Forex News

Rabobank’s Senior FX Strategist Jane Foley highlights that despite recent Pound resilience, UK risks remain elevated. Foley warns that an energy shock could add around 65 bps to UK CPI by mid-year, limiting BoE easing. Combined with high public debt, fragile growth, and potential political instability around Labour and PM Starmer, Foley expects Sterling-supportive short-covering to fade over the coming months.

Sterling support seen losing momentum

"There is no shortage of gloom in the UK press at present regarding the potential for higher oil and gas prices to impact domestic inflation, growth and public finances. Issues related to public finances have not strayed too far from the headlines since the Truss mini-budget in September 2022. The UK’s high public debt, Chancellor Reeves’ limited (though improved) fiscal headroom and the sensitivities of the gilt market all make frequent forays into the mainstream press."

"Thus, concerns as to how a prolonged spike in gas prices could erode the Chancellor’s headroom in addition to undermining UK growth have been widely discussed in recent days. Although there has been a pullback in oil and gas prices today and we will be closely monitoring the situation, it is Rabobank’s concern that the energy crisis could add around 65 bps onto UK CPI inflation by mid-year."

"In our view this could leave the headline rate at 2.7%, rather than at the previously forecast level of 2%. If the energy market extends today’s more stable tone, we will re-evaluate, but for now we are doubtful if the BoE will be able to cut rates any further this year."

"Moreover, May brings local elections for England and parliamentary elections for Wales and Scotland. A poor showing for Labour could trigger a leadership election for Starmer. The possibility of a strong left-wing candidate would worry the markets particularly."

"If higher wholesale energy prices persist into May, popular opinion against Starmer could deteriorate further and enhance these risks. Faced with this possibility, we would expect the recent positive impact on GBP from position adjustment to run out of steam."

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

ING’s Chris Turner notes that AUD/USD has been resilient, outperforming other high-beta currencies as equities have avoided a major sell-off and Australia benefits from stronger terms of trade as an energy exporter. A hawkish Reserve Bank of Australia and better-than-expected Chinese trade data are also supportive, with ING watching whether AUD/USD can break above 0.7150 year-to-date highs.

Australian Dollar resilience and key 0.7150 level

"AUD/USD is outperforming again and has delivered a very resilient performance as a high-beta currency. The reason it has held up is probably because we have yet to see a major equity sell-off, even though there was a hint of that a week ago."

"And the positives also come from Australia's position as an energy exporter (terms of trade up sharply) and a proven hawkish Reserve Bank of Australia."

"AUD/USD also saw some positive news overnight from the Chinese February trade data, where imports surprised on the upside. Let's see whether AUD/USD can push through the highs of the year at 0.7150."

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

Nordea’s Senior Macro and FX Strategist Sara Midtgaard notes that higher Oil and gas prices plus Norges Bank’s daily NOK purchases have recently supported the Norwegian Krone, with a risk that EUR/NOK briefly drops to 11 in March. However, she expects this NOK strength to fade, with EUR/NOK seen returning toward 11.25 over three months.

Temporary NOK boost from Oil and flows

"The NOK has already received some support in January and February from higher oil prices and Norges Bank’s daily NOK purchases. Nevertheless, the currency’s movements over the past week have been relatively modest given the sharp rise in oil prices throughout March."

"A further increase in oil and gas prices could raise the need for Norwegian oil and gas companies to purchase NOK in order to pay petroleum taxes. At the same time, Norges Bank continues to buy NOK at a pace of NOK 600 million per day. This could leave room for some additional NOK strength during March."

"We expect Norges Bank to revise the interest rate path significantly higher at the March meeting, indicating a clear probability of a rate hike. Such a move would imply a larger upward revision to the rate path than currently priced by the market. While this could provide some support to the NOK, experience suggests that exchange rate reactions to monetary policy meetings are often relatively short-lived."

"There is a risk that EUR/NOK could fall to 11 during March. However, we expect such a move to be temporary and forecast that EUR/NOK will move back towards 11.25 over the next three months."

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

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Canadian Dollar is modestly firmer against a softer Dollar, supported by narrower 1-year swap spreads and resilient risk appetite despite lower Oil. USD/CAD remains well above an estimated fair value near 1.3375, with analysts judging downside CAD risk limited and technicals pointing to firm support in the low 1.35s within a broader consolidation.

CAD resilient with limited downside risk

"The CAD is maintaining a small gain on the generally softer USD as lower crude prices are offset by the rebound in risk appetite."

"The CAD has found some additional support at the margin from slightly narrower 1Y swap spreads over the past week but may struggle to gain a stronger sense of direction as market attention shifts away from geo-political tensions for the moment at least."

"Despite the CAD’s resiliency, spot is trading quite significantly above fair value still (estimated at 1.3375 this morning, although it may take a day or so for the past week’s volatility to work out of the model)."

