Forex News

Commerzbank’s Senior Economist Dr. Ralph Solveen notes that Germany’s inflation rate rose from 1.9% to 2.7% in March 2026 as energy prices surged due to the war in Iran, while core inflation stayed at 2.5%. He stresses that second-round effects are not yet visible but business surveys show rising price expectations. Commerzbank expects the ECB to respond with a 25 basis point rate hike in late April.

War impact lifts German price pressures

"The inflation rate in Germany jumped from 1.9% to 2.7% in March as energy prices rose sharply due to the war in Iran."

"However, the longer the war continues and causes energy and other raw materials to become more expensive or scarce, the more likely it is that underlying inflation will also pick up, as business surveys already suggest."

"As expected, energy prices – which have risen sharply due to the war in Iran – have driven up the German inflation rate (national definition)."

"Although there are no signs of second-round effects yet, this could change in the coming months, especially if the war in Iran continues and energy prices therefore remain high or even rise further."

"Then the core inflation rate is likely to pick up again both in Germany and across the euro area, forcing the ECB to decide whether to counter this trend with interest rate hikes."

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

Rabobank’s Senior FX Strategist Jane Foley notes that the Pound has been the second best performing G10 currency after the Dollar since the Middle East conflict, driven by a sharp repricing of Bank of England (BoE) policy expectations. Rabobank economist Stefan Koopman now sees risk of only one BoE hike, potentially in April, and the bank expects EUR/GBP to move toward 0.87–0.88 over 3–6 months as UK growth and stagflation risks weigh on Sterling.

Sterling strength seen fading versus Euro

"After the USD, the pound is the second best performing G10 currency since the start of the war in the Middle East. This reflects the sharp turnaround in expectations regarding BoE policy. Ahead of the conflict, the market was comfortable with the forecast that the BoE could cut rates twice more this year."

"Currently, the market is priced for between two to three rate hikes on a one year view, though tightening expectations have fallen back a little today. This is unsurprising. In Rabo’s view, three rate hikes appears excessive."

"Given risk that this may shift the Labour party further to the left, this is also potentially unnerving for both gilts and the pound. We look for GBP to slip back vs. the EUR into the spring."

"It follows that it may be more vulnerable to recession risks than many of its peers, particularly if the BoE were to unleash an aggressive round of policy tightening. Against this backdrop, we expect the pound to give back some of its recent gains vs. a basket of (non-USD) G10 currencies into the spring."

"Against this backdrop, we expect the pound to give back some of its recent gains vs. a basket of (non-USD) G10 currencies into the spring. We expect EUR/GBP to trade in the 0.87 to 0.88 area on a 3-to-6-month view."

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

ING’s Chief Economist Bert Colijn highlights that Eurozone sentiment weakened in March as the Middle East war hit confidence. The economic sentiment indicator dropped from 98.3 in February to 96.6, with businesses and consumers more worried about inflation. Selling price expectations, especially in industry and among consumers, have risen sharply, while current output remains broadly stable but forward expectations have deteriorated.

War-driven shock lifts inflation expectations

"The eurozone sentiment indicator for March shows that businesses and consumers’ sentiment has dropped and that price expectations have increased on the back of the Middle East war."

"The Middle East war has clearly thrown the eurozone economy off track. The economic sentiment indicator fell from 98.3 in February to 96.6 in March. Where recent months still revealed more confidence in a recovery on the back of stronger public investment and consumer spending, worries about a new energy crisis have taken over this month."

"Selling price expectations for industry jumped from 12.3 to 19.7, the highest level since February 2023. With input prices on the rise due to higher energy costs and supply chain disruptions, this makes sense. The service sector saw a much smaller increase in selling price expectations, reflecting the sector's lower reliance on energy as an input."

"The decline in sentiment was mainly felt among consumers and retailers. Broader service sector sentiment was stable, as was the case for industry. Recent production for both broad sectors has not yet been affected, according to the survey."

"So when taking stock at the end of March, the Middle East war has so far scared consumers significantly as they worry about inflation but has not yet affected output for businesses significantly. But expectations of higher selling prices and weaker demand have already filtered through to businesses. A relatively quick end to the conflict would limit the economic fallout of course, but concerns about longer-lasting effects are clearly starting to affect the mood in Europe."

