when there have been plenty of reasons for it to break down. In itself, that persistence likely says a lot about the underlying strength of the market.
What I think it tells you is that given enough time, the US stock market, and in this case the Nasdaq 100, will find buyers on any pullback and selling just does not seem to be working out.
EUR/USD
The euro weakened significantly during the week. Much of this appears to be driven by expectations that energy costs in the European Union will rise sharply, which could heavily influence the options available to the European Central Bank.
Keep a close eye on the 1.15 level. If the market breaks below that point, the euro could decline sharply.
For now, the market remains within the same consolidation range it has been trading in for some time. I do not expect significant movement at the moment, but the 1.15 level will be important to watch.
USD/JPY
The US dollar continues to signal the possibility of a major breakout against the Japanese yen, although it has not achieved it yet. The ¥158 level marks the start of a strong resistance zone that extends up to the ¥160 level.
If the market manages to break above that area, it is likely to move significantly higher. In the short term, pullbacks could present buying opportunities as traders look to pick up the dollar at lower prices.
Over the longer term, I expect an eventual breakout to the upside. However, the current situation makes it challenging to short the market, while buying directly at this resistance zone is also difficult. It may be best to wait for better value and take advantage of opportunities when they appear.
The U.S. dollar weakened on Friday after a disappointing jobs report increased expectations that the Federal Reserve could cut interest rates. Nevertheless, the currency was still on track for a strong weekly gain, supported by rising demand for safe-haven assets amid escalating tensions in the Middle East.
By 16:30 ET (21:30 GMT), the Dollar Index — which measures the dollar against six major currencies — had fallen 0.4% to 98.89. Despite the decline, it remained poised for a weekly rise of about 1.3%, its strongest performance since August 2025.
Dollar pressured by weak payroll data
Markets focused on the February nonfarm payrolls report released Friday. The data showed the U.S. economy lost 92,000 jobs last month, far below economists’ expectations for a gain of 58,000. At the same time, the unemployment rate increased slightly to 4.4%.
The weak February figure followed a stronger January reading of 126,000 jobs, revised down from 130,000. December’s employment data was also revised lower, shifting from a gain of 48,000 to a loss of 17,000 jobs.
Following the report, traders increased their expectations that the Federal Reserve may cut interest rates. Since higher rates typically support the dollar while lower rates weaken it, the data weighed on the currency.
However, despite Friday’s pullback, the dollar benefited throughout the week from its safe-haven status as geopolitical tensions intensified in the Middle East.
U.S. Defense Secretary Pete Hegseth said Thursday that U.S. firepower directed toward Iran could increase significantly. Meanwhile, Israel announced earlier Friday that it had begun a large-scale wave of strikes targeting infrastructure in Tehran.
Iran retaliated by launching attacks against Israel and several regional countries including Gulf states, Cyprus, Turkey, and Azerbaijan, expanding the scope of the conflict.
Analysts at ING said the dollar is unlikely to resume a sustained decline unless a meaningful political breakthrough leads to a ceasefire. Until then, governments will likely continue grappling with the economic consequences of elevated energy prices. The Dollar Index is now approaching the key psychological level of 100.
According to Trade Nation senior market analyst David Morrison, the 100 level represents an important technical resistance point. The index repeatedly tested this level in November but failed to break through before eventually falling to a four-year low at the end of January.
At that time, some traders speculated the dollar’s decline could continue amid concerns it might eventually lose its role as the world’s primary reserve currency. Morrison said those predictions now appear premature, although the Dollar Index still faces several significant resistance levels.
Euro heads for weekly decline
In Europe, EUR/USD was mostly unchanged at 1.1611, though the euro was on track to lose about 1.7% for the week as higher energy costs weighed on economic growth prospects in the region.
Eurozone GDP data due later in the session is expected to confirm growth of 0.3% in the final quarter of last year and annual expansion of 1.3%.
Earlier data also showed eurozone inflation in February came in higher than expected, even before the outbreak of the Iran conflict.
Despite the geopolitical developments, European Central Bank policymaker and Dutch central bank chief Olaf Sleijpen said the eurozone’s monetary policy environment remains relatively stable.
Speaking in an interview Friday, he noted that while the situation is no longer ideal, he has not significantly changed his overall assessment of the region’s economic position.
Meanwhile, GBP/USD rose 0.3% to 1.3393, although sterling was still on track for a weekly decline of around 0.8% as rising energy prices add further pressure on the U.K. economy and government.
Yen weakens amid rising oil prices
In Asia, USD/JPY increased 0.2% to 157.83 and was on track for a weekly gain of 1.1%. The Japanese yen remained under pressure as higher oil prices raise inflation risks for energy-importing economies such as Japan.
Bank of Japan Deputy Governor Ryozo Himino told parliament that the weaker yen is pushing up import costs and could influence underlying inflation.
USD/CNY rose 0.1% to 6.8965 and was also heading for weekly gains, following a week in which Chinese authorities announced their lowest economic growth target since 1991.
Meanwhile, AUD/USD climbed 0.3% to 0.7026, though the Australian dollar was still set for a weekly loss of about 1.3%, as risk-sensitive currencies remained under pressure.
USD/CAD remains rangebound with a slight bearish tilt
Momentum indicators continue to signal consolidation
USD/CAD is still under pressure, trading within the range that has persisted since mid-February. The pair is confined between the 20-day and 50-day simple moving averages (SMAs), fluctuating within the narrow 1.3645–1.3700 zone. While the Canadian dollar faces pressure from a stronger US dollar, it is finding some support as rising oil prices—driven by the ongoing Middle East tensions—provide underlying demand.
Technical indicators highlight the subdued market conditions seen in recent weeks. The RSI is hovering around the neutral 50 level, reflecting a lack of strong momentum, while the MACD is clustering near its zero line and signal line, suggesting limited potential for a near-term upward move.
Recently, the pair has been drifting toward the lower end of the range after multiple rejections at the short-term descending trendline. Immediate support lies at the 20-day SMA around 1.3645, just above the 23.6% Fibonacci retracement of the November–January decline at 1.3635. A drop below these levels could open the door to further support at 1.3575, followed by the four-month low near 1.3471, last recorded in late January.
On the upside, a clear break above the 50-day SMA and the 38.2% Fibonacci retracement around 1.3730—where the short-term descending trendline converges—could shift the outlook to a more bullish tone. Such a breakout would pave the way for a move toward the 200-day SMA near 1.3809, which aligns with the 50% Fibonacci retracement level. Notably, the 200-day SMA recently formed a death cross with the 50-day SMA, reinforcing the technical resistance against a sustained upward move.
Overall, USD/CAD is showing fading momentum as it drifts closer to the lower boundary of its multi-week consolidation range, with the earlier rebound from the four-month low beginning to lose steam. Although the broader downward trend is still in place, downside pressure may remain contained as long as the pair stays above the 20-day SMA.
The U.S. dollar resumed its upward movement on Thursday after briefly pulling back from a three-month high, as ongoing tensions in the Middle East unsettled investors and increased demand for the safe-haven currency.
Initial optimism about a possible easing of the conflict quickly faded, replaced by renewed uncertainty after Iran warned that Washington would “bitterly regret” the sinking of an Iranian warship near Sri Lanka.
As a result, the dollar remained strong, with the euro slipping 0.18% to $1.1610 and the British pound falling 0.1% to $1.3358. The dollar index, which tracks the greenback against six major currencies, rose 0.18% to 98.99.
Nick Rees, head of macro research at Monex, said investors are struggling with limited clarity about the geopolitical outlook. He noted that markets currently react strongly even to minor headlines because confidence about future developments is low.
While geopolitical turmoil usually pushes investors toward safe assets, concerns about rising inflation have complicated the picture. Some traditional safe havens have behaved unpredictably, forcing investors to reconsider which assets truly provide protection.
Germany’s 10-year Bund yield, the eurozone benchmark, climbed 6.1 basis points to 2.807% on Thursday as bond prices declined.
Limited safe havens
Bas van Geffen, senior macro strategist at Rabobank, said investors appear to have few clear safe options. Even assets like gold are not responding in their usual way. Instead, the sharp rise in the dollar index suggests that dollar liquidity is currently the dominant refuge.
So far this week, the dollar has gained nearly 1.37%, standing out as one of the few assets to benefit during several volatile trading sessions that have pressured stocks, bonds, and occasionally even precious metals.
The surge in energy prices triggered by the Middle East conflict has also revived concerns that inflation could return, potentially disrupting expectations for interest rate cuts from major central banks.
Traders now see only a 31.5% probability that the Federal Reserve will cut interest rates in June, down from roughly 46% a week earlier, according to the CME FedWatch tool. Part of this shift reflects stronger-than-expected U.S. economic data released on Wednesday.
Expectations for rate cuts from the Bank of England have also been reduced, while markets are increasingly betting that the European Central Bank could raise interest rates as early as this year.
Thierry Wizman, global FX and rates strategist at Macquarie Group, said central bankers are increasingly worried about the return of inflation. He added that U.S. rate expectations could change significantly in 2026 if global inflation accelerates again due to energy supply constraints.
The Japanese yen also gave up earlier gains and was last trading 0.2% weaker at 157.35 per dollar.
Meanwhile, China set its 2026 economic growth target between 4.5% and 5%, slightly lower than last year’s 5% growth. The target leaves room for more efforts to reduce industrial overcapacity and rebalance the economy, though not aggressively.
The Chinese yuan recovered from a one-month low to trade roughly unchanged at 6.8951 per dollar after the People’s Bank of China set its daily reference rate at the strongest level in nearly three years.
In the cryptocurrency market, both bitcoin and ether declined by less than 1% following strong gains in the previous trading session.
The dollar hovered near a three-month peak in Asian trading on Wednesday, as traders pulled back from the euro amid escalating Middle East tensions that fueled concerns over persistently higher energy costs and battered global equities.
The euro edged down 0.2% to $1.1590, marking a third straight day of losses after earlier sliding to its weakest level since late November. The decline followed Tuesday’s data showing euro zone inflation rose more than anticipated in February, even before the outbreak of the Iran conflict.
