Forex News

• The Dow Jones plunged over 1,000 points overnight as Crude Oil breached $100 per barrel for the first time since 2022, driven by deepening Middle East supply disruptions.
• The Dow recovered from intraday lows near 46,600 but remained firmly below Friday's closing level at the time of writing, with the S&P 500 and Nasdaq Composite also in the red.
• Airline and cruise stocks led losses as jet fuel costs spiked, while defense and energy names were among the few pockets of strength.
• February CPI data on Wednesday and January PCE on Friday headline key economic data releases this week.

The Dow Jones Industrial Average (DJIA) opened sharply lower on Monday as a weekend escalation in the US-Iran conflict sent crude Oil prices surging past $100 per barrel. At the time of writing, the DJIA was trading near 47,059, down 423 points or 0.89% on the session, after opening at 46,812 and printing an intraday low of 46,593. The S&P 500 was down approximately 1.3% near 6,653 while the Nasdaq Composite fell around 1.1% to trade near 22,146. All three major indices are now at their lowest levels of 2026. Futures had plunged more than 2% overnight before a partial recovery into the cash session open, but the bounce has so far failed to reclaim Friday's closing prices.

Oil shock sends futures into freefall overnight

West Texas Intermediate (WTI) crude Oil spiked as high as $119 per barrel late Sunday before pulling back to around $101.56, while global benchmark Brent settled near $101.81. The surge came after Saudi Arabia joined Kuwait, Bahrain, and the UAE in announcing production cuts as the blockage of the Strait of Hormuz prevented seaborne exports and pushed storage to capacity. Iraq's output from its three major oilfields has reportedly collapsed 70%, falling from 4.3 million barrels per day to just 1.3 million. The energy shock sent Dow futures down more than 1,000 points, with S&P 500 and Nasdaq 100 futures each dropping over 2% before a partial recovery heading into Monday's open. Ministers from the G7 are meeting Monday to discuss a possible coordinated release of petroleum reserves through the International Energy Agency (IEA).

Airlines and cruise lines lead the sell-off

The spike in fuel costs hammered travel stocks across the board. United Airlines (UAL) dropped over 6%, with Delta Air Lines (DAL) falling around 4.6% and Southwest Airlines (LUV) sliding roughly 4.2%. Cruise operators fared even worse. Carnival (CCL) tumbled more than 7%, Royal Caribbean Group (RCL) lost over 6%, and Norwegian Cruise Line Holdings (NCLH) declined a similar amount. Norwegian has now fallen for seven consecutive sessions, and both Carnival and Norwegian have each plunged more than 20% in March alone. Royal Caribbean is down over 14% month to date. The Dow Jones Transportation Average was on track for a 9% decline over the past three trading sessions, its worst three-day stretch since the post-tariff sell-off last April.

Defense and energy names buck the trend

While the broader market bled red, defense contractors continued to benefit from the ongoing conflict. Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX (RTX) each rose roughly 1% in early trading, extending their month-to-date gains. Meanwhile, the S&P 500 Energy sector was the only index sector in the green on the day, though gains were modest. Dow Inc. (DOW) advanced over 4% following an upgrade from RBC Capital, which sees margin upside opportunities amid disruptions in the Middle East. Chevron (CVX) was one of only four Dow components trading higher. Oil's 50%-plus monthly gain in March is on pace to be the largest since April 2020, when crude was rebounding from negative prices.

Rate cut expectations fade as inflation risks mount

The oil-driven inflationary impulse is rapidly reshaping the interest rate outlook. According to the CME FedWatch tool, markets now price a 97% probability that the Federal Reserve (Fed) will hold rates unchanged at the March 17-18 Federal Open Market Committee (FOMC) meeting, with the federal funds rate steady at 3.50%-3.75%. Rate cut odds for March have collapsed to just 3%, down sharply from the roughly 23% probability priced in as recently as mid-February. Wolfe Research has flagged that a $20 per barrel increase in Oil prices could add 0.4 percentage points to headline inflation and shave 0.1% off Gross Domestic Product (GDP). Treasury yields pushed higher on Monday, reinforcing the view that the Fed will be forced to stay on the sidelines for longer despite a deteriorating labor market backdrop. February Nonfarm Payrolls (NFP) posted a surprise decline of 92K last Friday, the first negative print in years.

