Forex News

Brown Brothers Harriman’s (BBH) Elias Haddad notes that the Dollar is trading defensively even as Brent holds above $100 and European gas prices stay elevated. The bank highlights mixed news on shipping security through the Strait of Hormuz and questions whether markets are closer to peak fear, concluding that near-term USD risks remain skewed to the upside.

Strait security keeps USD risks elevated

"Brent crude oil prices are holding above $100 a barrel and natural gas prices in Europe remain just shy of recent highs. Iranian drones and missiles continue to batter energy infrastructure around the Persian Gulf. In parallel, USD is trading on the defensive against most major currencies, global sovereign bond yields pulled back from recent highs, while stock markets are finding a floor."

"News around the security of shipping through the crucial Strait of Horuz is mixed. Some countries (China, Pakistan, India, Turkiye, France, Italy) are reportedly securing side deals with Iran to keep their ships moving. That has stabilized the perceived risk of shipping through the Strait."

"Nevertheless, the head of the International Maritime Organization warned that naval escorts though the Strait cannot fully guarantee ships’ safety. The waterway’s narrow navigable channels (2-mile wide, or 3.7km) and proximity to Iran’s mountainous coastline leave vessels exposed to attacks."

"For financial markets, the key issue is whether we are closer to peak fear than to another leg higher in shipping security concerns. We lean towards the former, but with a very low conviction given US action so far appears more reactive than strategic. As such, near-term USD risks remain skewed to the upside."

"DXY holds under 100.00 while Brent stays above $100 a barrel. Stocks and bonds stable."

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

ING’s Francesco Pesole notes the Reserve Bank of Australia (RBA) delivered a split 25 bp hike to 4.10%, initially read as dovish and triggering a sell-the-fact move in AUD/USD before a rebound on Governor Bullock’s comments. ING sees signs of fatigue in the AUD bull market but still expects higher levels, targeting 0.70 in coming weeks and 0.74 by year-end.

RBA split hike and AUD fatigue

"The Reserve Bank of Australia delivered a back-to-back 25bp hike overnight, taking rates to 4.10% in a 5-4 split decision. The division in the board was read as a dovish signal initially by markets (that had priced in around 65% probability of a hike) and caused a correction in AUD/USD, with sell-the-fact kind of price action also playing a role in our view."

"AUD rebounded during Governor Michele Bullock’s press conference, where she clarified the Board’s debate was on the timing of a rate hike (March vs May) rather than on whether to tighten policy, and reiterated some alarmism on inflation."

"Still, we do see some signs of tiredness in the AUD bull market. The swap market remains aggressively hawkish (47bp priced in by year-end), but AUD has lost a bit of beta to rate expectations and is looking more sensitive to risk sentiment. That mirrors stretched long positioning, which requires a flow of positive news to fuel short-term rallies."

"We have just updated our AUD/USD forecasts, seeing 0.70 as a more likely target than 0.71 in the coming weeks. Beyond that, we remain bullish, thanks to AUD’s good carry and economic fundamentals and our expectations of a USD decline. Our year-end target is now 0.74."

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

• The Japanese Yen recovers its early losses against the US Dollar and turns slightly positive.
• Investors expect the Fed and the BoJ to leave interest rates unchanged this week.
• The BoJ is expected to highlight economic concerns in the policy meeting amid higher energy prices.

The Japanese Yen (JPY) claws back its early losses against the US Dollar (USD) during the European trading session on Tuesday. The USD/JPY pair falls back to its opening level around 159.00 as the US Dollar turns upside down amid uncertainty surrounding the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is marginally down to near 99.70 after giving back its early gains.

According to the CME FedWatch tool, traders are confident that the Fed will hold interest rates steady in the March policy meeting. The tool also shows that the Fed will maintain the status quo till the September policy meeting.

The Fed is expected to leave interest rates unchanged on expectations that price pressures will remain higher in the near term amid higher oil prices in the wake of conflicts in the Middle East.

Apart from the interest rate decision, investors will focus on the Fed’s dot plot, which shows where policymakers see interest rates heading in the medium and long term.

Though investors have underpinned the JPY against the US Dollar, the former underperforms its other peers ahead of the Bank of Japan’s (BoJ) monetary policy announcement on Thursday, in which the central bank is expected to leave interest rates unchanged at 0.75%. The BoJ is expected to leave the door open for more interest rate hikes, along with a warning that higher energy prices could act as a major drag on economic growth.

• EUR/USD clings to Monday’s gains near 1.1500 as the US Dollar comes under pressure.
• Both the Fed and the ECB are expected to leave interest rates unchanged this week.
• Higher oil prices have prompted inflation expectations.

The EUR/USD pair holds onto Monday’s gains slightly above 1.1500 during the European trading session on Tuesday. The major currency pair trades firmly as the US Dollar (USD) has come under pressure ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower to near 99.70.

