Forex News

TD Securities’ Global Strategy Team highlights that recent geopolitical tensions and a weaker 3-year auction pushed US rates higher, with attention now turning to February CPI. The bank expects core CPI to slow slightly month-on-month while remaining steady year-on-year, and sees asymmetric market reactions to surprises, with upside inflation risks if services disinflation underperforms.

CPI outlook and market reaction setup

"Rates moved higher on Tuesday following after news of Iranian mines being deployed into the Strait of Hormuz and that the US military had not escorted any oil tankers through the Strait yet. The 3y auction tailed in the afternoon by 1.1bp, with the lowest end-user takedown since the week following Liberation Day."

"On Wednesday, CPI will grab focus where we expect the print to come in near-consensus. We would expect markets to react asymmetrically, with a weaker print being ignored due to the recent oil shock, and a stronger print drawing focus to more inflation concerns excluding the conflict in Iran. The 10y reopening will also be watched for demand following Tuesday's weaker 3y auction."

"We look for core inflation to slow to 0.23% m/m in February, with the headline CPI posting a slightly firmer 0.25% gain. A slower rise in services prices along with more modest tariff pass-through should help keep the core segment under control."

"We project the core CPI stayed unchanged at 2.5% on a y/y basis; likewise for the total measure which likely moved sideways to 2.4%. We see the risks to our forecasts skewed to the upside in the event our assumption for services disinflation does not fully materialize."

"Our CPI NSA forecast at 326.762 is a whisker above the market's current fixing at 326.740."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

ING’s Francesco Pesole notes the Dollar remains closely tied to Oil volatility, with recent Brent swings driven by conflicting headlines on Middle East tensions and a potential record IEA reserve release. He argues the proposed stockpile move is only a temporary fix, and that mixed signals on de-escalation and slightly firmer US CPI could keep USD downside contained in coming days.

Oil-driven trading caps Dollar downside

"Depending on the actual size of the reserve release, we could see some capping in oil prices in the coming days. However, oil reserve release is a temporary measure and only military de-escalation can drive crude sustainably lower, and the IEA move might be sending a hidden signal to markets of few expectations for an imminent ceasefire. In our view, these mixed signals could prevent the dollar from dropping much further today unless there are some encouraging headlines on de-escalation."

"Bonds and equities are also closely tracking oil moves, making it challenging to find any alternative angle for the dollar. Nevertheless, FX volatility has not been excessive, with the relative resilience in equities acting as a stabilising anchor for high-beta currencies and perhaps limiting USD gains."

"CPI data for February are released in the US today. We expect a 0.3% MoM print for core inflation, above the consensus 0.2% MoM. This may add some pressure on US treasuries, although oil developments will remain a much bigger driver. The spillover on the dollar may prove relatively contained."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Brown Brothers Harriman’s (BBH) Elias Haddad notes that crude Oil prices are firmer as markets focus on security of shipping through the Strait of Hormuz. The International Energy Agency is considering releasing emergency reserves, which could exceed the 2022 drawdown, but BBH warns this would only be a short-lived remedy while the Strait remains largely shut, keeping energy markets sensitive to further disruption headlines.

IEA reserves offset but cannot replace flows

"USD and crude oil prices are firmer while stocks and bonds are under renewed downside pressure. The International Energy Agency (IEA) is looking to bring additional crude oil supply to the market to contain a spike in energy prices. IEA Member countries currently hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation."

"The proposed release could exceed the record 182 million barrels deployed during the 2022 Russia invasion of Ukraine."

"However, as long as the Strait of Hormuz remains all but shut, tapping IEA emergency oil reserves would only offer a short-lived remedy."

"15 million barrels per day, nearly 34% global crude oil trade, transits the Strait."

"However, it would not take much for fears to flare up again."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Japan announces the release of strategic Oil reserves ahead of a formal International Energy Agency decision.
• Germany is also preparing to release part of its reserves, according to local media reports.
• The International Energy Agency is expected to issue a recommendation on reserve releases later today.

According to Reuters, the International Energy Agency (IEA) is set to announce a recommendation regarding the potential release of emergency Oil reserves at 13:00 GMT. The move comes as governments seek to ease pressure on energy markets and contain rising fuel costs.

Japan has already confirmed it will begin releasing part of its strategic reserves as early as March 16. Prime Minister Sanae Takaichi stated that Tokyo intends to act even before a formal decision from the International Energy Agency (IEA). The plan includes releasing the equivalent of fifteen days of private-sector Oil reserves and around one month of state-held reserves.