A loaded economic calendar adds to market uncertainty

This week's data slate is stacked with high-impact releases that will test the inflation narrative. On Wednesday, the Bureau of Labor Statistics (BLS) publishes February Consumer Price Index (CPI) data, with consensus expecting headline CPI to rise 0.3% MoM versus 0.2% prior, and the YoY rate to hold steady at 2.4%. Core CPI, excluding food and energy, is forecast at 0.2% MoM, down from 0.3%, with the annual rate expected to hold at 2.5%. Any upside surprise would further cement expectations that the Fed stays on hold well into the summer.

On Friday, attention turns to January Core Personal Consumption Expenditures Price Index (PCE) data, the Fed's preferred inflation gauge, with consensus at 0.4% MoM and 3.0% YoY, both unchanged from December. Preliminary Q4 Gross Domestic Product (GDP) is also due Friday, expected to confirm the 1.4% annualized growth rate from the advance reading. Rounding out the week, the preliminary March University of Michigan (UoM) Consumer Sentiment Index is forecast to slip to 55.0 from 56.6, reflecting the growing drag from higher energy costs and geopolitical uncertainty on household confidence.

Dow Jones daily chart

• EUR/USD rebounds after opening the week with a bearish gap as the US Dollar retreats from intraday highs.
• Surging Oil prices revive global inflation fears, prompting traders to reassess ECB and Fed monetary policy outlook.
• Markets await US inflation data, including CPI and PCE, due later this week.

EUR/USD regains ground on Monday after opening the week with a bearish gap. The recovery comes as the US Dollar (USD) gives up earlier gains, allowing the Euro (EUR) to rebound from its lowest level in more than three months.

At the time of writing, the pair is trading around 1.1586, after touching a daily low near 1.1507 earlier in the Asian trading session. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of major currencies, trades near 99.10, easing from a daily high around 99.70.

The war between the United States, Israel and Iran continues to dominate global market sentiment, with no clear signs of de-escalation as the conflict enters its tenth day.

Escalating military strikes and retaliatory attacks across the region are disrupting oil flows through the Strait of Hormuz, keeping investors cautious and increasing volatility across the FX market

At the same time, rising Oil prices are reviving global inflation concerns, prompting traders to reassess the monetary policy outlook for major central banks.

Since Europe is a major net importer of energy, higher Oil prices could push inflation higher in the region while weighing on economic growth, raising stagflation risks. As a result, markets have started to price a tighter policy outlook from the European Central Bank (ECB).

Investors are now pricing that the ECB could deliver up to two 25-basis-point (bps) rate increases this year, compared with earlier expectations that rates would remain unchanged through 2026.

Across the Atlantic, traders have also trimmed expectations for Federal Reserve (Fed) rate cuts. Policymakers were already concerned about persistent inflation in the United States, and the recent surge in Oil prices is reinforcing the view that the Fed may need to keep interest rates higher for longer.

However, stagflation risks are also emerging in the US after last week’s weaker-than-expected Nonfarm Payrolls (NFP) report showed the economy lost jobs while the unemployment rate ticked higher, leaving policymakers in a difficult position as they try to balance inflation risks against signs of a cooling labor market.

Looking ahead, the Eurozone economic calendar is relatively light this week, leaving EUR/USD largely sensitive to US economic developments. Market attention will focus on US inflation data, with the Consumer Price Index (CPI) due on Wednesday and the Personal Consumption Expenditures (PCE) Price Index on Friday.

• GBP/USD falls 0.28% to 1.3366 as DXY climbs above 99.20.
• Oil spikes up to 30% intraday amid Strait of Hormuz disruption fears.
• Markets watch UK GDP, production data and BoE Governor Bailey's speech.

The British Pound (GBP) losses some ground versus the US Dollar (USD) on Monday as risk aversion keeps the Greenback bid, sponsored by the escalation of the Iran conflict. This triggered a sudden jump in oil prices, which are up 11%, retreating after gaining nearly 30% during Monday’s Asian session. At the time of writing, GBP/USD trades at 1.3366, down 0.28%.

Greenback appreciated on risk-off mood, rising crude prices

Most G8 FX currencies depreciated against the American currency, which, according to the US Dollar Index (DXY), posts gains of over 0.34%. The DXY, which measures the buck’s performance against six currencies, is at 99.20 after reaching a nearly three-month high of 99.69, a level last seen late in November of 2025.

The rise in Crude Oil prices, spurred by ships unable to pass through the Strait of Hormuz, triggered adjustments in Oil production amongst Gulf countries, like Iraq, Kuwait and the United Arab Emirates. The lack of signs of a de-escalation of the conflict could trigger a second wave of inflation, increasing stagflation fears.