According to George Saravelos, global head of FX research at Deutsche Bank, the Iran war’s effect on EUR/USD ultimately centers on energy. He noted that Europe is facing a negative supply shock that effectively acts as a tax, transferring income to overseas energy producers and increasing demand for dollars.
Markets extended their downturn on Wednesday as mounting inflation fears spread across stocks and bonds. Intensified strikes by Israeli and U.S. forces on Iranian targets triggered a flight to cash, further weighing on risk assets.
Oil and gas prices have surged as attacks on Iran disrupt Middle Eastern energy exports. Tehran’s countermeasures targeting shipping lanes and energy infrastructure have halted navigation in the Gulf and led to production suspensions from Qatar to Iraq.
Benchmark Brent crude climbed 1.9% to $82.94 a barrel—its highest level since July 2024—bringing total gains since Friday to 14%. Meanwhile, European gas prices have soared 70% since the end of last week.
ING analysts noted in a research report that the ECB’s previously comfortable position is now under pressure, adding that a quick resolution appears unlikely. They warned that the prospect of rate hikes from the European Central Bank could threaten carry trades and lead to a sharp widening in eurozone government bond spreads. Sterling weakened 0.3% to $1.3323.
The U.S. dollar index, which tracks the greenback against six major peers, rose 0.1% to 99.208 after earlier touching its highest level since November 28. The dollar slipped 0.2% against the yen to 157.52.
In offshore trading, the U.S. currency gained 0.1% versus the Chinese yuan to 6.9287, following mixed February PMI readings. Official data pointed to a contraction in activity, while a private survey significantly exceeded expectations.
The Australian dollar dropped 0.6% to $0.6996, despite figures showing stronger fourth-quarter GDP growth. Analysts at Capital Economics suggested the headline data may exaggerate weakness in private demand, noting that although details were mixed, the Reserve Bank of Australia is likely to remain wary that economic growth is still running above its sustainable pace.
The New Zealand dollar edged up 0.1% to $0.5898. In cryptocurrencies, bitcoin declined 0.4% to $67,776.69, and ether lost 0.5% to $1,958.81.
Currency markets experienced a noticeable shift in tone yesterday, as the initial energy shock evolved into a broader wave of risk deleveraging amid rising cross-asset volatility. Such unwinds are typically brief but intense.
Before rebuilding positions, investors will likely need reassurance—either through a moderation in energy prices or signals that central banks have room to ease policy.
USD: Attention May Shift to U.S. Inflation and the Fed
FX market drivers evolved yesterday. While Monday’s price action centered on the impact of elevated energy prices on importing versus exporting currencies, Tuesday brought a broader wave of deleveraging as cross-asset volatility surged. Equities sold off sharply—particularly financials—reflecting crowded overweight positioning in that sector.
Concerns around private credit redemptions (including headlines tied to Blackstone and Blue Owl) appear secondary to the wider risk-off move, though they remain worth monitoring. More broadly, rising volatility and higher Value-at-Risk metrics have triggered position trimming across asset classes. In FX, this dynamic has supported the U.S. dollar, especially given that speculative positioning had been skewed short.
Some of the dramatic overnight headlines—such as a 12% drop in South Korea’s Kospi—should also be viewed in context, following a roughly 50% rally year-to-date through February.
Looking ahead, near-term risk sentiment will likely hinge on two variables: whether energy prices can ease—potentially if the Strait of Hormuz reopens more fully—and whether central banks can provide policy support rather than tighten further. Risk assets briefly stabilized after President Trump suggested naval convoy protection for shipping through the Strait and federal backing for maritime insurance. While constructive, markets will want tangible follow-through. For now, energy prices remain firm.
On monetary policy, the inflationary implications of the energy shock have pushed short-end rate expectations higher. That hawkish repricing paused during yesterday’s equity slide, but absent another major sell-off, tighter short-end pricing appears to be the prevailing theme—another tailwind for the dollar.
Today’s catalysts include the monthly ADP employment report; a reading near +50K would reinforce the view that labor market downside risks have diminished, supporting the Fed’s stance. Attention will also fall on the ISM services “prices paid” component—an elevated reading would bolster the dollar. Later, the Fed’s Beige Book ahead of the March 18 FOMC meeting could shape expectations further. Any signs of persistent price pressures may prompt markets to trim expectations for rate cuts. Currently, roughly 45 basis points of easing are priced in for the year.
The dollar has posted strong gains this week on these dynamics, with DXY reaching as high as 99.68 yesterday. While investors may hesitate to chase it through the 100.00–100.35 highs seen over the past eight months, meaningful improvement in the energy backdrop may be required before short-dollar positioning regains traction.
EUR: 1.1500 Could Mark the Floor of the Trading Range
Heavy long positioning in the euro—particularly among asset managers—left EUR/USD exposed to downside pressure yesterday, with the pair touching a low of 1.1530. It is currently being weighed down by two forces: deteriorating terms of trade and a broader wave of market deleveraging. Of the two, the terms-of-trade dynamic is likely to be the more decisive factor. How long the energy shock persists will determine whether EUR/USD needs to slide toward the 1.10–1.12 region or can stabilize closer to 1.15. Our central scenario favors the latter, assuming operational tensions ease in the coming week and the Strait of Hormuz gradually reopens.
Unless fresh headlines emerge from the Gulf today, market sentiment may begin to steady—equity futures are already pointing to a less negative open—and EUR/USD could establish support in the 1.1550–1.1575 range.
The U.S. dollar extended its gains on Tuesday as escalating tensions in the Middle East reinforced the greenback’s traditional role as a global safe-haven asset.
At 04:25 ET (09:25 GMT), the Dollar Index (DXY), which measures the currency against six major peers, rose 0.8% to 99.080 — its highest level since January. The index had already advanced nearly 1% on Monday, marking its strongest daily performance in seven months.
Dollar supported by rising geopolitical tensions
Safe-haven demand continued to underpin the dollar as the conflict, initially centered between the U.S. and Iran, spread across the broader region.
Reports indicated missile strikes targeted the U.S. embassy in Riyadh, while Amazon data centers in the UAE and Bahrain were also hit as Iran launched retaliatory attacks throughout the Middle East.
The U.S. State Department confirmed it has ordered the evacuation of non-essential government personnel and family members from Bahrain, Iraq, and Jordan.
Meanwhile, Israel announced simultaneous military operations targeting Iran and Lebanon after the Tehran-backed Hezbollah group launched missiles and drones toward Tel Aviv.
Analysts at ING noted that the dollar strengthened broadly as investors reacted to surging energy prices. They added that in foreign exchange markets, the current environment highlights a divide between energy-independent economies and those heavily reliant on imports. In this context, the U.S. dollar appears well-positioned to benefit from the energy shock.
ING suggested the Dollar Index could remain supported in the near term, potentially targeting the 99.50–100.00 range as long as energy prices stay elevated.
The renewed safe-haven demand comes after months of skepticism about the dollar’s resilience during periods of stress, particularly after it failed to rally during last year’s tariff-driven global market downturn.
Euro pressured by energy exposure
In Europe, EUR/USD fell 0.5% to 1.1627, extending prior losses as the euro remained under pressure due to the region’s heavy dependence on imported energy.
ING noted that soaring natural gas prices have intensified downside pressure on the pair. While many expect the spike in gas prices to be temporary, sizable long positioning in the euro may discourage aggressive dip-buying unless clear signs of de-escalation emerge.
Investors are also awaiting the Eurozone’s flash February inflation data. Headline annual inflation is projected at 1.7%, unchanged from January, while core inflation — excluding food and energy — is expected at 2.2% year-on-year.
ING added that an upside surprise in inflation could lend modest support to the euro by making the European Central Bank more sensitive to energy-driven price pressures.
Elsewhere, GBP/USD declined 0.7% to 1.3314 as sterling remained weak. EUR/CHF slipped 0.2% to 0.9124 after the Swiss National Bank indicated a greater willingness to intervene in currency markets following the Swiss franc’s surge to a more-than-decade high against the euro.
Asian currencies struggle
In Asia, USD/JPY was little changed at 157.48 after climbing 0.8% overnight. Persistent uncertainty may prompt the Bank of Japan to adopt a more cautious policy stance, lowering expectations for a near-term rate hike.
Japan’s heavy reliance on imported energy also leaves the economy vulnerable to rising prices. Finance Minister Satsuki Katayama stated that currency market intervention remains an option to stabilize the yen.
ING noted that Japan’s energy-import dependence weakens the yen’s traditional safe-haven appeal, suggesting official intervention could become the primary support factor for the currency.
Elsewhere, USD/CNY rose 0.3% to 6.8994, recovering further from last week’s nearly three-year low, while AUD/USD fell 0.4% to 0.7060 as the risk-sensitive Australian dollar retreated.
Gold prices tumble toward $5,180 despite the ongoing conflict in the Middle East. Tehran has stepped up military operations near the Strait of Hormuz in retaliation against the United States, escalating regional tensions. At the same time, stronger-than-expected US factory inflation data has prompted traders to scale back expectations of near-term Federal Reserve rate cuts.
During Tuesday’s European session, XAU/USD declined roughly 2.5% to trade near $5,180. The pullback follows four consecutive days of gains, including a sharp rally on Monday when investors sought safe-haven assets amid intensifying geopolitical risks.
Over the weekend, the United States and Israel carried out coordinated airstrikes on Iran, reportedly eliminating several senior leaders, including Supreme Leader Ayatollah Ali Khamenei.
In response, Tehran shut down the Strait of Hormuz and launched attacks on Israeli territory as well as multiple US military installations across the region. Earlier Tuesday, Iranian forces also targeted the US Embassy in Riyadh using drones.
Although gold typically benefits from heightened geopolitical uncertainty, the metal has come under pressure as expectations for a dovish Federal Reserve have moderated. According to the CME FedWatch Tool, the probability that the Fed will keep interest rates unchanged at its June meeting has risen to 53.5%, up from 42.7% on Friday.
Traders reassessed their rate-cut expectations following Monday’s release of the US ISM Manufacturing Prices Paid index for February. The inflation gauge, which measures changes in input costs such as labor and raw materials, surged to 70.5—well above forecasts of 59.5 and the prior reading of 59.0—signaling stronger price pressures at the factory level.
