Forex News

• AUD/USD strengthens as markets anticipate a possible RBA interest rate hike next week.
• US inflation data comes in line with expectations, with the CPI holding steady at 2.4% in February.
• Geopolitical tensions in the Middle East and rising Oil prices are fueling global inflation concerns.

AUD/USD trades around 0.7150 on Wednesday at the time of writing, up 0.42% on the day and extending its winning streak for a fourth consecutive day. The Australian Dollar (AUD) remains supported by growing expectations of monetary tightening from the Reserve Bank of Australia (RBA).

Markets are now pricing in nearly a 75% chance of a 25 basis point rate hike at next week’s RBA meeting, according to Reuters, which would bring the policy rate to 4.1%. These expectations were reinforced by comments from RBA Deputy Governor Andrew Hauser, who warned that Oil price volatility and tensions in the Middle East represent a significant challenge for central banks. According to him, the magnitude and persistence of the energy-driven inflation shock remain highly uncertain.

On the US side, the latest inflation data did little to change monetary policy expectations. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) remained unchanged at 2.4% YoY in February, in line with market forecasts, while monthly inflation accelerated to 0.3% from 0.2% in January. Core inflation, which excludes volatile food and energy prices, increased by 0.2% MoM and 2.5% on an annual basis, in line with forecasts.

These figures suggest that price pressures in the United States (US) remain contained but persistent, still slightly above the Federal Reserve’s (Fed) 2% target. Investors widely expect the central bank to keep interest rates unchanged at its upcoming meeting while waiting for clearer evidence that inflation is cooling.

At the same time, geopolitical developments continue to drive uncertainty in financial markets. The conflict between the US and Iran has entered its twelfth day, while risks surrounding the Strait of Hormuz, a critical route for global Oil shipments, are keeping energy markets on edge. This situation could reinforce global inflation pressures and influence central bank policy decisions in the months ahead.

Commerzbank’s Senior Economist Dr. Christoph Balz notes that US CPI data for February show moderate inflation, but stresses that the Federal Reserve is more focused on the PCE deflator and the impact of higher energy prices following the war with Iran. He expects the Fed to keep rates unchanged at the next two meetings, with cuts likely from mid‑year under incoming Chair Kevin Warsh.

Fed weighs energy shock and PCE

"From the Fed's perspective, the figures for February are already somewhat outdated due to the war in Iran."

"The Fed is likely to be more concerned with how long the turmoil on the energy markets will continue and how great the risk is that more expensive energy will feed into higher prices for other goods and services."

"As long as inflation expectations remain low and the labor market remains under pressure, it will probably ignore the rise in oil prices."

"It would also be important for the Fed that the stabilization of consumer prices is reflected more strongly in the personal consumption expenditure (PCE) deflator, which did not show a clear downward trend last year."

"We continue to assume that the Fed will wait and see at its next two meetings, which are scheduled for the middle of this month and the end of April."

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

BNY’s Head of Markets Macro Strategy Bob Savage reports a synchronized selloff in EM sovereign debt as risk aversion rises with the Iran conflict. EM fixed income is seeing widespread net selling, while U.S. Treasuries, Bunds and other high-quality G10 assets benefit. The move reverses earlier diversification into EM duration and marks the strongest year-to-date EM selling across regions on a smoothed basis.

Conflict drives rotation into core bonds

"We have been documenting some of the assets most exposed to the current conflict, but in light of elevated risk aversion – notwithstanding some suggestions of a gradual cessation of hostilities – there are signs of a broadening in scope for asset liquidation."

"Our latest data refresh shows that, barring a handful of names in Latin America, almost every single emerging market fixed income market is now being net sold."

"U.S. Treasurys are clearly benefiting, with some residual flows into the likes of Bunds and other higher-quality G10 assets."

"On current evidence, however, this could prove one of the most challenging periods for EM fixed income, as the nature of the supply shock means there are very few places for shelter."

"For all three EM regions, selling last week was the strongest YTD on a weekly smoothed basis, and there is not a clear link between prior flow trends and what materialized last week."

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

ING economists Bert Colijn and Marcel Klok note that recent data show the Dutch economy entering 2026 with solid momentum, supported by stronger-than-expected GDP figures and resilient labour markets. They warn that the Middle East war raises downside risks through energy and transport disruptions, but still expect Dutch GDP to grow, assuming the conflict remains relatively short and contained.

Growth momentum meets geopolitical headwinds

"The Middle East war has sharply increased the risks to the Dutch economic outlook by disrupting global energy and transport markets. There’s major uncertainty about how long these pressures will persist. The Netherlands is relatively exposed as a major logistics hub and a significant importer of energy."

"Overall, the Dutch economy has been quite resilient to recent shocks. It came out of the pandemic quite well. It required only moderate fiscal support relative to other advanced economies and experienced a faster GDP recovery."

"The previous energy crisis resulted in higher inflation than in other countries and only a modest decline in GDP. "

"Unemployment remained under control throughout, and fiscal support for households limited the economic impact on the downside, including during the 2022 energy shock. A real recession with lasting high unemployment never materialised. And last year’s trade war did not result in a decline in export growth."

"However, these past episodes offer no guarantee going forward, and vulnerabilities remain with very low gas reserves."

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

Rabobank’s FX Strategy team expects EUR/USD to remain volatile as higher Oil and food prices stoke inflation concerns and support the Dollar’s safe haven appeal. They keep a central view of choppy ranges in 2026 but flag downside risks to their 1–3 month EUR/USD 1.16 forecast if the Strait of Hormuz stays effectively closed.

Energy shock keeps Euro under pressure

"Indeed, next week brings eight G10 central bank meetings including those from the Fed and the ECB, which adds extra interest into the outlook for EUR/USD. We haven’t altered our central forecast that EUR/USD is set to trade in choppy ranges this year as it digests and processes the newsflow this year. Indeed, activity since the start of 2026 has underpinned this viewpoint."

"We currently see downside risk to our 1 to 3 months forecast of EUR/USD1.16 should the Strait of Hormuz remain effectively closed for an extended period and we will be re-evaluating these forecasts over the coming week or so. For now, resistance on the upside is being provided by the 200-day sma at EUR/USD1.1676."

"In our view, the positive reaction of the USD to the conflict in the Middle East has underpinned that the greenback retains its safe haven status. Its recent gains should weaken fears that have prevailed since last spring that the USD has entered into a period of structural weakness."

"This relationship suggests that a higher for longer oil price is supportive for the greenback. In contrast, the EUR could come under pressure from the Eurozone’s position as a net energy importer."

"This week EUR/USD has printed lows in the 1.1507 area. We would not be surprised to see this area re-visited in the days ahead on the assumption that markets remain jittery. A sustained increase in the price of energy could push EUR/USD back to last summer’s levels in the 1.14 area and potentially below."

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

Annual inflation in the United States (US), as measured by the change in the Consumer Price Index (CPI), remained unchanged at 2.4% in February, the US Bureau of Labor Statistics (BLS) reported on Wednesday. This print came in line with the market expectation. On a monthly basis, the CPI rose 0.3% following the 0.2% increase recorded in January.

The core CPI, which excludes volatile food and energy prices, was up 0.2% on a monthly basis and 2.5% on a yearly basis, with both readings matching analysts' estimates.

Market reaction to US inflation data

The US Dollar Index edged slightly higher with the immediate reaction and was last seen gaining 0.15% on the day at 99.05.

This section below was published as a preview of the February inflation data at 04:00 GMT.

• 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).”