Meanwhile, Germany is also preparing to release part of its Oil reserves, according to a report from German news agency DPA, reinforcing expectations of a coordinated international effort to stabilize the market.

Market reaction

West Texas Intermediate (WTI) US Oil reversed course following these announcements. At the time of writing, the price of WTI is down 1.50% on the day, trading around $84 per barrel.

Brown Brothers Harriman’s (BBH) Elias Haddad notes that US February CPI is due, with headline and core expected to remain at 2.4% and 2.5% year-on-year, while super core services stays stuck at 2.7%. BBH argues markets will likely look past this release, as rising gasoline prices may push inflation higher and complicate the Federal Reserve’s easing path, increasing stagflation risks.

Gasoline-driven inflation risks and Fed path

"US February CPI is up next (12:30pm London, 8:30am New York). Headline and core CPI are expected to remain at 2.4% y/y and 2.5% y/y, respectively, for a second straight month."

"Watch-out for super core services CPI (less housing), a good indicator of underlying inflation trends, which has been stuck at 2.7% y/y since November."

"Regardless, markets will look past the February CPI figures given the recent surge in gasoline prices could lift inflation sharply in coming months."

"Persistent energy price pressure could complicate the Fed’s easing path and heighten stagflation risks as US labor demand is weak."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• The US Consumer Price Index is expected to rise 2.4% YoY in February.
• Annual core CPI inflation is expected to hold steady at 2.5%.
• EUR/USD’s near-term technical outlook points to a bearish bias despite the recent rebound.

The US Bureau of Labor Statistics (BLS) will publish the February Consumer Price Index (CPI) data on Wednesday. The report is expected to show a stabilization in inflation, still above the Federal Reserve’s (Fed) 2% target.

The monthly CPI is forecast to rise 0.3%, following the 0.2% increase recorded in January, while the annualized reading is seen holding steady at 2.4%. Core CPI figures, which exclude volatile food and energy prices, are expected to come in at 0.2% and 2.5%, on a monthly and yearly basis respectively.

Although inflation data is critical for Fed officials when deciding on the next policy step, the market reaction could remain muted due to the fact that the February CPI prints won’t reflect the impact of rising crude Oil prices on inflation. After the United States (US) and Israel launched a joint military operation against Iran on February 28, the barrel of West Texas Intermediate (WTI) rose sharply from about $67 to above-$110 before correcting lower.

What to expect in the next CPI data report?

CPI figures for February are unlikely to diverge significantly from market expectations. In the past six releases, monthly core CPI readings were either 0.2% or 0.3%. Similarly, CPI was up either 0.2% or 0.3% on a monthly basis in this time frame, with the exception of a 0.4% increase recorded in August, 2025.

The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) reports painted a mixed picture in regard to input price pressures in the private sector. The Prices Paid Index component of the Manufacturing PMI survey jumped to 70.5 in February from 59 in January, while the Prices Paid Index of the Services PMI survey declined to 63 from 66.6.

Previewing the inflation data, “the February CPI report this week should begin to show a moderation in services inflation that will help build confidence for the FOMC”, said TD Securities analysts.

“Core CPI likely moderated in February to 0.23% m/m owing to a slower rise in services along with more modest tariff pass-through. We look for the headline to accelerate to 0.25% m/m as energy prices rebounded. Our forecast translates to 2.5% and 2.4% y/y for core and headline, respectively,” they explained.

How could the US Consumer Price Index report affect EUR/USD?

Markets virtually see no chance of a Fed interest rate cut in March and only price in about a 12% probability of a 25 basis-points (bps) reduction in April, according to the CME FedWatch Tool. The odds of a fourth consecutive policy hold in June, after the central bank decided to keep interest rates unchanged in January, climbed to nearly 70% in the first few days after the US-Iran war started. Disappointing labor market data, which showed a decrease of 92,000 in Nonfarm Payrolls in February, and easing crude Oil prices, however, dragged that probability back below 60%.

A significant negative surprise in the monthly core CPI print, a reading at or below 0%, could cause investors to reassess the odds of a rate cut in June and cause the US Dollar (USD) to come under selling pressure with the immediate reaction. Conversely, a reading above 0.3% in this data could boost the USD by casting doubt on a policy-easing step in June.