Gold (XAU/USD) 4-Hour Chart Analysis
XAU/USD is trading below $5,200 at the time of writing. The short-term outlook has shifted to neutral with a bearish bias after the pair retreated from the upper boundary of its Rising Channel formation near $5,400 and moved back toward the 20-period Exponential Moving Average (EMA), currently positioned around $5,280.
Momentum indicators reinforce the weakening bullish tone. The 14-period Relative Strength Index (RSI) has fallen sharply from overbought territory above 80 to approximately 49, signaling a clear loss of upside momentum and diminishing buying pressure.
On the downside, immediate support is located near $5,065, aligning with the lower boundary of the Rising Channel. A decisive break beneath this level could expose the psychological $5,000 mark. Conversely, on the upside, the upper boundary of the Rising Channel remains the primary resistance zone, just above $5,400.
The U.S. dollar initially strengthened against the Canadian dollar over the course of the week, but has since pulled back and is now showing signs of indecision. This isn’t particularly surprising, given that the pair has been fluctuating within the same range for the past five weeks. Notably, the 1.3550 level continues to serve as solid support, while the 1.3750 area above remains a key resistance zone.
For longer-term traders, the prudent approach is likely to wait for a decisive breakout in either direction. In the meantime, short-term participants may keep trading the range, especially as the interest rate differential between the two currencies continues to narrow, encouraging back-and-forth price action.
EUR/USD
The euro has traded in a choppy, sideways manner throughout the week, much like the U.S. dollar against the Canadian dollar. The interest rate differential between the euro and the dollar is relatively modest, with the European Central Bank expected to hold rates steady while the Federal Reserve may move toward cutting them.
In this kind of environment, traders are searching for a catalyst to drive price in either direction. At the moment, the 1.18 level appears to be acting as a magnet, drawing price back toward it as the market struggles to establish a clear trend.
USD/MXN
The U.S. dollar moved higher against the Mexican peso over the week, which isn’t particularly surprising given how sharply it had declined beforehand. If the pair continues to rebound, the 17.50 level is likely to attract selling pressure, making it a potential area to consider short positions.
A sustained break above 18.00 would be needed before entertaining the idea of a broader trend reversal. For now, the interest rate differential continues to favor the downside, so the pair is often used to collect positive swap. I rarely look to buy this market, though sharp upside moves can occur and prove highly profitable—typically driven by strong momentum or bouts of risk aversion, which tend to override the yield advantage.
BTC/USD
Bitcoin has been highly volatile throughout the week, with price action continuing to revolve around the $60,000 level. This area is drawing significant attention, as a decisive break below it could pave the way for a swift move toward the $50,000 region.
A break above the $72,000 level would open the door for a potential rally toward $84,000. However, at this stage, the more likely scenario appears to be continued sideways consolidation. In fact, the longer Bitcoin trades within a range and builds a base, the healthier the overall structure becomes, potentially setting the stage for a more sustainable move higher later on.
USD/JPY
The U.S. dollar edged higher against the Japanese yen over the week, though the ¥158 level continues to act as resistance. At this point, traders seem to be searching for a catalyst strong enough to push the pair beyond the key ¥160 threshold.
A sustained move above ¥160 could trigger a significant rally, as that area marks the major swing high dating back to 1990. In the meantime, short-term pullbacks are likely to be viewed as buying opportunities, supported by the wide interest rate differential and Japan’s heavy debt burden, which limits the scope for materially higher domestic rates.
DAX
The German equity market has been somewhat erratic, with the DAX moving back and forth, though overall activity has been relatively subdued. The 25,000-euro level remains a key focus, as it represents a major round number with strong psychological significance. In the near term, minor pullbacks are likely to be viewed as buying opportunities.
There is also the potential for a push above the 25,400 level. A decisive breakout there could pave the way for a move toward the 27,000-euro region. At this stage, I have no interest in shorting the DAX, as the German economy appears to be supported by substantial government stimulus measures.
NASDAQ 100
The Nasdaq 100 has experienced significant volatility throughout the week. Despite ongoing challenges and heavy selling pressure in major stocks such as Nvidia, the index is set to close the week in relatively steady shape. The 25,000 level remains a key focus, as it represents a major psychological milestone.
A decisive move above 25,000 could open the door to the 25,500 area, which may act as the next resistance barrier. Overall, the broader outlook remains constructive, with short-term pullbacks likely presenting buying opportunities.
Meanwhile, the U.S. dollar has continued to weaken against the Swiss franc over the past week, making this currency pair one to monitor closely.
USD/CHF
The U.S. dollar has edged lower against the Swiss franc over the past week, making the pair particularly important to monitor. Swiss officials have expressed concern about the franc’s strength, which adds another layer of sensitivity to current price movements.
The 0.76 level appears to be providing near-term support, and the market will be watching closely to see whether it holds. A breakdown below that area could open the way toward the 0.75 level. Over the longer term, there is a strong possibility that the Swiss National Bank may step in to curb further franc appreciation, though any intervention would more likely begin in the euro–Swiss franc pair rather than in USD/CHF itself.
Recent weeks have clearly shown that President Trump’s domestic, foreign, and trade policy actions continue to weigh on the US dollar. Several of his tariff measures were struck down by the Supreme Court, creating frustration within the administration and adding fresh uncertainty. The independence of the Federal Reserve may also face scrutiny under the designated Fed Chair Kevin Warsh, who is seen as politically aligned with Trump. At the same time, the risk of military tensions with Iran adds another layer of geopolitical concern. In addition, shifting relative growth dynamics and a narrowing US interest rate advantage are likely to favor the euro. Overall, we see persistent headwinds for the USD and expect further depreciation against the EUR.
Yen – Weak despite Takaichi’s decisive win
Despite Prime Minister Takaichi’s landslide election victory, the yen remains under pressure. With her coalition securing a three-quarters majority and the LDP holding two-thirds of parliamentary seats, attention now turns to whether promised stimulus measures and tax cuts — including a potential suspension of VAT on food — will be implemented. BoJ Governor Ueda reiterated that rate hikes would depend on supportive economic data. Given the current political backdrop, we expect the BoJ to keep policy rates unchanged for now. As a result, EUR/JPY is likely to move sideways.
CHF – Strength amid rising uncertainty
Amid persistent trade and geopolitical uncertainty — much of it originating from the US — defensive currencies like the Swiss franc have benefited. Switzerland’s solid structural fundamentals, including economic resilience and strong fiscal and external positions, reinforce its safe-haven status. However, we anticipate a modest depreciation of the CHF in 2026, supported by stronger eurozone growth momentum, unless equity markets correct sharply or geopolitical risks intensify again. We view the franc’s current strength as temporary. With EUR/CHF near 0.90, the risk of Swiss National Bank intervention cannot be ruled out. Further CHF appreciation would be unwelcome given inflation remains extremely low at just 0.1% year-on-year, as it would deepen imported deflationary pressures.
The U.S. dollar weakened this week amid ongoing geopolitical tensions and renewed uncertainty over U.S. trade policy. The setback followed a ruling by the Supreme Court of the United States declaring the Trump administration’s tariffs illegal, prompting President Donald Trump to announce a fresh round of levies. Even stronger-than-expected Producer Price Index (PPI) data failed to revive the greenback.
The U.S. Dollar Index (DXY) hovered near the 97.60 area, down about 0.20% on the day and ending the week modestly lower, as traders remained cautious amid trade and geopolitical uncertainty.
EUR/USD traded around 1.1810, edging higher during the U.S. session after Germany’s flash Harmonized Index of Consumer Prices (HICP) for February came in softer than expected at 2% year-on-year (vs. 2.1% forecast) and 0.4% month-on-month (vs. 0.5%). Investors also evaluated testimony from Christine Lagarde, President of the European Central Bank, before the European Parliament. Lagarde reiterated that inflation is gradually returning to the 2% target and said she intends to complete her term, dismissing speculation about an early departure.
GBP/USD hovered near 1.3470, rebounding after nearly revisiting a one-month low earlier in February. Meanwhile, Andrew Bailey, Governor of the Bank of England, indicated there is room for rate cuts as inflation is expected to move back toward the 2% target.
USD/JPY traded near 156.00, stabilizing after recouping most of its intraday losses. Tokyo’s February CPI rose 1.6% year-on-year, with the core measure excluding fresh food falling below the Bank of Japan’s 2% target for the first time since 2024.
AUD/USD climbed back toward 0.7120, turning positive after reversing earlier declines. Attention now shifts to Australia’s TD-MI Inflation Gauge, due Monday.
USD/CAD hovered around 1.3630, marking nearly a two-week low, as markets assessed economic data from both sides of the border. According to Statistics Canada, Canada’s GDP contracted at an annualized 0.6% rate in the fourth quarter, following a revised 2.4% expansion in Q3.
Gold traded near $5,260, reaching a one-month high amid persistent geopolitical uncertainty. The precious metal is attempting to retest its all-time high of $5,598 set earlier this year.
Anticipating economic perspectives: Key voices in focus
Sunday, March 1
Joachim Nagel – European Central Bank
Monday, March 2
Frank Elderson – European Central Bank
Joachim Nagel – European Central Bank
Christine Lagarde – European Central Bank
Dave Ramsden – Bank of England
Michele Bullock – Reserve Bank of Australia
Tuesday, March 3
Kazuo Ueda – Bank of Japan
John C. Williams – Federal Reserve
Olaf Sleijpen – European Central Bank
Martin Kocher – European Central Bank
Neel Kashkari – Federal Reserve
Wednesday, March 4
Piero Cipollone – European Central Bank
Tiff Macklem – Bank of Canada
Luis de Guindos – European Central Bank
Thursday, March 5
Luis de Guindos – European Central Bank
Martin Kocher – European Central Bank
Christine Lagarde – European Central Bank
Friday, March 6
Piero Cipollone – European Central Bank
Mary Daly – Federal Reserve
Beth Hammack – Federal Reserve
Scott Paulson – Federal Reserve
Central bank meetings and key data releases set to steer monetary policy outlook
Monday, March 2
Australia: TD-MI Inflation Gauge
China: February RatingDog Manufacturing PMI
Germany: January Retail Sales
Switzerland: January Real Retail Sales
Spain: February HCOB Manufacturing PMI
Italy: February HCOB Manufacturing PMI
Germany: February HCOB Manufacturing PMI
Canada: February S&P Global Manufacturing PMI
U.S.: February ISM Manufacturing Employment Index
U.S.: February ISM Manufacturing New Orders Index
U.S.: February ISM Manufacturing PMI
U.S.: February ISM Manufacturing Prices Paid
New Zealand: January Building Permits (s.a.)
