Forex News
- EUR/JPY may decline further as Japanese Yen strengthens on expectations the BoJ will tighten policy in April.
- The International Monetary Fund praised Japan’s economic resilience, backing gradual stimulus withdrawal.
- ECB’s Lagarde and policymakers reiterated that policy will stay restrictive until inflation sustainably returns to the 2% target.
EUR/JPY moves little after registering modest losses in the previous trading day, hovering around 183.80 during the Asian hours on Monday. The currency cross may extend its decline as the Japanese Yen (JPY) strengthens on growing expectations that the Bank of Japan (BoJ) will tighten policy in April to counter rising inflation driven by higher energy costs.
The International Monetary Fund (IMF) has backed the BoJ’s current path of rate hikes. Following a policy consultation on Friday, the IMF praised Japan’s economic resilience and supported a gradual withdrawal of monetary stimulus, with inflation projected to converge toward the 2% target by 2027.
However, the JPY faced pressure as oil prices surged after US President Donald Trump escalated threats against Iran. Japan remains particularly vulnerable to supply disruptions due to its heavy reliance on Middle East oil imports.
Trump issued a new deadline for Iran to reopen the Strait of Hormuz while intensifying threats against its power plants and civilian infrastructure. Iranian officials warned of reciprocal retaliation, targeting US-linked infrastructure, and stated the strait would stay closed until war damages are compensated.
Meanwhile, downside in the EUR/JPY cross may be limited as the Euro (EUR) finds support from the hawkish stance of the European Central Bank (ECB). ECB President Christine Lagarde and other policymakers have reiterated that policy will remain restrictive until inflation sustainably returns to the 2% target.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- AUD/JPY drifts higher to around 110.20 in Monday’s Asian session.
- The cross keeps a mildly bullish vibe, but further consolidation cannot be ruled out amid neutral RSI momentum.
- The first upside barrier emerges at 111.25; initial support is located at 110.00.
The AUD/JPY cross attracts some buyers to near 110.20 during the Asian trading hours on Monday. The Australian Dollar (AUD) edges higher against the Japanese Yen (JPY) on expectations of further interest rate hikes from the Reserve Bank of Australia (RBA).
However, the upside for the cross might be limited as escalating tensions in the Middle East could boost safe-haven demand for the JPY. Iran’s central military command on Monday warned of far more “devastating and widespread” retaliation if its adversaries hit civilian targets. The statement came after US President Donald Trump threatened to destroy Iran’s power plants and bridges if Tehran didn’t make a deal to fully reopen the Strait of Hormuz.
Technical Analysis:
In the daily chart, the near-term bias of AUD/JPY is mildly bullish as price holds above the rising 100-day exponential moving average near 107.35, extending the broader uptrend despite the latest pullback. The RSI eases to the midline, suggesting that further consolidation cannot be ruled out in the near term.
Immediate resistance emerges near the Bollinger middle band of 111.25. Above that, the next upside reference aligns near the March 19 high of 112.61, en route to the upper Bollinger Band of 113.65. On the downside, initial support is seen at the 110.00 psychological level. A deeper setback would target the lower limit of the Bollinger Band near 108.75, followed by the 100-day EMA around 107.35.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- US Dollar Index gathers strength to around 100.25 in Monday’s Asian session.
- US NFP rose by 178,000 in March, stronger than expected; Unemployment Rate edged lower to 4.3%.
- The US March ISM Services PMI data is due later on Monday.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 100.25 during the Asian trading hours on Monday. The DXY edges higher on the stronger-than-expected US jobs data and heightened uncertainty in the Middle East.
Data released by the US Bureau of Labor Statistics (BLS) on Friday revealed that the US economy added 178,000 jobs in March, compared to a 133,000 decline (revised from -92,000) in February. This reading came in better than the estimations of a 60,000 gain. The Unemployment Rate edged lower to 4.3%, though that was largely from a sharp reduction in the labor force.
Following the upbeat jobs report, futures pointed to virtually no chance of a move at the April 28-29 Federal Open Market Committee (FOMC) meeting and a 77.5% probability the Fed will stay on hold through the end of the year, according to the CME FedWatch tool.