Investors expect the Fed to leave interest rates unchanged in the current range of 3.50%-3.75% as the Middle East conflict-driven spike in the oil price has prompted inflation expectations in the entire world.

In the policy meeting, investors will pay close attention to cues regarding how long the Fed could hold interest rates steady at their current levels.

Meanwhile, the Euro (EUR) demonstrates a mixed performance in the countdown to the European Central Bank’s (ECB) interest rate decision on Thursday. The ECB is anticipated to leave interest rates steady. Latest comments from a slew of ECB officials showed that they are not encouraged to any monetary policy adjustment, as inflationary pressures have remained broadly close to the 2% target.

EUR/USD technical analysis

EUR/USD holds onto gains near 1.1510 at the press time. The pair extends a medium-term decline beneath the 20-day Exponential Moving Average (EMA) around 1.16, keeping the near-term bias bearish while price holds below this dynamic cap.

RSI hovers in the mid-30s after recovering from oversold territory, showing weak momentum and only a modest loss of downside pressure rather than a firm bullish shift.

Immediate resistance emerges at the three-day high of 1.1530, followed by the 1.1630 area where the 20-day EMA converges as a stronger barrier. A daily close above 1.1630 would be needed to ease downside pressure and open a recovery toward 1.1690. On the downside, initial support aligns with the recent 1.1415 low, with a break exposing 1.1360 and then 1.1300 as the next bearish targets.

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

German ZEW Survey - Economic Sentiment arrives at -0.5 in March. Economists expected the sentiment data to come in lower at 38.7 from 58.3 in February.

The ZEW Survey - Current Situation unexpectedly improves to -62.9 from -65.9 in February. The data was expected to deteriorate further to -67.1

In the Eurozone, the ZEW Survey - Economic Sentiment also turns negative. The data arrives at -8.5 vs. 24.0 estimates and the previous release of 39.4.

Market reaction

There seems to be no immediate reaction in the Euro (EUR) following the release of the sentiment data. As of writing, EUR/USD trades 0.1% higher to near 1.1510.

TD Securities analysts note that US rates rallied as markets stabilised, with attention on Fed policy expectations and geopolitical headlines. While hike odds have risen, they pushes back, arguing the hawkish outcome is more likely a prolonged pause. The upcoming 20-year bond reopening and developments in the Middle East are seen as key drivers for the US Dollar and Treasuries.

Hike odds rise but TD Securities favours longer pause

"Rates rallied on Monday as markets found some stability with swap spreads widening sharply. Bessent spoke in the morning, saying that if the China visit is postponed, it would be because Trump wanted to rather than Hormuz."

"Media reports suggested that President Trump is looking for a "month or so" delay to his China trip. Trump later urged another rate cut and said that the Strait of Hormuz would be sorted out soon, with the war wrapping up but "not this week.""

"We published a note on the odds of a Fed hike that have increased in recent weeks. We push back on the narrative that the Fed will hike, as we expect the hawkish scenario to be a longer pause."

"On Tuesday, the 20y bond reopening will be watched for signs of any cracks in demand. Markets will be largely focused on news coming from the Middle East, which have continued to outweigh data releases."

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

MUFG’s Senior Currency Analyst Lee Hardman notes that the RBA delivered a second consecutive 25 bps hike to 4.10%, now the highest policy rate among G10 central banks, and that Australian Dollar gains versus the US Dollar were initially strong but faded. Despite a narrow 5–4 vote and Governor Bullock’s cautious guidance, markets still price further RBA tightening as inflation risks stay elevated.

RBA split vote but hawkish bias

"The main development overnight was the RBA’s decision to tighten monetary policy for the second consecutive meeting. The policy rate was raised by a further 25bps to 4.10% which is now the highest rate amongst G10 central banks. The Australian dollar initially strengthened in response to the rate hike hitting a high of 0.7094 against the US dollar but has since given back all of those gains."

"Today’s decision to raise rates reflected the RBA’s judgement that “there is a material risk that inflation will remain above target for longer than previously anticipated”. Information since February suggested that some of the increase in inflation reflects greater capacity pressures due in part to greater momentum in demand in the latter part of 2025."

"The RBA did judge though that inflation is likely to remain above target for some time and that risks have “tilted further to the upside” leaving the door open to further hikes."

"Despite the close vote, Australian rate market participants currently expect the RBA to hike rates again as soon as the next policy meeting in May. In the press conference, Governor Bullock emphasized that today’s decision doesn’t say anything about the forward policy path. She couldn’t say whether this is a front-loading of rate hikes or this is one of many rate hikes."

"Overall, the hawkish comments relating to inflation risks from the conflict support market expectations for two further hikes this year. Rising yields in Australia remain a tailwind for the Aussie alongside higher commodity prices which have both helped it to outperform this year. The energy price shock would have to deliver a bigger negative global growth shock and deeper risk asset correction to trigger a reversal of Aussie strength."

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