Japan: January Unemployment Rate
Tuesday, March 3
Australia: January Building Permits
Eurozone: HICP (Harmonized Index of Consumer Prices)
The U.S. dollar slipped on Friday but remained on course for its first monthly advance since October, supported by escalating geopolitical tensions and a more hawkish Federal Reserve stance.
As of 15:11 ET (20:11 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — was down 0.2% at 97.59, though it was still headed for a roughly 0.6% gain for the month.
Dollar supported by heightened geopolitical tensions
The dollar has drawn support from concerns that the U.S. military buildup in the Middle East could escalate into a conflict with Iran, even as both sides continue discussions over Tehran’s nuclear program.
While the United States and Iran reportedly made some progress in Thursday’s talks, mediator Oman said negotiations concluded without a breakthrough that might prevent potential U.S. military action.
U.S. President Donald Trump told reporters Friday that he was “not exactly happy” with how Iran was handling the negotiations. He added that Tehran had not shown willingness to meet key U.S. demands and reiterated his dissatisfaction with the pace of progress.
Analysts at ING noted that any further escalation in U.S.-Iran tensions currently poses the greatest upside risk for the dollar. They pointed out that prediction market Polymarket still assigns a relatively elevated 55% probability of a U.S. strike on Iran by the end of March, which they believe is limiting further dollar weakness for now.
The greenback has also benefited from a slightly more hawkish tone at the Federal Reserve, after several policymakers signaled at January’s meeting that additional rate hikes remain possible if inflation stays persistent.
Supporting that view, January’s U.S. Producer Price Index (PPI) data released Friday came in well above expectations.
“Near-term factors continue to favor further USD strength, though renewed tariff uncertainty has reinforced the dollar’s risk premium,” ING added, expecting the currency to stabilize barring any major geopolitical developments.
Euro slips in February
In Europe, EUR/USD rose 0.2% to 1.1822 on the day, but the single currency remained on track for a roughly 0.2% monthly decline, as markets expect the European Central Bank to keep interest rates unchanged in the coming months.
Data showed Germany’s unemployment total edged up by 1,000 in February to 2.977 million, reflecting the prolonged economic slowdown that has weighed on Europe’s largest economy over the past three years.
Meanwhile, French consumer prices increased 1.1% year-on-year in February, exceeding expectations and marking a pickup after inflation slowed to a more than five-year low in January.
Analysts at ING said the 1.180 level is likely to continue acting as a near-term anchor for EUR/USD, as heightened uncertainty surrounding Iran discourages strong directional bets.
Elsewhere, GBP/USD was little changed at 1.3485 but was poised to end a three-month winning streak, with sterling down about 1.5% for February.
UK Prime Minister Keir Starmer saw his Labour Party suffer a notable by-election defeat, losing one of its safest seats to the left-wing Green Party of England and Wales.
The result adds to political pressure on Starmer after weeks of turbulence and renewed calls for his resignation. ING noted that developments perceived as weakening Starmer’s position have recently weighed on the pound, as a stronger showing by the Greens may raise expectations of a more left-leaning successor should he step down prematurely.
Yen on track for monthly decline
In Asia, USD/JPY slipped 0.1% to 156.00 on the day, but the pair remained poised for a 0.8% gain in February, reflecting continued weakness in the Japanese currency. The yen has come under pressure as investors assess the fiscal implications of Prime Minister Sanae Takaichi’s stimulus and tax cut proposals.
Takaichi’s ruling coalition strengthened its position after securing a supermajority in Japan’s lower house, clearing the way for her fiscal agenda.
At the same time, uncertainty over the timing of the next rate hike from the Bank of Japan has weighed on the yen. Soft February consumer price data from Tokyo — often viewed as a leading indicator of nationwide inflation — showed core CPI slipping below the BOJ’s 2% annual target for the first time in nearly four years, potentially limiting the scope for further tightening.
Elsewhere, USD/CNY rose 0.3% to 6.8579 after the People’s Bank of China removed a key foreign exchange risk reserve requirement for certain forward contracts, effectively making it cheaper to buy dollars domestically.
The move followed a strong rally in the yuan in recent months, partly fueled by exporters selling dollars amid a robust trade surplus with the United States.
AUD/USD gained 0.2% to 0.7120, with the Australian dollar set for a more than 2% monthly advance, supported largely by a more hawkish policy outlook from the Reserve Bank of Australia.
Indices: Tech Drags as Futures Edge Lower Before PPI
U.S. equity futures slip slightly after a weak session led by semiconductor losses. The tech-heavy Nasdaq 100 (-1.2% to 25,034) paced declines, followed by the S&P 500 (-0.5% to 6,908), while the Dow 30 (flat at 49,499) avoided closing in the red. Treasury yields eased across the curve, with the 10-year hovering near the 4% threshold, as investors await January PPI data. CME FedWatch pricing still points to rate cuts in July and October as the base case.
Stocks: Chip Selloff; Media Takeover Saga Nears Conclusion
Nvidia (-5.5%) slid despite beating earnings and revenue expectations, dragging the broader semiconductor space lower, including AMD (-3.4%), Intel (-3%), and ASML (-4.1%).
The contest for Warner Bros Discovery (-1.7% AH) appears to be wrapping up, with Netflix (+8.5% extended) stepping aside after Paramount Skydance (+10% close; +6.2% AH) presented a stronger bid.
Block (+23.6%) surged in extended trading after earnings and announcing plans to cut over 4,000 jobs.
IonQ (+21.7%) rallied on upbeat revenue guidance, with Morgan Stanley lifting its price target.
Meta (-0.7% AH) dipped after reports its in-house chip project faced hurdles and that it struck a deal to lease Google TPUs for AI development.
PayPal (-3.7%) declined after denying talks of a potential sale.
Meme stock movers included Beyond Meat (+2.9%), GoPro (+3.3%), Krispy Kreme (+27.8%), Opendoor (+8.6%), and BlackBerry (+2.6%).
Earnings Highlights:
Dell Technologies beat on both earnings and revenue; shares rose 11.6% after hours.
Zscaler missed on deferred revenue and billings; shares fell 9.5% AH.
Synopsys disappointed with full-year guidance; shares dropped 5.2%.
Rolls-Royce beat expectations, raised its profit outlook, and announced £2.5bn in buybacks; shares closed up 5.2%.
Baidu missed revenue forecasts; shares slid 5.7%.
Commodities:
Gold volatility eased as prices hovered near $5,200 but failed to sustain gains above that level, amid geopolitical uncertainty and a firmer dollar. Silver reclaimed $90, narrowing the gold/silver ratio below 58. The World Gold Council flagged stretched valuations.
WTI crude steadied around $65 after elevated intraday swings, with attention on Geneva talks and lingering U.S. military rhetoric. Traders are also focused on Sunday’s OPEC+ meeting amid speculation of a possible April output increase.
FX / Central Banks / Crypto:
Bitcoin retreated toward $68K, while Ether remained above $2K.
The U.S. Dollar Index firmed back into the 97 area, reversing prior losses on stronger labor data and reduced expectations for near-term Fed easing.
Fed officials offered mixed signals: Miran backed four quarter-point cuts this year, while Goolsbee cautioned against easing too quickly before inflation cools.
ECB President Lagarde reiterated inflation is expected to return to the 2% target over the medium term, emphasizing a data-dependent approach and monitoring — not targeting — FX markets.
Data: Stronger-Than-Expected Labor Figures
U.S. initial jobless claims came in at 212K (vs. 217K forecast), with continuing claims falling to 1.833m. Kansas Fed manufacturing improved sharply to 10 from -2.
Tokyo headline CPI rose to 1.6% y/y, though core measures eased. Retail sales rebounded 1.8% y/y, while industrial production disappointed at 2.2% growth (vs. 5.3% expected).
Ahead:
U.S. PPI, Chicago PMI, and Baker Hughes rig count data due later today.
In Europe, German preliminary CPI, import prices, and labor data.
Saturday: Earnings from Berkshire Hathaway.
Sunday: OPEC+ meeting to determine April output levels.
Most Asian currencies slipped on Friday as investors weighed a mixed interest rate outlook across the region. The Australian dollar was on track for a solid monthly gain, while the Japanese yen remained under pressure.
The Chinese yuan declined after Beijing lowered a key reserve requirement to make dollar purchases cheaper domestically, though the currency continued to hover near three-year highs.
Meanwhile, the dollar index and dollar index futures edged down about 0.1% in Asian trading. Despite the dip, the greenback was up 0.7% for February, supported by safe-haven demand and lingering uncertainty over the direction of interest rates.
Japanese yen subdued after weak Tokyo CPI, February decline in focus
The Japanese yen saw the USD/JPY pair slip 0.2% on Friday and was on track to gain 0.7% for February.
Pressure on the yen intensified as uncertainty grew over the timing of the Bank of Japan’s next interest rate hike. Those doubts deepened following softer-than-expected consumer price index data from Tokyo for February.
The reading—often viewed as a leading indicator for nationwide inflation—showed core CPI falling below the BOJ’s 2% annual target for the first time in nearly four years, potentially complicating the central bank’s plans for further rate increases.
The yen had weakened earlier in February amid concerns about the fiscal implications of Prime Minister Sanae Takaichi’s proposed stimulus measures and tax cuts. However, she appeared to gain momentum for advancing her fiscal agenda after her ruling coalition secured a supermajority in Japan’s lower house of parliament.
Chinese Yuan slips after PBOC lowers FX risk reserve ratio
The Chinese yuan’s USD/CNY pair rose 0.2% on Friday after the People’s Bank of China removed a key foreign exchange risk reserve requirement for certain forward contracts—a step that makes dollar purchases cheaper domestically.