Rising tensions between the US and Iran might contribute to the US Dollar’s upside as a safe-haven asset. US President Donald Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz, threatening to hit the country’s power plants and bridges if it does not comply. Iran's foreign ministry spokesperson said that Tehran will reciprocate attacks on its infrastructure and target similar infrastructure owned by the US or related.
Traders brace for the US March ISM Services Purchasing Managers Index (PMI) data later on Monday. If the report shows a weaker-than-expected outcome, this could drag the DXY lower in the near term.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- WTI attracts some intraday sellers following a modest Asian session rise to a nearly one-month peak.
- Rising geopolitical tensions and Fed rate hike bets support the USD, capping gains for the commodity.
- Supply disruption worries should act as a tailwind for Crude Oil prices and help limit further losses.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – struggles to capitalize on modest Asian session gains to the $106.45 region, or a nearly four-week high, and retreats to the lower end of its daily range in the last hour. The commodity slips below the $104.00 mark in the last hour, though the downside potential seems limited amid supply concerns.
Rising geopolitical tensions, along with growing bets for an interest rate hike by the US Federal Reserve (Fed), continue to act as a tailwind for the US Dollar (USD). A firmer buck caps the upside for the USD-denominated commodity. Meanwhile, US President Donald Trump threatened to target Iran’s power plants and bridges if the Strait of Hormuz is not reopened on Tuesday, while Iran introduced new conditions for reopening the strategic waterway. This raises the risk of a further disruption to global trade routes and should act as a tailwind for the black liquid.
From a technical perspective, the near-term bias is bullish against the backdrop of last week's rebound from the rising 100-period Exponential Moving Average (EMA) on the 4-hour chart and a breakout beyond the 100.00 psychological mark. This keeps the broader uptrend intact despite recent volatility. Furthermore, the latest Moving Average Convergence Divergence (MACD) reading has turned back up, with the line recovering into positive territory and the histogram improving, suggesting buyers are reasserting control after a brief loss of momentum.
Meanwhile, the Relative Strength Index (RSI) around 61 stays above its midline yet below overbought territory, indicating sustained upside pressure without signs of exhaustion. Hence, any subsequent pullback is likely to attract some buyers around $102.00, where recent intraday pullbacks have stabilized, followed by stronger support near $99.50. The rising 100-period EMA on the 4-hour chart, now clustered below $94.00, reinforces that deeper dips toward the low-$90s would be viewed as corrective while the indicator maintains its upward slope.
On the upside, initial resistance stands at the recent peak near $105.70, and a clear break above this area would open the way toward the $108.00 region next.
(The technical analysis of this story was written with the help of an AI tool.)
WTI 4-hour chart
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- Silver struggles as rising energy prices strengthen hawkish expectations for major central banks’ policy outlooks.
- Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz, escalating threats against its civilian infrastructure.
- Fed may delay rate cuts and could raise borrowing costs later this year if inflation remains persistently elevated.
Silver price (XAG/USD) holds losses for the third successive day, trading around $72.20 per troy ounce during the Asian hours on Monday. The non-interest-bearing Silver is under pressure as escalating Middle East tensions have driven a sharp rise in energy prices, reinforcing hawkish expectations for major central banks’ policy outlooks. The white metal has also failed to receive support from increased safe-haven demand, weighed down by forced liquidations as investors cover losses in other markets.
US President Donald Trump issued a fresh ultimatum to Iran, warning of strikes on its power plants and other civilian infrastructure if the Strait of Hormuz is not reopened. Trump threatened severe consequences, saying he would bring “hell” to Iran, and set a new deadline for Tuesday at 8 PM Eastern Time. Tehran has rejected the ultimatum and continues attacks on energy assets across the Middle East.
Markets are increasingly pricing in the US Federal Reserve (Fed) to delay rate cuts, with the possibility of higher borrowing costs later this year if inflation remains persistent. Investors now turn their focus to the latest Federal Open Market Committee (FOMC) Meeting Minutes for clearer signals on the policy path ahead.
Meanwhile, the Bank of England (BoE) unanimously kept the Bank Rate unchanged at 3.75% in March, pausing its recent easing cycle amid rising inflation risks linked to higher energy costs driven by Middle East tensions. Some analysts expect rate cuts to be pushed back until late 2026 or even 2027, while others warn that a pre-emptive rate hike remains possible if inflation expectations become unanchored. Moreover, European Central Bank (ECB) President Christine Lagarde and other Governing Council members have reiterated that policy will stay restrictive until inflation sustainably returns to the 2% target.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- USD/CAD trades with a positive bias for the third straight day, though it lacks bullish conviction.