In the meantime, G7 finance ministers plan to discuss petroleum release from its reserves according to an article in the Financial Times (FT), which could temper the jump in Oil prices.

The New York Fed Survey of Consumer Expectations (SCE) revealed that one-year inflation expectations were seen at 3% in February, down from 3.1 % in January, while both three and five-year are anchored at 3%.

Monday’s economic docket in the UK was absent, yet traders are eyeing the release of BRC Retail Sales for February. Alongside this, traders are waiting for Industrial Production data, GDP figures and a speech by the Bank of England Governor Andrew Bailey.

In the US, the schedule will feature jobs data, housing data – namely Existing Home Sales, Building Permits and Housing Starts, inflation on the consumer side and the Federal Reserve's favorite inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.

Given the backdrop and the rise of Oil prices, the US Dollar is poised to remain in the front seat due to its haven appeal. Hence, further GBP/USD downside is seen, unless the countries involved in the Iran conflict decide to end the war, which would ease inflationary pressures and improve market mood.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3392. The near-term bias looks neutral with a slight bearish tilt as spot hovers just above the clustered 50/100/200-day simple moving averages around 1.3530–1.3400 but remains capped by the descending resistance trend line from 1.3869. Price has slipped back below the recent sequence of lower highs while the upward-sloping support trend line from 1.3035 continues to hold, highlighting compression between long-term support and short-term selling pressure. The fading FXS Fed Sentiment Index, which has steadily retreated from above 123 to near 109, aligns with a softer macro backdrop for sterling against the dollar and limits the chances of a decisive upside break in the very near term.

Immediate resistance is seen at the descending trend-line zone near 1.3450, with a daily close above that area needed to reopen the path toward 1.3550 and the late swing high at 1.3695. On the downside, initial support emerges at the recent low around 1.3360, followed by 1.3300, where a break would expose the rising trend-line region projected from 1.3035 and signal an extension of the pullback. A sustained move below that dynamic support would strengthen the bearish case and shift focus toward 1.3200, while holding above 1.3360 keeps the pair locked in a broader consolidation beneath the downtrend line.

(The technical analysis of this story was written with the help of an AI tool.)

• AUD/USD rises around 0.24% on Monday, trading near 0.7040 at the time of writing.
• Stronger-than-expected Chinese inflation supports the Australian Dollar.
• The US Dollar remains underpinned by geopolitical tensions and rising Oil prices.

AUD/USD advances on Monday, trading around 0.7040 at the time of writing, up 0.24% on the day. The pair benefits from renewed demand for the Australian Dollar (AUD) as stronger-than-expected economic data from China provides support to currencies closely linked to Chinese growth.

China’s Consumer Price Index (CPI) rose by 1.3% YoY in February, sharply accelerating from 0.2% in January and marking the highest level in three years, according to data released by the National Bureau of Statistics of China. The figure came above market expectations and helped improve sentiment toward the Australian Dollar, often considered a proxy for Chinese economic momentum. Meanwhile, China’s Producer Price Index (PPI) declined by 0.9% YoY in February, compared with a 1.4% drop previously and better than the expected 1.1% fall, suggesting some stabilization in factory-gate prices.

Despite the recovery in the Aussie, the upside for AUD/USD remains somewhat limited by underlying support for the US Dollar (USD). A sharp intraday surge of more than 25% in Crude Oil prices has intensified global inflation concerns and reduced expectations of near-term interest rate cuts by the US Federal Reserve (Fed). This development, combined with persistent geopolitical tensions in the Middle East, continues to support safe-haven demand for the Greenback.

Geopolitical risks have also increased after Mojtaba Khamenei was announced as Iran’s new Supreme Leader. US President Donald Trump stated last week that the appointment would be “unacceptable”, raising fears of further escalation in the region and maintaining a cautious mood across financial markets.

Meanwhile, the US Dollar Index (DXY), which measures the value of the US Dollar against a basket of six major currencies, trades around 99.15, up 0.18% on the day. Looking ahead, investors are now focusing on the release of the US CPI data for February on Wednesday, which could provide fresh clues about the Federal Reserve’s policy outlook and influence the next direction for AUD/USD.

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Euro is weaker versus the Dollar despite a more supportive rate outlook as markets focus on geopolitical risks. Risk reversals show growing demand for downside protection, while technicals remain bearish but stretched, with hammer patterns, nearby support around 1.1520–1.1500 and limited resistance up to 1.18 suggesting a near-term range-bound EUR/USD profile.