The move follows a strong rally in the yuan against the dollar in recent months, partly fueled by exporters offloading the greenback amid a robust trade surplus with the United States.
However, rapid appreciation of the yuan can weigh on Chinese exporters by shrinking returns on overseas sales. Friday’s decision suggests the central bank may be aiming to curb further strength in the currency.
The yuan had approached a three-year high on Thursday before pulling back.
Australian dollar set for February gains on hawkish RBA outlook
The Australian dollar’s AUD/USD pair climbed 0.25% on Friday, ranking among Asia’s top performers for the month.
The Aussie was on track to advance 2.3% in February, largely supported by a more hawkish stance from the Reserve Bank of Australia. The central bank raised interest rates by 25 basis points earlier in the month and signaled it would tighten further if inflation fails to ease.
Stronger-than-expected January CPI data released this week reinforced expectations that the RBA could deliver additional rate hikes.
Elsewhere in the region, most Asian currencies edged lower on Friday. The South Korean won’s USD/KRW pair ticked up slightly but remained down 1.3% for February.
The Indian rupee’s USD/INR pair steadied after climbing back above the 91-per-dollar mark, though it was still 0.8% weaker this month, despite gaining support from a U.S.–India trade agreement.
Meanwhile, the Singapore dollar’s USD/SGD pair was little changed on the day and down 0.7% for February.
The U.S. dollar steadied on Thursday, recovering from earlier declines after upbeat earnings from AI heavyweight Nvidia, as investors looked ahead to further clarity on upcoming U.S. tariff measures.
As of 03:00 ET (08:00 GMT), the US Dollar Index, which measures the greenback against six major peers, was up 0.1% at 97.650. Despite the modest rebound, the index remained on course for a weekly drop of roughly 0.2%.
Dollar Holds Steady Following Strong Results from Nvidia
The dollar steadied after starting the session under pressure, as stronger-than-expected earnings from Nvidia lifted investor sentiment and reduced demand for the traditional safe-haven currency.
The world’s most valuable company reported January-quarter revenue that topped analyst forecasts and projected current-quarter sales above market expectations, reinforcing optimism around the AI theme.
“Improved sentiment has weighed on the dollar over the past 24 hours, with only the yen faring worse among G10 currencies yesterday,” analysts at ING Group noted.
Markets are also watching how the Trump administration responds to the February 20 Supreme Court decision that invalidated the president’s emergency tariffs. Meanwhile, U.S. Trade Representative Jamieson Greer said Wednesday that tariff rates for certain countries will increase to 15% or more from the newly introduced 10%, though he did not specify which trading partners would be affected.
In addition, U.S. and Iranian officials are set to meet in Geneva to discuss a potential nuclear agreement, with Donald Trump warning that “bad things” could occur if meaningful progress is not made.
According to ING, any escalation in tensions could serve as the most credible trigger for a broader dollar rally, particularly given the supportive backdrop from Nvidia’s results and the absence of major economic data releases. Overall, while the dollar may find some near-term stability, downside risks persist as the positive spillover from Nvidia’s earnings keeps investors leaning away from defensive currencies for now.
Euro edges lower
In Europe, EUR/USD slipped 0.1% to 1.1798 ahead of the latest Eurozone consumer confidence data due later in the session.
Still, both these figures and Friday’s inflation release are unlikely to move the needle much for the single currency, as the European Central Bank is widely expected to leave interest rates unchanged for the foreseeable future.
“For now, the EUR/USD short-term rate differential remains unsupportive for the pair, but we haven’t seen a sufficient rebound in dollar confidence to call for a significant downside break. We continue to view 1.1750 as solid support, absent a major escalation involving Iran,” analysts at ING Group said.
Meanwhile, GBP/USD declined 0.3% to 1.3523, with sterling failing to gain traction despite improved sentiment data from the UK’s business and professional services sector.
The latest quarterly survey from the Confederation of British Industry showed optimism in the sector rebounded sharply to -3 in February from -50 in November — its strongest reading since August 2024.
Yen Strengthens Following Interview with Kazuo Ueda
In Asia, USD/JPY slipped 0.3% to 156.01 after Kazuo Ueda, governor of the Bank of Japan, told the Yomiuri Shimbun that policymakers will внимательно assess incoming data at their March and April meetings, keeping the door open to another rate hike if inflation and wage growth remain solid.
His comments bolstered expectations that Japan will stay on a gradual path toward policy normalization.
The yen had weakened the previous day following reports that Prime Minister Sanae Takaichi adopted a cautious stance on additional rate increases, alongside news that two dovish-leaning nominees were selected for the BOJ board.
Meanwhile, USD/CNY declined 0.4% to 6.8392, hitting a fresh 34-month low amid anticipation of supportive measures ahead of China’s annual legislative gathering, the National People’s Congress. Investors are looking for growth targets and potential fiscal stimulus signals from the meeting, which typically outlines Beijing’s economic agenda for the year.
Elsewhere, AUD/USD eased 0.1% to 0.7114, while NZD/USD fell 0.2% to 0.5988.
Most Asian currencies traded in a tight range on Thursday as lingering uncertainty over U.S. trade policy kept sentiment cautious, though the Chinese yuan and Japanese yen stood out on domestic drivers.
The US Dollar Index slipped 0.1% during Asian trading hours, with its futures also down 0.1% as of 00:22 ET (05:22 GMT).
Chinese yuan surges to 34-month high on policy hopes
China’s onshore yuan strengthened, with USD/CNY sliding 0.5% to a new 34-month low of 6.834 ahead of the country’s annual parliamentary session, the National People’s Congress. Markets are betting on fresh policy backing as investors look for growth targets and potential fiscal stimulus signals that will shape Beijing’s economic agenda for the year.
The offshore yuan also advanced, with USD/CNH touching its weakest level since mid-April 2023.
Elsewhere in the region, currencies were mostly subdued as concerns over U.S. tariffs persisted. President Donald Trump’s 10% global tariffs came into force earlier this week, with plans underway to raise them to 15%.
The South Korean won was little changed after the Bank of Korea kept its benchmark rate steady at 2.5%, in line with expectations. The Singapore dollar edged 0.1% higher against the greenback, while the Indian rupee gained 0.1%. The Australian dollar rose 0.2%.
Yen rebounds on BOJ rate hike expectations
The Japanese yen strengthened, with USD/JPY falling 0.4%, after Kazuo Ueda, Governor of the Bank of Japan, said policymakers would carefully assess incoming data at their March and April meetings, leaving room for another rate hike if inflation and wage growth remain solid.
His comments bolstered expectations that Japan will stay on a gradual path toward policy normalization.
The yen had weakened a day earlier following reports that Prime Minister Sanae Takaichi adopted a cautious stance on further tightening and after two more dovish-leaning members were nominated to the BOJ board.
Analysts at ING said the addition of new board members would broaden the range of views in policy discussions, though no single perspective is likely to dominate. They added that a June rate hike appears more likely than one in April, pending confirmation of strong spring wage gains and April inflation data.
GBP/USD extended its advance for a fourth straight session, hovering near 1.3510 in Wednesday’s Asian trading. The pair is benefiting from continued softness in the US Dollar after US President Donald Trump delivered the first State of the Union address of his second term before a joint session of Congress.
Technical Analysis
GBP/USD continues to draw support near the 200-period Simple Moving Average (SMA) on the four-hour chart, around the 1.3550 area, which now serves as an important short-term pivot. The MACD histogram remains in negative territory, reflecting that the MACD line is still below the Signal line near the zero threshold. Meanwhile, the RSI stands at 40 — leaning neutral-to-bearish — after bouncing from earlier lows, indicating that upside moves may lack strong conviction.
As long as price holds above the upward-sloping 200-period SMA, the near-term bias remains constructive. However, a decisive break back below this level would tilt momentum in favor of sellers. A turn of the MACD histogram into positive territory would signal easing bearish pressure. For a stronger recovery outlook, the RSI would need to climb back above 50; remaining below that mark would likely keep rallies contained and shift focus toward consolidation rather than a sustained advance.
Fundamental Analysis
The GBP/USD pair edges lower for a second consecutive session on Tuesday, sliding to its weakest level in over a week — around the mid-1.3500s — during early European trading after the release of the UK labor market data.
Figures from the UK Office for National Statistics showed the ILO unemployment rate rose to 5.2% in the three months to December, up from 5.1% previously and marking the highest reading since early 2021. Meanwhile, jobless claims increased by 28.8K in January, signaling further softening in the labor market at the start of 2026.
Wage growth also cooled notably. Average Earnings Excluding Bonus rose 4.2% in the three months to December, easing from 4.6% in the prior quarter and hitting the slowest pace in nearly four years. Earnings Including Bonuses likewise slowed to 4.2% from 4.6%. Unless UK inflation data due Wednesday delivers an upside surprise, the latest employment figures reinforce expectations that the Bank of England could cut rates as soon as March, adding pressure on the British Pound.
At the same time, the US Dollar strengthens to a one-week high, further weighing on GBP/USD. However, the greenback’s upside appears limited by dovish Federal Reserve expectations. Following softer US inflation data last Friday, markets increased bets that the Fed may begin easing policy in June. Current pricing suggests at least two rate cuts in 2026, and lingering concerns about the Fed’s independence also restrain bullish USD momentum.
With traders hesitant to take aggressive positions ahead of clearer guidance on the Fed’s path, attention now shifts to the FOMC Minutes on Wednesday and the US Personal Consumption Expenditure (PCE) Price Index on Friday. These releases will be pivotal for shaping expectations around US monetary policy and, in turn, the direction of the dollar. Additionally, Wednesday’s UK CPI report could inject fresh volatility into GBP/USD as the week progresses.
US stock futures stabilized on Tuesday following a shaky start to the week, as renewed selling linked to AI disruption concerns unsettled investors. Sentiment was also dented by fresh uncertainty around US President Donald Trump’s tariff agenda. Anxiety over artificial intelligence’s potential to disrupt software and wider industries intensified after a bearish report from Citirni Research highlighted AI-related risks extending beyond the tech sector.
While the intensity of the “AI scare” trade appears to be easing and traders are stepping back into some beaten-down tech names, markets remain cautious amid ongoing tariff confusion. This comes after Friday’s turbulence triggered by the US Supreme Court’s decision to overturn President Trump’s sweeping tariff measures.