- Rising geopolitical tensions and Fed rate hike bets continue to support the USD and spot prices.
- Elevated Crude Oil prices underpin the Loonie and hold back bulls from placing aggressive bets.
The USD/CAD pair attracts some buyers for the third consecutive day on Monday and trades just below mid-1.3900s during the Asian session, well within striking distance of a nearly four-month high set last week amid a firmer US Dollar (USD). The uptick, however, lacks bullish conviction as elevated Crude Oil prices could underpin the commodity-linked Loonie and cap gains for spot prices.
US President Donald Trump threatened to target Iran’s power plants and bridges if the Strait of Hormuz is not reopened by Tuesday, while Iran introduced new conditions for reopening the strategic waterway. This raises the risk of a further escalation of the ongoing conflict in the Middle East and continues to underpin the USD's status as the global reserve currency. Adding to this, rising bets for an interest rate hike by the US Federal Reserve (Fed) turn out to be another factor supporting the USD and acting as a tailwind for the USD/CAD pair.
The closely-watched US Nonfarm Payrolls (NFP) report showed on Friday that the US economy added 178K new jobs in March, reversing the previous month's revised net loss of 133K. Adding to this, the Unemployment Rate unexpectedly fell to 4.3% last month. This comes on top of inflation fears stemming from the war-driven surge in Crude Oil prices and removes any near-term pressure on the Fed to cut rates, which remains supportive of elevated US Treasury bond yields. The outlook, in turn, continues to support the USD and the USD/CAD pair.
Meanwhile, supply disruption worries lift Crude Oil prices to a nearly four-week top. This might hold back traders from placing aggressive bearish bets around the Canadian Dollar (CAD) and warrants some caution before positioning for any further move higher for the USD/CAD pair. Hence, it will be prudent to wait for a sustained strength and acceptance above the 1.3900 mark, or the year-to-date high, before positioning for an extension of a nearly one-month-old uptrend from the 1.3525 region, or the March monthly swing low.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- NZD/USD posts modest losses around 0.5695 in Monday’s Asian session.
- Trump threatened that Iran would be “living in Hell” if it didn’t open the Strait of Hormuz.
- RBNZ is widely expected to keep the OCR on hold at 2.25% at its April meeting on Wednesday.
The NZD/USD pair remains on the defensive near 0.5695 during the Asian trading hours on Monday. The US Dollar (USD) strengthens against the Kiwi as traders weigh developments in the Middle East. The Reserve Bank of New Zealand (RBNZ) policy meeting will be in the spotlight later on Wednesday.
US President Donald Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz, threatening to hit the country’s power plants and bridges if it does not comply. Iran's foreign ministry spokesperson said that Tehran will reciprocate attacks on its infrastructure and target similar infrastructure owned by the US or related. Lingering geopolitical uncertainty in the Middle East could boost a safe-haven asset such as the Greenback and act as a headwind for the pair in the near term.
The RBNZ will announce its interest rate decision on Wednesday. Markets widely expect the Official Cash Rate (OCR) to remain steady at 2.25%. RBNZ Governor Anna Breman indicated the bank might "look through" temporary energy-driven inflation but could hike if long-term expectations are threatened.
While a rate hold is anticipated, Westpac analysts suggested the central bank may signal future hikes if energy-driven inflation becomes persistent. Markets have priced in nearly a 40% probability of a rate hike by September 2026, with a full 25 basis points (bps) move fully priced in by December.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- GBP/USD struggles as the US Dollar receives support on increased safe-haven demand amid rising Middle East tensions.
- Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz, escalating threats against its civilian infrastructure.
- The Pound Sterling remains under pressure as Iran conflict heightens risks of an energy shock to the UK economy.
GBP/USD remains subdued for the third consecutive trading day, hovering in the negative territory around 1.3190 during the Asian hours on Monday. The pair struggles as the safe-haven demand for the US Dollar (USD) increases amid heightened uncertainty in the Middle East.
