Forex News

MUFG’s Senior Currency Analyst Michael Wan highlight that a Strait of Hormuz closure would hit India through Oil, Liquified Petroleum Gas and Natural Gas Liquids shortages, with spillovers to fertiliser, food production and inflation. The bank estimates every US$10/bbl Oil increase cuts GDP growth by 0.1–0.2pp and lifts inflation by about 0.2pp, with sustained US$100/bbl Oil likely pushing FY2026/27 growth below 6.5% and inflation above 4.5%.

Energy shortages threaten stagflation risks

"This time is different in this crisis - it is not just about higher oil prices but a potential looming energy shortage, with India and Asia disproportionately hit by a prolonged Strait of Hormuz closure: While this applies to the rest of Asia as well, the vulnerability specifically in India’s case comes from Liquified Petroleum Gas (LPG), with virtually all of India’s LPG and Natural Gas Liquids imports coming from the Middle East."

"In addition, 60% of India’s imports of natural gas comes from the Middle East, and in particular Qatar. With natural gas a notoriously difficult energy product to store and also transport, the potential for a prolonged disruption is also significant."

"Both these factors in natural gas and LPG shortages could have spillovers to other areas such as fertiliser and food production, and as such growth and inflation as well."

"Overall, we estimate that every US$10/bbl increase in oil prices cuts GDP growth in India by around 0.1-0.2pp and raises inflation by around 0.2pp in India. These historical sensitivities however likely under-estimates the macro impact, because the specific transmission mechanisms in this crisis may not just be about oil prices, but also includes potential energy shortages, meaningful negative indirect spillovers across sectors over time, coupled with non-linear effects as oil prices rise above certain thresholds."

"Our current GDP forecasts for India is 7% for FY2026/27, and if oil prices rise above our baseline assumption of US$70/bbl say to US$100/bbl on a sustained basis, growth will likely come in below 6.5% for instance."

"Again, if oil prices were to rise to US$100/bbl, average inflation in India will likely rise above 4.5% for FY2026/27."

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

ING’s Francesco Pesole highlights the Australian Dollar as a key G10 outperformer, supported by strong RBA hike expectations and high Oil prices. Markets now assign a 70% probability to a 25bp hike next week, with AUD/USD seen targeting 0.7200 if equities hold up. However, aggressive positioning raises the risk of a post‑decision correction.

RBA pricing lifts Aussie but risks build

"The Aussie dollar remains the big winner in G10."

"Equity instability remains a major correction risk for AUD, but we must also note that markets are turning rather aggressive in pricing another RBA hike on 17 March."

"The implied probability of a 25bp increase next week is now 70% in the Cash Rate future market, and economic consensus also seems to be aligning with the hike call."

"That is offering more tailwind to AUD, with CME reporting a large surge of call option volume driven by aggressive speculative flows ahead of the RBA announcement."

"In a scenario where oil prices remain high, but equities show more signs of relative resilience, 0.7200 appears to be a very reasonable target for AUD/USD going into the RBA decision."

"We could then see a sell-the-fact correction given aggressive positioning and the RBA striking a cautious tone on further tightening, given high uncertainty."

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

Brown Brothers Harriman’s (BBH) Elias Haddad argues the US Dollar is supported in the short term by haven flows and elevated Dollar funding needs during market stress. However, the bank maintains a structural bearish view on the Dollar, citing declining confidence in US trade and security policy, worsening fiscal credibility, and increasing politicization of the Federal Reserve.

Short term support, long term downside risks

"In the short term, USD can continue to benefit from haven bid driven by dollar funding needs."

"Demand for short-term USD funding tends to spike during periods of stress due to the dollar’s dominant role in the global financial system (trade invoicing, cross border lending, global bond issuance, FX reserves). When stress hits, foreign market participants scramble for dollar to secure liquidity to roll over debt and meet liquidity needs."

"Structurally, we remain bearish USD because of fading confidence in US trade and security policy, worsening US fiscal credibility, and the ongoing politicization of the Fed."

"The US Trade Representative's office initiated yesterday Section 301 of the Trade Act to bypass the legal constraint imposed by the recent Supreme Court (SCOTUS) tariff ruling. The countries under investigations are China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India."

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

Societe Generale analysts describe Brent as having broken out of a large base and accelerated towards $120 before a steep pullback. The contract is holding above $81, with an upside gap near $93.80 and the $120 pivot high seen as a key hurdle. Ongoing Gulf supply risks keep the focus on these technical levels.

Oil holds above key support band

"Crude and nat gas prices took off again following the new developments in the Gulf, compromising exports from Oman and tanker movements in Iraqi waters."

"Brent recently broke out of a large base formation and accelerated higher towards $120. A steep pullback followed, but Brent has held above the upper end of the prior consolidation zone near $81."

"An upside gap has also formed on the daily chart. In the short term, price action may remain within a broad range."

"The recent pivot high around $120 stands as an interim hurdle, a break above this may lead to further extension of the uptrend."

"The up‑gap near $93.80 and $81 could act as near‑term supports."

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

ING strategists Warren Patterson and Ewa Manthey report LME Aluminium trading near four-year highs as Middle East conflict-driven supply risks support prices. Rising cancelled warrants and accelerating stock withdrawals point to growing physical tightness, particularly at Port Klang. They argue Aluminium remains structurally tight versus other base metals, suggesting limited downside despite broader macro headwinds.

Supply risks and tight stocks support prices

"LME aluminium prices edged higher, trading around four-year highs, as supply disruption risks linked to the Middle East conflict support the market. The situation remains unstable, leaving aluminium highly sensitive to geopolitical headlines and keeping volatility elevated."

"Signs of physical tightness are becoming increasingly pronounced. Cancelled warrants jumped by 96,050t to 178,600t earlier this week, the largest daily increase since May 2024."

"This lifts cancellations to around 40% of total LME aluminium inventories, up sharply from just 9% at the start of the month."

"Aluminium remains structurally tight relative to other base metals. Accelerating stock withdrawals suggest the downside should remain limited despite broader macro headwinds."

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