The US100 is trying to stabilize after sliding 1.13% in the previous session, breaking below a medium-term ascending trendline drawn from the August lows. The index is trading just beneath the 38.2% Fibonacci retracement of the October 30–November 21 decline from the record peak of 24,757. Immediate support is seen at the 23.6% Fibonacci level around 24,400, while a recovery could prompt a retest of the short-term SMAs near 25,075 and 25,300.
Tariff uncertainty and US-Iran tensions support Gold
Gold is retreating from a three-week high near 5,250 as a firmer US dollar and profit-taking pressure prices after a rally fueled by tariff uncertainty and geopolitical risks in the Middle East. Investors are awaiting further clarity on President Trump’s trade policy after the Supreme Court invalidated his earlier global tariff framework. The administration has since introduced temporary 15% tariffs aimed at addressing what it describes as a balance-of-payments crisis, a characterization questioned by many economists.
Attention also remains on escalating US-Iran tensions ahead of a third round of talks, as the White House signals it may be edging closer to potential military action related to Iran’s nuclear program, including additional naval deployments. Later today, President Trump’s State of the Union address could add another layer of volatility.
Technically, gold has snapped a four-day winning streak and is testing firm support at 5,141 — the 61.8% Fibonacci retracement of the January 29–February 2 decline from its record high. Further support lies near the 20-day SMA around the key 5,000 mark. Despite the pullback, the broader bias remains positive, with both MACD and RSI still in bullish territory, albeit turning cautious. A rebound could target 5,342, with scope for fresh highs above 5,420.
Yen ahead of CPI
The yen extended its decline against a stronger dollar as tariff concerns resurfaced and reports suggested Japanese Prime Minister Sanae Takaichi voiced caution about additional Bank of Japan rate hikes during discussions with Governor Kazuo Ueda. The yen’s rebound following the February 8 election has faded, reviving the so-called “Takaichi trade” amid fears that fiscal expansion could further weaken the currency.
Yen weakness also shifts attention to Friday’s Tokyo CPI data. Current fiscal measures may struggle to keep inflation anchored at the BoJ’s 2% target, while recent figures indicate earlier cost-push pressures are easing. Continued currency softness could bring forward expectations for the next BoJ rate hike from December to as early as April.
Technically, USD/JPY is approaching an upside breakout from a symmetrical triangle pattern, testing two-week highs around 156.30. Momentum remains modest, with the RSI hovering near the neutral 50 level and the MACD still below zero. A daily close above the 50-day SMA — coinciding with the triangle’s upper boundary — could pave the way toward 157.60. On the downside, a move below the 20-day SMA may expose the psychological 154.00 level.
The U.S. dollar recovered on Tuesday after the prior session’s slide, supported by upbeat economic data, while investors stayed cautious amid fresh volatility tied to President Donald Trump’s tariff policies.
At 15:24 ET (20:24 GMT), the Dollar Index—measuring the greenback against six major currencies—rose 0.2% to 97.86, after falling as much as 0.5% a day earlier.
Strong data underpin dollar
Encouraging economic releases lent the dollar some backing. ADP reported a gain of 12.8K in private payrolls last week, exceeding the previous reading. In addition, the Conference Board’s consumer confidence index for February surprised to the upside at 91.2.
According to José Torres, senior economist at Interactive Brokers, the stronger-than-expected figures nudged both the dollar and yields modestly higher, with a bear-flattening move led by shorter-dated maturities that are more sensitive to monetary policy.
He noted that firmer labor data are pushing rates up, as improving employment conditions weaken the case made by dovish Federal Reserve members for interest rate cuts based on softening job trends.
Trade tensions cloud outlook
Despite the rebound, uncertainty surrounds the U.S. currency as Trump’s revised tariff plans take shape following a Supreme Court ruling that his use of a 1977 emergency law to impose tariffs overstepped his authority.
In response, Trump said he would lift a temporary import tariff from 10% to 15% on goods from all countries. The move has cast doubt on the reliability of trade agreements reached prior to the ruling. Reflecting this uncertainty, the European Parliament delayed a vote on the European Union’s trade pact with the United States due to the new import tax.
Trade concerns have resurfaced at a time when questions are also emerging over the durability of heavy investment in artificial intelligence and the resilience of the U.S. economy after last week’s weak growth data.
Euro steady; Yen under pressure
In Europe, EUR/USD slipped 0.1% to 1.1779, with the euro largely steady after ECB President Christine Lagarde reiterated in Washington that the European Central Bank’s rate policy remains in a “good place,” while emphasizing the need for flexibility.
GBP/USD edged up 0.1% to 1.3501 ahead of parliamentary testimony from four Bank of England rate-setters, which may shape expectations before the March policy meeting.
In Asia, USD/JPY jumped 1% to 155.76 as expectations for near-term tightening by the Bank of Japan softened. The yen was also pressured by a Nikkei report suggesting U.S. authorities led recent rate-check efforts aimed at supporting Japan’s currency.
USD/CNY fell 0.4% to 6.8830 after the People’s Bank of China kept its one-year and five-year loan prime rates unchanged, signaling Beijing’s preference for calibrated support while balancing growth and financial stability. Chinese markets reopened Tuesday following the Lunar New Year holiday.
Elsewhere, AUD/USD rose 0.1% to 0.7060, while NZD/USD advanced 0.2% to 0.5967.
The U.S. dollar weakened on Monday as investors assessed the implications of the Supreme Court of the United States decision to strike down tariffs introduced by Donald Trump, along with the administration’s subsequent response.
Traders were also monitoring renewed nuclear negotiations between Washington and Tehran.
As of 14:12 ET (19:12 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — was down 0.2% at 97.65. The currency had posted a gain of roughly 1% last week, marking its strongest weekly advance in more than four months.
Dollar pressured by mounting trade uncertainty
The Supreme Court of the United States ruled on Friday that sweeping tariffs introduced by Donald Trump exceeded his authority. In response, Trump criticized the court and unveiled a blanket 15% levy on imports.
The new duties are set to remain in place for 150 days, but it remains unclear whether the U.S. government must reimburse importers for tariffs already collected, as the Court did not address that issue.
The uncertainty could trigger prolonged legal battles and further confusion as Trump explores alternative mechanisms to reinstate broad-based global tariffs on a more permanent footing.
Thierry Wizman, global FX and rates strategist at Macquarie, said the firm’s bearish U.S. dollar outlook for 2026 was based on the view that tariffs signal U.S. “disengagement” from the rules-based order underpinning free trade. He added that tariff conflicts themselves generate uncertainty centered on the United States — a negative for the dollar.
“In that sense, while the Supreme Court ruling may have strengthened institutional checks, it also heightens uncertainty, as Trump is likely to revive the tariff war through different — and more legally grounded — channels that have yet to be detailed. We see no reason to revise our broader expectation for a weaker USD in 2026,” Wizman said.
Beyond trade policy, investors are also watching a U.S. military buildup in the Middle East aimed at pressuring Iran to abandon its nuclear ambitions, with further talks between Washington and Tehran expected later this week.
Euro advances as confidence in Europe strengthens
In Europe, EUR/USD rose 0.2% to 1.1799, with the single currency drawing support from trade-driven weakness in the dollar.
Growing confidence in the region’s economic outlook also underpinned the euro, following data on Friday showing eurozone business activity expanded faster than expected this month, as manufacturing returned to growth for the first time since October.
Momentum was reinforced on Monday as Germany’s Ifo business climate index climbed to 88.6 from 87.6 the previous month, signaling improving sentiment in Europe’s largest economy.
Meanwhile, GBP/USD added 0.1% to 1.3497, with sterling firming ahead of key event risks this week — including testimony before the Treasury Committee by Andrew Bailey, governor of the Bank of England, and Thursday’s UK by-election in Gorton and Denton.
Yen edges higher
In Asia, USD/JPY fell 0.4% to 154.48, with the Japanese yen supported by its traditional safe-haven appeal as investors remained cautious about the economic impact of higher U.S. tariffs. Trading volumes were thinner due to a public holiday in Japan.
USD/CNY was little changed at 6.9087, with Chinese markets shut for New Year holidays. Elsewhere, AUD/USD declined 0.3% to 0.7060, while NZD/USD also dropped 0.3% to 0.5961.
Thierry Wizman of Macquarie said that while the dollar could remain under pressure amid persistent U.S.-driven uncertainty, some currencies — such as the yuan and the euro — may outperform, whereas others, including the Canadian and Mexican pesos, could lag. He added that even in the face of potential credit rating actions, long-term U.S. Treasury yields might rise due to uncertainty over revenue replacement, and equities could come under strain if higher yields lead to valuation compression.
The US dollar at one stage surged sharply against the Mexican peso, but by week’s end it had given back some of those gains. The 17.00 area below continues to act as a key support zone, and a decisive break beneath it could open the door for a move toward 16.50.
While short-term bounces are possible, the broader setup suggests selling into strength. The 17.50 region remains a significant resistance barrier, and the wide interest rate differential still strongly favors the Mexican peso.
S&P 500
The S&P 500 pulled back early in the week but appears to be stabilizing as it continues to trade within a broader consolidation range. Since early December, price action has been confined between 6,800 and 7,000, suggesting a market building momentum for its next major move.
The bias still leans to the upside. A decisive daily close above 7,000 could trigger a stronger breakout and accelerate gains. On the other hand, a breakdown below 6,800 would signal a shift in tone and mark a more bearish development.
EUR/USD
The euro declined notably over the course of the week, but it continues to find buyers near the 1.18 level, making that area especially important to watch. Given the current structure, caution is warranted when trading this pair.
Price action appears largely range-bound, with 1.18 acting as a central pivot or magnet. Resistance stands near 1.1850, while solid support can be found around 1.1750, reinforcing the broader sideways pattern.
USD/CAD
The US dollar has advanced against the Canadian dollar, but price action remains choppy around the 1.3750 zone — an area that has repeatedly proven significant. The pair appears to be oscillating as traders assess whether momentum can build for a sustained move higher.
