Forex News

United States (US) President Donald Trump said that he had some strong talks over the Iran war and that they’ll see where the talks lead. Adding that if the talks can carry through, the conflict will end, speaking to reporters before boarding his presidential plane on Monday.

Key takeaways:

We have had strong talks.

We'll see where talks lead.

Have major points of agreement.

Witkoff, Kushner had talks.

If they carry through, will end conflict.

Discussions on Sunday into evening.

They want to make a deal, we want to make a deal too.

Will talk today probably by phone.

Hope to meet soon.

Hope to settle this.

Talked to top leadership.

US talked to Iranian top respected leader.

Have not heard from ayatollah's son supreme leader.

I don't want him to be killed.

Don't know if he is living.

Looking for no nuclear weapons, peace in Middle East.

Want nuclear dust, have agreed to that.

Want no enrichment, and want enriched uranium.

If deal happens, it's a great start for Iran and great for region.

Israel will be very happy with what we have.

Talked to Israel a little while ago.

Can't guarantee a deal.

They called, I didn't call.

Very easy to take enriched uranium ourselves if we have a deal.

We don't talk strategy.

Think it was an imminent threat.

They have no telecommunication so imagine they have a lack of communication.

I don't consider Khamenei's son the leader.

Are 15 points of agreement. They have agreed to no nuclear weapon.

Maybe joint leadership. Will be very serious form of regime change.

Maybe we find a leader like we did in Venezuela.

I want to have as much oil in the system as possible.

Don't think they are getting any oil money.

The price will drop like a rock as soon as there's a deal.

Strait of Hormuz will be opened very soon if there's a deal.”

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MUFG analysts see recent Yen weakness as fundamentally justified and expect further downside for the Japanese Yen if the Middle East crisis persists. They argue terms-of-trade deterioration, rising global yields, and increased unhedged foreign equity buying by Japanese households are undermining the currency. MUFG warns USD/JPY could break key resistance and retest the 2024 high near 161.95.

Yen fundamentals deteriorate as crisis deepens

"Since Friday 13th March we have had five separate occasions when Finance Minister Katayama has spoken specifically on foreign exchange, indicating that the government was concerned over the level of the yen and implying that there was a high threat of intervention. Last Monday, Katayama stated that the recent moves of the yen did not reflect the fundamentals and that the MoF would “fully respond” to excessive yen moves."

"The yen rebounded last Thursday in response to the BoJ policy announcement and Governor Ueda’s press conference. However, nearly the entire move reversed on Friday and it’s clear that short-term short yen positions were liquidated on Thursday given Governor Ueda was not as dovish as expected but the speed in which that move reversed underlines the near-term deterioration in yen fundamentals."

"... the terms of trade shock will naturally reduce expectations of a lower USD/JPY while the Fed is now priced at just 50% chance of one cut. In Europe, both the ECB and the BoE are now priced to potentially deliver three to four 25bp rate hikes while the RBA has already delivered two with three more hikes now expected. Global yields are again diverging from Japan and hedging costs are rising not falling which reinforces short-term downside risks for the yen."

"The hope must be that rhetoric will cap the upside. But as is always the case, rhetoric loses its value over time and if we see further energy price rises this week (more likely than not) then USD/JPY will be through the key level and testing the 2024 high of 161.95."

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

Societe Generale economists Fabien Bossy, Michel Martinez, Anatoli Annenkov and Sam Cartwright argue that the ECB is edging toward discussing early insurance rate hikes after the recent energy shock. They see around 50bp of room before policy becomes restrictive and stress that upcoming PMIs, inflation data, energy prices and financial conditions will be crucial for decisions at the 30 April meeting and beyond.

ECB weighs oil shock and early hikes

"For the ECB to feel comfortable delivering early hikes, it will want to see a clearly larger shock to prices than to growth."

"However, earlier market hikes (than what we have), the spelled out upside risk to inflation and the two adverse scenarios suggest that the bias is for early rate hikes."

"All of this suggests that the ECB may have a bias to move early, at least to an upper end of a neutral policy stance, linked to the memory and embarrassment from 2022 when the ECB started hiking late, when inflation stood at 8.6%."

"We think the ECB has a margin of around 50bp to raise rates before moving clearly into a restrictive policy stance. This would allow an early 25bp insurance hike in April or June, with another following the summer."