Geopolitics weigh as range consolidates

"The EUR is weak, down 0.5% vs. the USD (from Friday’s close) while entering the NA session largely unchanged from a rare gap open."

"Sentiment remains dominant as risk reversals reveal a further increase in the premium for protection against EUR weakness."

"Bearish – momentum is bearish and the RSI is hovering just above the oversold threshold at 30. The decline is showing some signs of exhaustion with a candle chart that reveals a sequence of ‘hammer’ doji’s revealing price action where buyers are continuing to attempt to regain control."

"Meaningful intraday support has been observed around 1.1520, and we would expect considerable support around 1.15."

"We see limited resistance ahead of 1.1650 and little between the level and 1.18 – given the aggressive pace of the latest decline. We look to a near-term range bound between 1.1520 and 1.1620."

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

TD Securities strategists Oscar Munoz and Eli Nir argue that the Federal Reserve will stay on hold near term as the Iran conflict and mixed US labor data keep uncertainty elevated. They still expect three rate cuts starting in June, contingent on continued inflation progress and no major shock from geopolitics or tariffs, with policy decisions remaining highly data-dependent.

Fed on hold as cuts loom

"The evolving Iran conflict and an unclear labor market picture will keep the Fed on the sidelines in the near term. Developments in the conflict will continue to dominate the market's attention, but Fed officials have noted it is too soon to make material outlook changes given mounting uncertainty."

"We maintain our Fed call for three cuts this year starting in June owing to "good news" inflation progress—barring significant price pressures from a sustained conflict in Iran."

"With the labor market showing signs of stabilization, we expect the Fed to shift its attention toward the inflation mandate and its anticipated progress for 2026. This means that the onus will be on the data to force the Fed's hand."

"We project a more gradual 25bp quarterly easing path this year, starting in June and ending in December with a Fed funds rate at 3.00%."

"The outlook will be fluid amid uncertainty around the Trump administration's execution of new trade, fiscal, regulatory, and immigration policies. New developments in financial markets and the escalation of geopolitical conflicts remain key risks for our economic projections over the forecast horizon."

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

BNP Paribas Economic Research Team projects Euro appreciation versus the Dollar, supported by structural changes in US fiscal policy and an expected strengthening of growth in Europe. The bank also forecasts a gradual and moderate rise in EUR/USD to 1.20 by Q4 2026, reflecting relatively stronger European fundamentals compared with the United States.

Euro expected to gain versus peers

"After holding up well in 2025 (1.5%), growth is expected to strengthen in 2026 (+1.6%). It is expected to grow at a stable quarterly rate of 0.5% over the year."

"Favourable carryover effect would keep the average annual unchanged in 2027 (1.6%), despite a lower quarterly profile (+0.3% q/q). The roll-out of fiscal measures in Germany and the planned increase in military spending and AI-related investment in Europe, against a backdrop of labour market resilience, underpin this scenario."

"The EU-US trade agreement remains precarious and tensions with China are mounting, creating uncertainty around our forecasts. Inflation is expected to remain below the 2% target in 2026."

"Stronger economic activity will lead to a progressive acceleration in inflation in 2027, albeit a moderate one. This would lead the ECB to increase the policy rate in H2 2027, bringing the deposit facility rate to 2.5%."

"We expect the dollar to continue depreciating against the euro. Structural changes in fiscal policy and the expected strengthening of growth in Europe, coupled with the slowdown in the United States, underpin our forecast of a gradual and moderate rise in the EUR/USD exchange rate by the end of 2026 (1.20 in Q4 2026)."

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

MUFG strategists Derek Halpenny, Lee Hardman and Abdul-Ahad Lockhart note that the Japanese Yen has not yet benefited from the latest volatility spike, with the BoJ’s trade‑weighted JPY index near year‑to‑date lows. However, they stress that previous volatility shocks triggered sharp JPY rallies, and a squeeze on accumulated JPY‑funded carry trades could see a counter‑trend Yen recovery if risk aversion intensifies.

Carry trade risks for Japanese Yen

"On the other hand, funding currencies such as the JPY have not rebounded. The BoJ’s trade‑weighted JPY index remains close to year‑to‑date lows. The JPY strengthened on the last two occasions when FX volatility spiked, first in April 2025 and again in the summer of 2024."