A decisive push and hold above 1.3750 would signal renewed strength for the US dollar. Conversely, a breakdown below 1.35 would represent a notably bearish shift in sentiment.
Major Technical Support and Resistance Levels
Gold (XAU/USD)
Gold remains choppy, initially easing back during the week, yet buyers continue to emerge on dips, stepping in whenever prices soften. The 4,800 level appears to be firm support, while the 5,000 mark is likely to act as a psychological magnet for price action.
The broader bias still favors buying pullbacks, with the expectation of an eventual move higher. However, volatility may persist after the sharp turbulence seen in recent weeks, following what had previously been a near one-way surge. Over the longer term, a retest of the highs seems plausible, though it will likely require patience amid ongoing fluctuations.
Bitcoin (BTC)
The Bitcoin market is still searching for renewed upside momentum, but the encouraging development is that price action has at least stabilized. Given the prolonged weakness seen in recent periods, simple stability is a constructive step forward for the market.
The $60,000 level remains a crucial support zone and a major psychological benchmark. Holding above this area is essential if Bitcoin is to maintain any realistic prospect of a sustained recovery.
USD/JPY
The US dollar posted solid gains against the Japanese yen over the week, with the ¥152 level continuing to provide strong support. The 50-week EMA is positioned just beneath that area, reinforcing the floor and encouraging dip-buying as the interest rate differential remains in favor of the US dollar.
With the Bank of Japan maintaining its current policy stance, there appears to be little immediate catalyst for a structural shift. As a result, the pair may be entering a consolidation range between ¥152 on the downside and ¥158 on the upside. A decisive move above ¥160 would represent a significant breakout, clearing a resistance zone that has been in place since 1990.
GBP/USD
The British pound declined sharply during the week, dropping to test the 1.35 level — a large, round psychological threshold that has proven important on multiple occasions. The fact that buyers are attempting to defend this area is at least a constructive short-term signal.
However, recent UK economic data has been somewhat underwhelming. As a result, sterling may currently be one of the weaker major currencies against the US dollar. This pair deserves close monitoring, as broader dollar strength could translate into pronounced downside pressure here, potentially making GBP/USD particularly vulnerable.
The U.S. dollar edged lower on Friday as investors digested the impact of the Supreme Court’s decision to invalidate President Donald Trump’s broad tariff measures. Despite the pullback, the greenback remained on track for its strongest weekly advance since November, supported by a more hawkish tone from the Federal Reserve and ongoing geopolitical tensions between the U.S. and Iran.
As of 17:31 ET (22:31 GMT), the Dollar Index slipped 0.2% to 97.72, though it was still poised to post a weekly gain of around 1%, its best showing in nearly three months.
The Supreme Court ruled 6–3 that Trump lacked authority under the International Emergency Economic Powers Act (IEEPA) to implement sweeping reciprocal tariffs. The president criticized the decision as “deeply disappointing” and indicated that tariffs would remain in effect through alternative legal channels, alongside a new 10% global levy.
According to Jeff Buchbinder of LPL Financial, removing the tariff overhang eliminates a drag on economic growth that had been expected to lift costs and pressure corporate margins. With that risk easing, growth may stabilize and inflation expectations embedded in bond markets could cool more quickly, potentially prompting a modest reassessment of Fed rate-cut expectations and weighing slightly on the dollar.
Even so, the dollar had attracted demand earlier in the week, underpinned by resilient U.S. economic data, hawkish Fed meeting minutes, and heightened Middle East tensions.
Friday’s data, however, delivered mixed signals. Core PCE — the Fed’s preferred inflation measure — rose 0.4% month-over-month and 3.0% year-over-year in December 2025, marking the highest annual reading since November 2023 and remaining well above the 2% target. Meanwhile, preliminary fourth-quarter GDP growth came in at 1.4%, falling short of the 2.8% consensus forecast.
In Europe, EUR/USD ticked up 0.1% to 1.1781, though the euro was still headed for a 0.7% weekly decline amid uncertainty surrounding ECB President Christine Lagarde’s tenure and softer German producer price data. Analysts at ING noted that while sentiment indicators such as the ZEW survey disappointed, the eurozone composite PMI is expected to stay above the 50 threshold, limiting downside pressure on the euro.
GBP/USD rose 0.1% to 1.3474, but sterling hovered near a one-month low and was set for a weekly loss of about 1.3%. Strong January retail sales — up 1.8% month-over-month and 4.5% year-over-year — failed to provide sustained support. ING analysts said markets are pricing in a Bank of England rate cut in March, with another possible move in June, while political risks continue to weigh on the pound.
In Asia, USD/JPY held steady at 155.06 after data showed Japan’s inflation slowed to 1.5% in January, slipping below the Bank of Japan’s target for the first time in nearly four years. Core inflation excluding fresh food and fuel also moderated, reinforcing uncertainty over the timing of the next rate hike. Separate data showed Japanese factory activity expanded at its fastest pace in over four years in February.
USD/CNY was unchanged at 6.9087, with Chinese markets closed. Meanwhile, AUD/USD climbed 0.5% to 0.70892, although the Australian dollar trimmed some gains after unemployment held at 4.1% in January, signaling a still-tight but gradually cooling labor market.
Macro uncertainty is intensifying just as EUR/USD and GBP/USD test pivotal technical zones. With interest-rate expectations shifting and tail risks mounting, the next directional move may depend more on macro catalysts than chart patterns.
Both pairs are hovering near critical support and resistance levels, while a dense lineup of U.S. and European data raises the prospect of increased volatility. The dollar continues to trade in close correlation with Treasury yields and evolving Federal Reserve rate pricing, reinforcing the macro-driven backdrop.
At the same time, tariff developments and geopolitical tensions are injecting additional tail risk ahead of the weekend, leaving markets vulnerable to sharp, sentiment-driven swings.
Summary
As the week moves into its final stretch, both Europe and the United States face a heavy slate of economic releases—and this is unlikely to be mere background noise for markets. Recent price action has already underscored how reactive EUR/USD and GBP/USD are to changes in relative rate expectations across the U.S., U.K., and euro area.
With both currency pairs now positioned near critical technical thresholds, the incoming data flow carries the potential to do more than simply inject volatility. It may ultimately determine whether the latest directional moves gain traction—or begin to lose momentum and reverse.
Heavy Data Calendar Lifts Volatility Threat
Flash PMIs rarely fail to generate movement in EUR/USD and GBP/USD, largely because European participants tend to respond far more decisively to the releases than traders elsewhere. In the euro area, the focus is likely to center on price components and new orders, especially in light of the recent resilience in the single currency. In the UK, attention may gravitate toward price pressures, employment trends, and overall activity, reflecting the economy’s persistent softness.
The more consequential headline risk, however, lies in the United States. The advance Q4 GDP print stands out. While backward-looking and heavily estimate-based, it still carries the potential to influence how the dollar closes the week. An upside surprise would reinforce the narrative of U.S. exceptionalism. A downside miss, on the other hand, could reignite expectations for Federal Reserve rate cuts—expectations that have recently been scaled back after generally firm data and relatively hawkish FOMC minutes.
December’s core PCE deflator rarely delivers genuine surprises these days. Enhanced data mapping has largely diminished its shock factor, shifting attention toward the consumption and income components instead. Markets will scrutinize the consumption data for signs that recent weakness in goods demand has spilled into services, while income figures should provide a clearer indication of households’ capacity to sustain spending.
US flash PMIs, meanwhile, have produced inconsistent market reactions and are often overshadowed when more significant releases land on the same day. Broadly speaking, they have tended to exaggerate the signal seen in ISM surveys. As a result, a stronger market response may emerge if there are clear signs of softening—particularly within the services sector.
Weekend Risk Premium Builds
Beyond the dense data schedule, traders also face mounting tail risks heading into the weekend. A ruling from the Supreme Court of the United States on the legality of tariffs imposed under the International Emergency Economic Powers Act (IEEPA) could arrive around 10 a.m. U.S. time, although there is no certainty a decision will be issued today. Even the possibility is sufficient to keep markets cautious, given the potential implications for Treasury yields and overall risk sentiment.
At the same time, Donald Trump has set a 10-day deadline for Iran to reach a deal or face potential military action. Considering the risks to global energy supply—and the United States’ position as a major energy producer—any pre-emptive strike would likely support the dollar against European currencies, particularly if it sparks a renewed wave of risk aversion.
Regarding tariffs, the market reaction may remain relatively muted regardless of the court’s decision—unless investors begin to question whether any shortfall in government revenues can be covered through alternative channels. Should doubts arise on that front, both the dollar and longer-dated Treasuries could face meaningful downside pressure as fiscal concerns move to the forefront.
Dollar Catalysts Return to Center Stage
Underscoring the significance of the upcoming data and event risk, the US Dollar Index (DXY) has shown a notably tight correlation over the past week with Fed rate-cut expectations, front-end yield differentials, US two-year Treasury yields, and even Brent crude, as illustrated in the middle panel of the chart above. In practical terms, the dollar has reverted to trading primarily as a rates-and-yields narrative, with an added layer of sensitivity to energy prices.
Yet the 20-day correlation metrics shown on the right paint a much less compelling picture. Over the past month, these relationships have been weak and statistically insignificant, serving as a reminder that the recent alignment may prove temporary rather than structural.
GBP/USD Faces Growing Downside Pressure
As discussed in earlier analysis this week, the release of key UK labour market and inflation figures acted as the catalyst that pushed GBP/USD out of its consolidation phase. Combined with firm U.S. data, the move triggered a decisive break below multiple technical markers, including the November uptrend and the 50-day moving average, before finding support at the 200-day moving average. Whether assessed through pure price action or momentum indicators, the bias now tilts toward increasing downside risk.
The 14-period RSI continues to trend lower below the 50 mark, while MACD has crossed beneath its signal line and moved into negative territory—both reinforcing the build-up of bearish momentum. As a result, selling rallies appears more favorable than buying dips. That said, the pair’s proximity to the 200DMA provides a clearly defined reference point for structuring trades as incoming data and headlines shape sentiment.