"If production shows only a slight impact (that’s our expectation) but prices pressures shoot up, the need for an early hike will be easier to defend."

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

• USD/JPY drops sharply following a shift in tone from the White House on Middle East tensions.
• Easing geopolitical risks reduces demand for safe-haven flows into the US Dollar.
• The Japanese Yen remains supported by tightening expectations and intervention risks.

USD/JPY falls by 0.40% on Monday and trades around 158.60 at the time of writing, after dropping from the 159.60 area to an intraday low near 158.25, as the US Dollar (USD) weakens following an unexpected geopolitical development.

The move comes after US President Donald Trump announced a postponement of potential military strikes on Iranian energy infrastructure, citing “productive” discussions aimed at de-escalating tensions in the Middle East. This marks a sharp contrast with earlier threats of escalation, which had supported the US currency through its safe-haven appeal.

In immediate reaction, the US Dollar Index (DXY) comes under pressure and drops to near 99.20, reflecting a decline in demand for the Greenback. The relative easing of tensions reduces the attractiveness of defensive assets, as investors reassess short-term geopolitical risks.

However, uncertainty remains elevated. Reports from Iran’s Fars News Agency indicate that no direct or indirect communication is taking place with Washington, highlighting ongoing divergences and limiting market visibility. This helps explain the partial rebound of the US Dollar after its initial decline.

On the Japanese side, the Japanese Yen (JPY) continues to benefit from structural support. Authorities maintain a vigilant stance on foreign exchange volatility, while the Bank of Japan (BoJ) keeps a relatively hawkish bias. Governor Kazuo Ueda recently reiterated that further rate hikes remain possible if inflation evolves in line with expectations.

At the same time, intervention risks are increasing as the pair trades near levels not seen since the 2024 highs. This prospect keeps market participants cautious and caps further upside in USD/JPY.

In this environment of relative geopolitical easing and lingering uncertainty, USD/JPY is likely to remain highly volatile in the near term.

TD Securities strategists Robert Both and Emma Lawrence expect the Bank of Canada (BoC) to keep the overnight rate at 2.25% throughout 2026, despite markets pricing significant tightening. They argue higher energy prices linked to US strikes on Iran are a shock the BoC can largely look through, with policy normalization only starting in early 2027.

BoC seen sidelined despite market repricing

"We believe the Bank of Canada has reached the end of its easing cycle and look for them to hold the overnight rate at 2.25% through 2026, before a return to neutral in early 2027."

"Higher energy prices resulting from US strikes on Iran and subsequent threats to global crude supply have introduced a new shock to the Canadian outlook, although we believe the Bank can remain patient as it waits for more clarity on the geopolitical backdrop and spillovers to the domestic outlook."

"We expect the Bank to look through the headline inflation shock, while the current environment of excess supply should help to absorb the incremental boost to growth."

"We continue to look for the Bank to stay on the sidelines through 2026, before hiking in 2027Q1 to bring policy back to neutral."

"Senior Deputy Governor Rogers is set to discuss the economic outlook in a speech to the Brandon Chamber of Commerce on Thursday, March 26th, where markets will also look for any comments on the recent shift in near-term rate expectations with over 75bps of tightening priced for the end of 2026."

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

• USD/CAD trades flat on Monday, even as the US Dollar softens following Trump’s decision to postpone planned strikes on Iran.
• Elevated Crude Oil prices continue to provide underlying support to the Canadian Dollar.
• Ongoing uncertainty around the Middle East conflict keeps volatility elevated across global markets.

The Canadian Dollar (CAD) struggles for direction against the US Dollar (USD) on Monday, even as the Greenback weakens following US President Donald Trump’s decision to postpone planned strikes on Iranian energy infrastructure

At the time of writing, USD/CAD trades near 1.3715 after briefly hitting an intraday low of 1.3683 in the immediate reaction to Trump’s comments.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 99.37 after pulling back from an intraday high of 100.15.

Trump said he had instructed the Department of War to postpone planned strikes on Iranian power plants and energy infrastructure for five days, subject to the outcome of ongoing discussions, Reuters reported.