"During the last major energy price shock in 2022, the JPY was one of the worst‑performing G10 currencies (alongside the SEK), as Japan was hit by a sharp negative terms‑of‑trade shock and the BoJ maintained a cautious stance, keeping rates on hold while the Fed and other major central banks lifted rates away from the zero bound."

"This policy divergence encouraged the build-up of JPY‑funded carry trades."

"The trade‑weighted JPY has weakened significantly since that 2022 energy shock by around 23%, with over half of those losses occurring after market volatility peaked in April 2025 when Trump announced his Liberation Day tariffs."

"This price action highlights the risk that the JPY could stage a counter trend rally if the volatility shock from the conflict in the Middle East intensifies triggered by a squeeze of JPY‑funded carry positions that have been built up since the Ukraine conflict began in 2022."

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

• GBP/JPY rises for a third straight day as traders reassess BoE and BoJ policy outlook.
• Surging Oil prices linked to the US-Iran war revive global inflation concerns.
• Markets scale back BoE rate-cut bets, with money markets now pricing a possible hike by year-end.

GBP/JPY extends gains on Monday, rising for a third consecutive day as traders reassess the monetary policy outlook for the Bank of England (BoE) and the Bank of Japan (BoJ) amid soaring Oil prices driven by the escalating US-Iran war, which is reviving global inflation concerns.

At the time of writing, GBP/JPY is trading around 211.70. With little economic data from the UK and Japan, the cross remains largely driven by shifting interest-rate expectations.

The British Pound (GBP) is outperforming the Japanese Yen (JPY) as traders scale back expectations for near-term easing by the BoE and begin to price in the possibility of a rate hike.

Before the Iran conflict escalated, markets had priced in roughly an 80% probability of a rate cut at the BoE’s March 19 meeting, with another reduction expected later in the year. However, money markets now see around a 50% probability of a rate hike by the end of the year, Bloomberg reported.

Meanwhile, the Japanese Yen remains under pressure as traders expect the BoJ to proceed cautiously with further policy tightening. The Middle East conflict could delay the timing of the next rate hike, as Japan’s heavy reliance on energy imports may weigh on economic growth.

BoJ Governor Kazuo Ueda reiterated that the central bank will continue raising interest rates if economic and inflation trends evolve in line with projections. However, he added that policymakers will “closely watch the impact of Middle East developments on the domestic and overseas economy.”

Japan’s Prime Minister Sanae Takaichi said on Monday that the government is considering measures funded from emergency reserves to prevent gasoline prices from rising to levels intolerable for households. Separately, Japan has instructed a national oil reserve site to prepare for a potential crude release, according to Nikkei.

On the data front, Japan’s Labor Cash Earnings rose 3% YoY in January, up from 2.4% in December. Meanwhile, the Current Account surplus stood at ¥941.6 billion, below expectations of ¥960 billion and sharply down from ¥7,288 billion in December.

Looking ahead, Japan’s Gross Domestic Product (QoQ) for Q4 is due on Tuesday, followed by Producer Price Index (PPI) data on Wednesday. In the UK, January GDP data will be released on Friday, along with Industrial Production, Manufacturing Production, and Consumer Inflation Expectations.

HSBC Asset Management discusses how recent geopolitical tensions have driven Oil higher and raised market volatility. The report outlines two main scenarios: a transitory Oil price shock that preserves the current growth and profit outlook, and a persistent spike above USD100 that could hurt growth, profits and equity valuations, especially in markets already priced for perfection.

Oil shock scenarios and market impact

"In terms of oil price shocks, the size, speed, and persistence of the price move will determine the implications for the growth-inflation mix, profits, and investor sentiment. But they also impact countries differently."

"First, the oil price shock is transitory as geopolitical risk abates, supported by still-high global supply. This is disruptive, but should leave the base case on track. Growth can be sustained by supportive policies, strong (and broadening) profits, and the AI capex boom."

"Alternatively, a longer-lasting oil price spike could present a challenge to the investment outlook. A persistent shock of more than USD20, or oil above USD100 – as we last saw in 2022 – would be more disruptive to growth, which could hamper profits, and potentially undermine stock market multiples."

"So, what could a persistent USD10 shock do? Modelling shows that the growth and inflation impact on developed economies would be largely uniform. But in emerging markets, it’s more variable."

"With some parts of global markets, particularly in the US, now “priced for perfection”, any adverse news could challenge performance. However, valuation gaps in emerging markets and developed market ex-US stocks, create some cushion against negative macro shocks."

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