A sustained break below the 200DMA would strengthen the bearish case, opening the door for short positions with stops placed just above the average. Initial downside targets would sit at 1.3371, followed by 1.3300 and 1.3250. Conversely, if price manages to hold above the 200DMA, the setup could shift tactically. Long positions above the level, with stops placed beneath, would target 1.3535—a zone where several technical indicators, including the 50DMA, currently converge. A reclaim of that area would undermine the newly established bearish bias and shift directional risks back toward a sideways-to-higher outlook.
Triangle Formation Brings Breakout Levels Into View
With EUR/USD coiling within a descending triangle and momentum indicators drifting lower, downside risks appear to be gradually building. A decisive break beneath the confluence of the 50-day moving average and horizontal support at 1.1768 may prove pivotal in unlocking further weakness. Thursday’s doji candle aligns with that narrative, highlighting a degree of indecision among market participants at a technically sensitive juncture.
While the bearish case in GBP/USD looks more straightforward—given recent UK data and the repricing of Bank of England rate expectations—the outlook for the euro is less clear-cut. That ambiguity reinforces the importance of upcoming data and headlines in shaping near-term direction. RSI (14) has slipped just below 50, offering a neutral-to-soft signal, while MACD has rolled over but remains marginally above zero, underscoring the lack of decisive momentum so far.
The descending triangle structure keeps the downside break scenario firmly in focus, but confirmation is still required. A sustained break and close below the 50DMA/1.1768 area would strengthen the bearish case, with short positions targeting 1.1684 initially, followed by the 200-day moving average. Stops could be placed just above the broken support zone for protection.
Conversely, if the pair manages to hold this confluence area, a tactical long setup may be considered with tight stops below, initially targeting the January downtrend line. Should price test but fail to clear that trendline convincingly, it may favor squaring positions or re-establishing shorts with stops above, aiming for a retest of the 50DMA/1.1768 region. A clean upside breakout, however, would alter the landscape, opening scope toward 1.1837 and potentially 1.1918, shifting directional risks back toward a sideways-to-higher bias.
Here’s what you need to know for Friday, February 20:
The US Dollar Index (DXY) maintains its upward momentum, hovering near 98.00 after reaching a near one-month high on Thursday. The economic agenda for Friday features preliminary February Purchasing Managers’ Index (PMI) data from Germany, the Eurozone, the UK and the US. The spotlight, however, will be on the first estimate of fourth-quarter Gross Domestic Product (GDP) growth and the December Personal Consumption Expenditures (PCE) Price Index, both to be released by the US Bureau of Economic Analysis.
The US Dollar outperformed major peers on Thursday amid a risk-off market tone fueled by rising tensions between the US and Iran. According to BBC, US President Donald Trump warned that Iran must strike a deal or face serious consequences. Iran, in communication with UN Secretary-General Antonio Guterres, stated it does not seek conflict but would not tolerate military aggression. Iranian officials also reportedly cautioned that any US military move over the nuclear issue would be met with a decisive response. Early Friday, US stock index futures were modestly higher.
The US economy is expected to have expanded at an annualized pace of 3% in Q4, following a 4.4% increase in the prior quarter. Meanwhile, the core PCE Price Index — the Federal Reserve’s preferred inflation gauge — is forecast to rise 2.9% year-over-year in December, up slightly from 2.8% in November.
EUR/USD, which closed lower on Thursday, remains under pressure early Friday, trading near 1.1750. PMI figures from Germany and the Eurozone are anticipated to continue signaling expansion in private-sector activity for February.
GBP/USD extended its decline for a fourth straight session on Thursday and trades below 1.3450, marking its weakest level since late January. Data from the UK’s Office for National Statistics showed that Retail Sales climbed 1.8% month-over-month in January, significantly beating the 0.2% consensus estimate.
USD/JPY continues its weekly advance and holds comfortably above 155.00 in early Friday trading. Japan’s Prime Minister Sanae Takaichi stated that necessary expenditures would largely be financed through the initial budget, adding that efforts would be made to gradually reduce the debt-to-GDP ratio and restore fiscal discipline. Japan’s National Consumer Price Index rose 1.5% in January, down from 2.1% in December.
Gold benefited from safe-haven demand on Thursday but struggled to build momentum amid broad USD strength. XAU/USD edges higher during the European session on Friday, trading above $5,000.
In Australia, flash data from S&P Global showed the Composite PMI easing to 52 in February from 55.7 in January. AUD/USD largely brushed off the release and was last seen slightly lower on the day near 0.7050.
The United Kingdom is set to release its preliminary February Purchasing Managers’ Index (PMI) figures, with the data scheduled to be published by S&P Global on Friday at 09:30 GMT.
The Services PMI is forecast at 53.6, slightly lower than January’s reading of 54.0, signaling a modest slowdown in services sector growth.
Potential Impact on GBP/USD
If the Services PMI prints in line with expectations, GBP/USD could face pressure, as a softer services reading may counterbalance the recent strength seen in UK Retail Sales.
UK Retail Sales rose 1.8% month-over-month in January, well above December’s 0.4% gain and surpassing the 0.2% market forecast. Core Retail Sales increased 2.0% over the same period, improving from a 0.3% rise previously and exceeding expectations for a 0.2% uptick.
However, the pair may remain under strain as the US Dollar stays firm following the release of the January meeting minutes from the Federal Open Market Committee. The minutes revived speculation that the Federal Reserve could consider further rate hikes if inflation proves persistent. Although most officials favored holding rates steady, only a minority supported a cut, and policymakers suggested easing could be appropriate if inflation slows as projected.
From a technical standpoint, GBP/USD has stabilized after rebounding from daily losses, hovering near 1.3460 at the time of writing. Daily chart analysis points to a developing bearish tone, with the pair trading below an ascending channel formation. Immediate support is located near the two-month high of 1.3344. On the upside, resistance is seen at the 50-day EMA around 1.3524, followed by the nine-day EMA near 1.3548.
USD/JPY is consolidating Wednesday’s strong advance, hovering near the 155.00 mark early Thursday. The bullish bias remains intact as concerns over Japan’s fiscal outlook and a generally positive market sentiment continue to weigh on the safe-haven Japanese Yen.
At the same time, the latest FOMC Minutes revealed divisions among Fed officials regarding the need and timing of additional rate cuts amid lingering inflation risks. This uncertainty lends support to the US Dollar, providing an added tailwind for the pair.
USD/JPY Technical Overview
The US Dollar (USD) is trading with a mild bullish bias against the Japanese Yen (JPY) this week, hovering near the top of the 153.00 range. However, the pair remains confined within its weekly boundaries, as resistance around 154.00 continues to cap upside attempts ahead of the release of the minutes from the US Federal Reserve’s latest meeting.
Fundamental Overview
The Federal Reserve kept its benchmark rate unchanged at 3.5%–3.75% and signaled that policy is likely to remain steady in the near term. The meeting minutes are expected to underscore divisions within the committee—differences that are drawing added attention after last week’s softer U.S. inflation data and disappointing jobs report.
On Tuesday, Chicago Fed President Aistan Goolsbee pointed to those internal splits, noting that if inflation continues to ease, the central bank could lower rates multiple times this year.
In Japan, weak fourth-quarter GDP data released Monday have renewed worries about the country’s economic prospects, reinforcing Prime Minister Sanae Takaichi’s push for substantial fiscal stimulus and tax cuts.
Meanwhile, the International Monetary Fund cautioned that reducing the consumption tax could strain public finances and urged the Bank of Japan to tighten monetary policy further to keep inflation in check. As a result, the yen’s recent bullish momentum has faded somewhat, offering relief to the previously pressured U.S. dollar.
The US Dollar Index (DXY) is taking a breather after climbing to a more than one-week high in the previous session, trading in a tight range around 97.70 during Thursday’s Asian session and holding steady on the day.
Minutes from the Federal Reserve’s January meeting showed policymakers split over the timing and need for further rate cuts, given lingering inflation concerns. While some officials suggested additional easing could be appropriate if inflation cools as projected, others warned that cutting rates too soon might jeopardize the Fed’s 2% target. The relatively less dovish tone has helped curb expectations for aggressive policy easing and continues to lend support to the US dollar.
The upbeat January Nonfarm Payrolls report released last week has also reinforced the case for a cautious approach from the Fed, further underpinning the greenback. In addition, reports that the US military could be ready to strike Iran as soon as this weekend are keeping geopolitical risks elevated, sustaining demand for the dollar’s safe-haven appeal.
However, markets are still pricing in the likelihood of at least two Fed rate cuts in 2026. Softer US consumer inflation data released last Friday, combined with a generally positive risk tone, has limited stronger bullish momentum in the dollar. Attention now turns to Friday’s US Personal Consumption Expenditure (PCE) Price Index, which may offer fresh direction for the DXY.
GBP/USD is struggling to stage a meaningful rebound after dropping to a four-week low in Thursday’s Asian session, with the pair hovering just below the 1.3500 psychological level and appearing vulnerable to further losses. It is currently consolidating declines recorded over the past three days within a tight range near weekly lows.
The British pound remains under pressure amid growing expectations that the Bank of England will deliver a rate cut at its March meeting. Those bets were reinforced by weaker UK employment data and a slowdown in consumer inflation to its lowest level in nearly a year. Combined with a firm US dollar, this keeps the near-term bias tilted to the downside for GBP/USD.
Meanwhile, minutes from the Federal Reserve’s January meeting revealed divisions among policymakers regarding the timing and need for additional rate cuts, given persistent inflation concerns. While some officials signaled that easing could be appropriate if inflation continues to cool, others warned that premature cuts might jeopardize the Fed’s 2% target. The relatively less dovish tone has helped underpin the US dollar.
Geopolitical tensions also remain in focus, with reports suggesting the US military could be ready to strike Iran as soon as this weekend. Such risks have supported safe-haven demand for the greenback, allowing it to hold onto recent gains and reinforcing the case for an extension of the pair’s weekly downtrend. Any attempted recovery in GBP/USD may therefore attract fresh selling interest.
Traders now turn to Thursday’s US data releases, including weekly initial jobless claims, the Philadelphia Fed Manufacturing Index, and pending home sales. Speeches from key FOMC members are also due later in the North American session, though attention will ultimately center on Friday’s US Personal Consumption Expenditures (PCE) Price Index for clearer policy direction.
THE ETERNAL SOVEREIGN 