Crude Oil prices fell sharply on the news, with West Texas Intermediate (WTI) falling nearly 12% in the immediate reaction before trimming losses to around 7.5%. At the time of writing, WTI is trading near $90, after touching an intraday low of $83.99.

While the move has temporarily eased further escalation risks, uncertainty around the conflict remains high. Iran’s Fars News Agency, citing sources, said there are no direct communications with the US, nor through intermediaries.

At the same time, Iran’s Foreign Ministry, cited by Mehr News Agency, said Trump’s remarks are aimed at lowering energy prices and buying time for military plans.

Despite the intraday decline, Oil prices remain relatively high, helping limit downside pressure on the commodity-linked Loonie, as Canada is a major crude exporter.

Traders also digested comments from Federal Reserve (Fed) officials. Fed Governor Stephen Miran said, “We shouldn’t make policy based on short-term headlines,” adding that he does not see a need to consider rate hikes at this stage.

Chicago Fed President Austan Goolsbee said Oil shocks are “typically stagflationary,” raising both inflation and unemployment. He added that rates could come down by the end of 2026, but “we need more proof on inflation.”

BNP Paribas strategists expect the US economy to grow above potential in 2026, with GDP at 2.9% and inflation at 3.0%, keeping the Federal Reserve on hold after three cuts in 2025. They project the Fed Funds target range at 3.5%-3.75% through 2026. Against this backdrop, strategists expect the Dollar to continue depreciating versus the Euro.

Fed on hold as Dollar softens

"The US economy is expected to grow above its potential pace in 2026, with an average annual growth rate of +2.9%, a yearly improvement (+2.1% in 2025)."

"The inflation overshooting of the target is set to continue (+3.0% in 2026) until at least the end of 2027 due to tariffs – although the impact of these appears to be less significant than expected – and the rise in oil prices."

"The rebalancing of risks surrounding the Fed's dual mandate and its emphasis on the ‘employment’ component has triggered a new cycle of rate cuts."

"The FOMC implemented three rate cuts (-75 bps cumulative) in total in 2025, and we expect the Fed Funds target range to be held steady at 3,5% - 3,75% throughout 2026."

"We expect the dollar to continue depreciating against the euro."

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

ING’s Francesco Pesole notes that EUR/GBP is trading modestly above his team’s short‑term fair value estimate. While Bank of England communication and UK data, including PMIs and inflation, could move rate expectations, he argues that unstable global risk sentiment is likely to cap significant downside in EUR/GBP, limiting the potential for sustained Pound outperformance.

Risk sentiment caps EUR/GBP downside

"Today, we’ll hear from a dove (Piero Cipollone) as well as Chief Economist Philip Lane. President Christine Lagarde is due to deliver remarks on Wednesday and there are plenty of other speakers to watch."

"While Bank of England policymakers aren’t as active in off-meeting comments as Fed or ECB members, we’ll hear from Chief Economist Huw Pill tomorrow, and from Megan Greene, Sarah Breeden and Alan Taylor later this week. Here, rate expectations should also be very sensitive to any remarks."

"On the data side, UK inflation for February is published on Wednesday but should not matter much given the March developments so far. Tomorrow’s PMIs will be more interesting."

"EUR/GBP is around 0.5% above its short-term fair value in our estimates, but risk sentiment instability argues against major downward corrections."

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

OCBC highlights that the Bank of England’s (BoE) latest communication has triggered aggressive market repricing, with almost 85 bps of hikes now priced for 2026. This makes the bank’s previously expected BoE cut in 3Q26 less certain, with an extended hold more plausible. Forecasts still show GBP/USD broadly stable around 1.33–1.35 over the next year.

BoE hawkish risk but growth concerns

"The BoE’s message was straightforward: policy is on hold, but rate hikes are possible if needed."

"Markets reacted aggressively, pricing almost 85bp of hikes for 2026."

"This makes our expected BoE cut in 3Q26 less certain, with an extended hold now more plausible."

"While hawkish risks to our BoE and ECB forecasts exist, the scale of market repricing looks excessive relative to the growth slowdown that would follow if energy prices remain elevated."

"Higher oil is not just an inflation shock—it is also a growth drag, a classic stagflation mix. This week’s March PMIs and other sentiment surveys will offer the first read on the damage. The numbers will likely soften, which may not bode well for risk assets."

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