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

In an interview with Fox News on Monday, United States (US) Treasury Secretary Scott Bessent said that the Oil market is well supplied, but added that any additional supply would be helpful, per Reuters.

Bessent explained that they are seeing more Oil supply as countries cut deals with Iran and noted that the US will take control of the Strait of Hormuz over time.

Market reaction

These comments failed to trigger a significant market reaction. At the time of press, US stock index futures were rising between 0.7% and 0.8%.

MUFG analysts note that NOK has outperformed most European peers during the Middle East conflict, supported by Norway’s energy exporter status and a hawkish repricing of Norges Bank policy. They expect rising energy prices and higher yields to underpin NOK near term, while warning that a much larger Oil spike and global slowdown risk could eventually erode this support.

Oil-linked strength and rate hike prospects

"Rising energy prices are likely to continue supporting NOK in the near term. However, a much larger oil price spike could eventually become less supportive if it heightens concerns over a sharper global slowdown or recession."

"At the same time, the NOK has received near‑term support from the hawkish repricing of the Norges Bank’s policy outlook. At its latest policy meeting last week, the Norges Bank stated clearly that it “will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings.”"

"Given that inflation has been above target for several years, the Norges Bank feels compelled to respond to the upside risks. The disinflationary impact of the stronger NOK will help dampen imported inflation, but it is not sufficient to alleviate the Bank’s concerns over persistent inflation pressures."

"As a result, the Norges Bank is planning to raise rates by 25–50bps in 2026."

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

HSBC analysts note recent Japanese Yen (JPY) weakness is consistent with higher energy prices and Japan’s net Oil and gas deficit, but warns this macro backdrop could shift. They highlights that tighter global financial conditions, falling US Treasury yields and rising risk aversion could quickly trigger a JPY rebound, with USD/JPY direction hinging on US yield dynamics.

JPY weakness may reverse on risk

"The JPY’s recent weakness is broadly understandable, reflecting terms-of-trade headwinds from higher energy prices and Japan’s sizeable net oil and gas deficit (c2.7% of GDP in 2025)."

"However, the bigger risk is a shift in the JPY’s behaviour."

"This could happen if global financial conditions tighten abruptly, in addition to higher equity volatility and falling US Treasury yields."

"Historically, in such situations USD/JPY has declined in the majority of cases (85% of weekly observations since 2006 based on our analysis)."

"If yields continue to rise alongside higher oil prices, USD/JPY is likely to go higher, despite the ongoing FX intervention risk."

"Conversely, if risk aversion intensifies and US Treasury yields fall, potentially driven by mounting growth concerns, the JPY could rebound quickly."

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

• Annual CPI inflation in Germany jumped to 2.7% in March.
• EUR/USD extends its daily slide below 1.1500 after the data.

Annual inflation in Germany, as measured by the change in the Consumer Price Index (CPI), climbed to 2.7% in March (preliminary estimate) from 1.9% in February, Germany's Destatis reported on Monday. On a monthly basis, the CPI rose by 1.1% following the 0.2% increase recorded in February.

The Harmonized Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, was up 2.8% on a yearly basis, compared to 2% in February.

Market reaction

EUR/USD stays under bearish pressure following the German inflation data and was last seen trading at 1.1475, losing about 0.3% on a daily basis.

Societe Generale analysts note the INR rallied over 1% after RBI intervention and new limits on banks’ net open FX positions, but the currency remains down 4% this month amid heavy FPI outflows. They warn the relief is likely short‑lived given trade and fiscal headwinds and rising 10‑year IGB yields near 7.0%.

Intervention bounce versus structural headwinds

"The INR rallied by over 1% to 93.53/USD low after intervention by the RBI."

"The central bank directed commercial banks to limit their net open positions in the rupee in the FX markets to $100m at the end of each business day (effective 10 April) vs earlier limit of 25% of the firm’s total capital."

"The currency is down 4% this month amid record FPI outflows (- $12.1bn from equities and -$1.6bn from bonds)."

"Respite is likely to be short-lived, however given fundamental headwinds on trade and public finances, and negative FPI portfolio flows."

"The 10y IGB yield is on the cusp of breaching 7.0% for the first time since July 2024."

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