"At the very least, the risk of a sharp fall in the CAD looks limited at this point."

"Scope for USD gains is limited, however, as the broader consolidation in place since the start of Feb extends."

"Spot losses based a little below noted support at 1.3530 and, with a bullish “hammer” signal developing on the daily chart yesterday, the low 1.35 zone looks firm support for the USD in the short run"

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

TD Securities Senior Commodity Strategist Daniel Ghali highlights surprisingly weak Gold demand since the onset of the war, with OTC interest fading after the first session and volumes resembling a summer lull. Leveraged participation, ETFs, SHFE positioning and retail buying have all softened, reflecting concerns about the debasement trade, reduced Middle Eastern purchases and Gold’s now-mainstream institutional ownership.

Positioning and debasement fears cap demand

"Where are the gold flows? Since the onset of the war, we see little evidence of OTC demand kicking in beyond the first trading session."

"Our volumes-based analysis places gold demand at summer-lull levels in recent trading sessions. Levered participation has somewhat declined over this horizon, likely owing to the modest deleveraging from quant funds highlighted last week."

"ETF holdings of gold have subsided. The largest traders in SHFE gold have modestly liquidated some length. Retail demand has abated since the cohort's unprecedented purchases in January."

"The lack of inflows into gold reflect (1) concerns around the debasement trade as markets price-out Fed cuts, (2) reduced gold purchases by Middle Eastern nations; and (3) gold positioning - gold is no longer a fringe asset, and is instead now held by a large majority of institutional investors as per our analysis of 13F filings."

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

Nomura’s Global Markets Research Team argues that Switzerland’s low energy weight in CPI and hydropower reliance limit the inflation impact of higher Oil and gas prices. With inflation around 0.1% and CHF facing safe-haven appreciation, the SNB is prepared to intervene in FX markets, while keeping the policy rate at 0.00% and treating a return to negative rates as a high bar.

Safe-haven flows complicate benign inflation

"Inflation in Switzerland is close to zero (0.1% y-o-y), so some mild inflationary pressures would be welcome in the country. However, Swiss consumers are less exposed to an energy price shock than their European neighbours, as energy makes up a smaller share of the CPI basket than in the euro area (5% vs. 9%) and the Swiss electricity grid draws on significant hydropower production (though imported fossil fuels are important for the industrial sector)."

"A key concern for the SNB at present will be CHF appreciation pressures stemming from the current risk environment, which make FX intervention from the central bank possible. With the SNB policy rate at 0.00%, the SNB’s main tools to prevent deflation as a result of further CHF appreciation are a negative policy rate or FX intervention. SNB Chairman Schlegel has been clear that the bar for a negative policy rate is high. Furthermore, the SNB said in a statement last week that “in view of international developments, we are increasingly prepared to intervene in the foreign exchange market”."

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

TD Securities strategists argue the Dollar is acting as a conditional safe haven during the Iran-related shock, helped by the US economy’s relative insulation and prior short USD positioning. They see near-term USD upside as risk premia stay elevated, but maintain a bearish 2026 view given fading US growth exceptionalism, fiscal concerns and diminished haven appeal.

Dollar gains seen as tactical and temporary

"USD upside should persist while risk and uncertainty premia remain elevated, potentially echoing the price action seen in June 2025 for a few weeks until a regime shift happens in Iran with US backing or even through a prolonged but limited regional war (with lower intensity strikes spread out and no ground invasion). We are not yet changing our bearish USD view for 2026, given fading US growth exceptionalism, diminished safe-haven appeal, and the ongoing “Hedge America” trade, which may intensify after recent US actions."

"Tail risks have grown large enough to warrant attention and hence we offer a playbook for the scenario of escalation and extended conflict."

"In this scenario, the US prioritizes the inflation shock, keeping the Fed on hold, while peers face simultaneous growth and inflation shocks, pushing rate differentials further in USD’s favor. In terms of macro impact, China, Europe and EM Asia will be most exposed."

"We see scope for a near-term USD positioning adjustment, but expect some limits to escalation on both sides of the conflict, particularly in a US midterm election year. An extended war will complicate the Fed's ability to cut interest rates at a time when Trump has prioritized affordability to shore up voter support."

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

Pete Hegseth, United States (US) Secretary of War, said that Iran made a big mistake targeting its neighbors at a Pentagon briefing alongside Chairman of the Joint Chiefs of Staff General Dan Caine on Tuesday

Key takeaways:

Iran made a big mistake by targeting its neighbors.

If Iran does anything to stop the flow of oil within the Strait of Hormuz, they will be hit harder than ever.“

Caine added that they’re looking at a range of options if tasked with escorting ships through the Strait of Hormuz.