US President Donald Trump set a fresh deadline for Iran to reopen the Strait of Hormuz on Tuesday, while escalating threats targeting its power plants and other civilian infrastructure. Iranian officials responded that Tehran would retaliate in kind against any attacks on its infrastructure, including striking comparable assets owned by or linked to the United States (US). Authorities in Tehran also stated that the strait would remain closed until compensation for war-related damages is secured.
The Greenback draws additional support as the conflict triggered a sharp surge in energy prices, heightening speculation that the Federal Reserve (Fed) may postpone rate cuts and could even raise borrowing costs later this year if inflationary pressures persist. Market participants are now looking ahead to the latest Federal Open Market Committee (FOMC) Meeting Minutes for clearer guidance on the central bank’s policy trajectory.
Furthermore, data released during Friday’s holiday indicated that the US economy added 178,000 jobs in March 2026, following a revised decline of 133,000 (previously reported as -92,000), and surpassing market expectations for a 60,000 increase. At the same time, the Unemployment Rate edged down to 4.3% in March from 4.4% in February, coming in better than forecasts.
The Pound Sterling (GBP) remains under pressure as the conflict has intensified concerns over a potential energy shock to the United Kingdom (UK) economy. The UK is particularly vulnerable due to its reliance on energy imports, while investors continue to express caution over the country’s fragile public finances.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- EUR/USD declines to near 1.1515 in Monday’s early Asian session.
- The upbeat US jobs data and escalating geopolitical tensions in the Middle East support the US Dollar.
- ECB policymakers highlighted that policy will remain restrictive until inflation sustainably returns to the 2% target.
The EUR/USD pair trades with mild gains around 1.1515 during the early Asian session on Monday. The stronger-than-expected US jobs data and heightened uncertainty in the Middle East boost demand for the US Dollar (USD) as a safe-haven.
US President Donald Trump on Sunday appeared to set a new deadline for Iran to reopen the Strait of Hormuz on Tuesday. This came as Trump issued a profane message renewing threats to bomb power plants and other infrastructure if Tehran does not lift its effective blockade on the vital waterway.
Iranian officials noted that Iran will reciprocate attacks on its infrastructure and target similar infrastructure owned by the US or related to it. Tehran added that the strait will remain blocked until Iran receives pay for war damages.
The US economy added 178,000 jobs in March 2026, the US Bureau of Labor Statistics (BLS) reported on Friday. This figure followed a 133,000 decline (revised from -92,000) and came in above the market consensus of a 60,000 gain. Meanwhile, the Unemployment Rate edges lower to 4.3% in March from 4.4% in February, better than the estimates.
Hawkish tone of the European Central Bank (ECB) might help limit the EUR’s losses. The ECB has maintained a firm commitment to combating inflation. President Christine Lagarde and other Governing Council members have delivered consistent messages, emphasizing that policy will remain restrictive until inflation sustainably returns to the 2% target.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- AUD/USD softens to around 0.6885 in Monday’s early Asian session.
- Nonfarm Payrolls increased by 178K in March, stronger than expected.
- Westpac analysts anticipate three additional hikes in 2026 to combat inflation.
The AUD/USD pair extends the decline to near 0.6885 during the early Asian session on Monday. The US Dollar (USD) strengthens against the Australian Dollar (AUD) amid stronger-than-expected US employment data and ongoing geopolitical tensions in the Middle East. The US March ISM Services Purchasing Managers Index (PMI) data will be the highlight later on Monday.
Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that the US Nonfarm Payrolls (NFP) rose by 178K in March. This figure followed a 133K decline (revised from -92K) and came in well above market expectations for a 60K gain. The Unemployment Rate ticked lower to 4.3% in March from 4.4% in February.
US President Trump on Sunday escalated his threats to bomb Iranian power plants starting Tuesday and bring “Hell” to the country after US forces rescued an airman from Iran more than a day after his fighter jet was shot down.
Escalating tensions between the US and Iran and concerns over the Strait of Hormuz closure continue to boost a safe-haven currency such as the Greenback and create a headwind for the pair in the near term.
Market expectations for the May meeting lean toward another potential rate hike due to rising oil prices and a tight labor market. Westpac analysts expect the Reserve Bank of Australia (RBA) to deliver three further rate hikes in 2026. This would take the cash rate to 4.85%, a level not seen since November 2008.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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