Still, investors could refrain from taking large positions based on this data alone, given the uncertainty surrounding the inflation outlook from March on because of the volatility in energy prices caused by the US-Iran war.

Eren Sengezer, FXStreet European Session Lead Analyst, shares a brief technical outlook for EUR/USD.

“The Relative Strength Index (RSI) indicator on the daily chart rebound from near-30 but stays below 50, suggesting that EUR/USD is yet to complete a bullish reversal. Additionally, the pair remains below the strong 1.1675-1.1700 resistance area, reinforced by the 200-day Simple Moving Average (SMA), the Fibonacci 61.8% retracement of the November-January uptrend and the 100-day SMA.”

“In case EUR/USD fails to reclaim this region, 1.1600-1.1590 (static level, Fibonacci 78.6% retracement) could be seen as the first support area before 1.1500-1.1470 (static level, beginning point of the uptrend). Looking north, technical resistance levels could be spotted at 1.1750 (Fibonacci 50% retracement) and 1.1820 (Fibonacci 38.2% retracement).”

• WTI Oil trades around $86.30 on Wednesday as geopolitical tensions in the Middle East support prices.
• G7 energy ministers support, in principle, the use of strategic Oil reserves to stabilize the market.
• The International Energy Agency could propose a record release of about 400 million barrels to ease supply pressures.

West Texas Intermediate (WTI) US Oil trades around $86.30 on Wednesday at the time of writing, up 1.20% on the day as markets remain focused on escalating geopolitical tensions in the Middle East and potential policy responses aimed at stabilizing global energy supply.

Energy ministers from the Group of Seven (G7) said in a statement on Wednesday that they support “in principle” the use of strategic Oil reserves to address current disruptions in the global Oil market. The announcement comes as Crude prices remain elevated amid fears that the war involving the United States (US), Israel and Iran could significantly disrupt energy flows from the Gulf region. However, French Industry and Energy Minister Roland Lescure said that no final decision has yet been made on releasing Oil stockpiles, noting in an interview with RMC Radio that the issue will be discussed by G7 leaders.

According to a report from the Wall Street Journal, the International Energy Agency (IEA) has proposed what could be the largest coordinated release of Oil reserves in its history, potentially reaching about 400 million barrels. The proposal was discussed during an emergency meeting held on Tuesday among officials from the IEA’s 32 member countries to assess the impact of the Middle East conflict on global energy markets.

The near-total closure of the Strait of Hormuz remains a central concern for traders. This critical maritime chokepoint normally carries roughly one-fifth of the world’s Oil supply. Iranian attacks on Oil tankers and the risk of maritime mines have significantly disrupted shipments through the corridor.

Meanwhile, military tensions continue to intensify in the region. The US Central Command reported that US forces eliminated sixteen Iranian mine-laying vessels near the Strait of Hormuz. At the same time, the Israel Defense Forces launched a new wave of strikes inside Iran after explosions were reported in Tehran, while also targeting infrastructure linked to Hezbollah in Lebanon.

Supply disruptions are already becoming visible. Several major Middle Eastern producers, including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, have collectively reduced output by more than six million barrels per day as shipping through the Strait of Hormuz remains severely constrained. In addition, the largest Oil refinery in the United Arab Emirates halted operations after being hit by a drone strike.

Analysts at Rabobank warn that current Oil prices may not yet fully reflect the risks linked to the escalating conflict around the Strait of Hormuz. According to the bank, a strategic reserve release coordinated by the IEA could temporarily ease market pressure, but it would not eliminate the deeper uncertainty surrounding the physical availability of energy supplies in the region.

MUFG’s Head of Research Derek Halpenny highlights that the Pound is currently the third best performing G10 currency since the conflict began, supported by a sharp 35 bps jump in UK 2-year yields and reduced BoE rate-cut pricing. He contrasts this with 2022’s Russia-related energy shock and warns that higher energy and food prices could pressure real incomes and inflation expectations.

Pound outperforms as BoE cuts repriced

"The performance of the pound stands out."

"In fact, the pound is the third best performing G10 currency since the conflict began, with only the Australian and Canadian dollars performing better."

"That is certainly somewhat surprising based on the most recent episode – the Russia-related energy shock in 2022."

"The MPC will certainly be more wary of cutting rates given the fact that there are already a number of hawks who were concerned, prior to this energy price spike, about the continued stickiness of underlying inflation."

"Yield certainly appears to be providing the pound with support but whether that would persist is questionable given the potential hit to real incomes."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)