USD

The dollar regained momentum on Thursday as risk‑off sentiment resurfaced. With little on the data calendar, the greenback tracked swings in oil prices and broader market tone. Initial jobless claims ticked up to 210k but remained historically low, underscoring a still‑tight labour market despite rising uncertainty about the Iran conflict. These dynamics kept US yields elevated and the DXY index nudging 100. Looking ahead, we expect the dollar to remain bid as month‑end flows and headlines from the Middle East dominate. Today’s focus will be on a raft of Federal Reserve speeches, where policymakers are likely to repeat that policy will stay tight until inflation risks from the energy shock abate. A further increase in oil prices could reignite safe‑haven demand, though any progress toward a ceasefire would cap gains.

EUR

EURUSD slipped again on Thursday, consolidating just above 1.15. After Tuesday’s flash PMIs signalled stagflationary pressures, European Central Bank officials have struck a more cautious tone when it comes to risks stemming from conflict in the Middle East, weighing on the single currency at the margin. That sense of concern should have been underscored this morning, with March CPI data for Spain failing to show the kind of pickup that traders had anticipated. Headline CPI rose from 2.3% YoY in February to an estimated 3.3% YoY this month, albeit this was a smaller increase than the jump to 3.6% predicted by consensus estimates. If this undershoot is repeated across other national readings in the coming days, it should do much to curtail a recent acceleration in ECB hiking bets. Such an outcome would put the euro on track to end March in retreat, absent a surprise pause in Middle East hostilities.

GBP

Sterling continued to struggle on Thursday, giving up yet more ground to the dollar. That dynamic remains intact this morning, despite the release of February retail sales and GfK confidence. Both printed better than expected, but neither is hugely significant in our view. The former is dated, like CPI earlier in the week, which also failed to park a meaningful market response. Meanwhile, we retain our longstanding scepticism around the reliability of confidence indicators under significant shocks, leading us to discount a modestly better than expected print. All told, then, we suspect sterling will continue to track oil prices and risk conditions today.

CAD

The Canadian dollar remained under pressure on Thursday, with USDCAD pushing above 1.38 despite another day of volatile oil trading. In a speech to the Brandon Chamber of Commerce, BoC Senior Deputy Governor Carolyn Rogers acknowledged that higher oil prices will push inflation higher in the near term and that the Bank will monitor the Middle East conflict closely before deciding if further action is needed. She reiterated that the policy rate, held at 2.25% last week, remains appropriate but that officials stand ready to respond if inflation pressures broaden. Looking ahead, there are no major domestic releases today; USDCAD should therefore continue to take its cue from risk sentiment and oil prices. A durable ceasefire could support the loonie via a drop in energy risk premia, but with hostilities ongoing, we remain cautious about calling a top in USDCAD.

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