USD

The dollar slipped back initially on Monday before posting a rebound, closing out the day just above 100 on the DXY as markets weighed Washington’s escalating rhetoric against Iran against faint hopes of a ceasefire. Liquidity remained thin following Easter, even as haven demand persisted after President Trump threatened to target Iranian infrastructure if the Strait of Hormuz was not reopened by 8 pm ET today. US data releases had little impact over the long holiday weekend – the March jobs report surprised to the upside on Friday, while Monday’s ISM services survey showed slowing output but surging input costs. Neither prompted a significant FX reaction, with markets still focused squarely on Middle East risks. Indeed, safe‑haven flows kept rates elevated, and traders pushed back expectations for Fed easing. With Swedish CPI data due today and the RBNZ rate decision tomorrow providing little direct US focus, attention should quickly turn to Friday’s US CPI print, which we expect to show an energy‑driven jump in headline inflation. Absent progress towards a lasting ceasefire, we expect elevated oil prices and geopolitical uncertainty will continue to keep the dollar supported.

EUR

The single currency traded modestly firmer early on Monday, but faded to around 1.15 against the dollar late in the session as risk appetite ebbed later in the day. Investors remain torn between glimmers of diplomacy and the real possibility of further escalation in the Middle East, leaving haven flows into the dollar intact. Today’s Swedish CPI release will give the first of this week’s European inflation readings; we expect headline CPIF to jump on energy costs, though underlying inflation should remain near target, posing downside risks for the krona and limiting spill‑over support for the euro. That aside, with no major euro‑area releases on the calendar this week, the single currency is likely to stay rangebound and at the mercy of Middle East headlines and US data.

GBP

Cable edged up towards 1.33 in early Monday trading before slipping back to the mid‑1.32s as risk sentiment deteriorated. The pound remains sensitive to swings in energy prices and broader market volatility, given the UK’s heavy reliance on imported energy and a mixed domestic outlook. This backdrop should keep the BoE cautious for the time being, a sentiment we think is likely to be reinforced by the Bank’s credit conditions survey, released on Thursday. Before then, however, there are no significant UK data releases due, meaning sterling’s direction will largely depend on developments in the Middle East and movements in oil markets. Our bias remains that, without clear progress towards peace, GBPUSD rallies will be short‑lived as safe‑haven demand for the dollar persists.

CAD

The Canadian dollar gained modestly on Monday, with USDCAD slipping towards 1.39 as risk appetite improved and WTI hovered near $114 per barrel. Even so, the loonie’s advance was limited. Canada’s S&P Global services PMI remained in contraction at 47.2 in March, highlighting underlying economic softness. Looking ahead, there are no major Canadian releases today, leaving the loonie driven by oil prices and global risk sentiment again. Later this week, attention will turn to March employment data; we expect a modest rebound in payrolls but still‑soft labour market conditions, which should keep the Bank of Canada on hold. Until geopolitical tensions ease and energy markets stabilise, we see limited scope for sustained CAD gains.

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