USD

Monday saw the dollar drop back sharply, sparked by President Trump’s decision to delay strikes on Iran’s power grid, with the President instead pointing to progress in negotiations, and setting a new five-day deadline. The resulting relief rally helped saw rate hike bets trimmed aggressively, leaving the DXY close out the day down 0.4%, albeit fresh fighting and conflicting signals are keeping markets cautious. Today’s data calendar is relatively light with S&P PMIs top of the docket, meaning risk sentiment will continue to be dominated by headlines from the Gulf and any fresh signals on Fed policy. With the Strait of Hormuz still effectively closed and safe‑haven demand elevated, we expect the dollar to stay supported, especially if oil resumes its rise and markets reaccelerate rate‑cut expectations.

EUR

Monday’s partial risk rebound lifted EURUSD back to 1.16 as markets digested conflicting statements from the US and Iran, combined with further fighting around the Gulf. That move goes some way to reversing the single currency’s recent losses, albeit with worries around longer-term oil and gas costs still weighing heavily on the pair. Today’s euro‑area calendar should give some indication of just how concerning that picture is, seeing flash March PMIs published this morning. This represents the first solid data point on how firms perceive the risks stemming from conflict in the Middle East, with knock-on implications for growth and inflation across the bloc. With geopolitical risks still skewed to the upside and oil prices volatile, we expect EURUSD to remain heavy, trading defensively unless news of de‑escalation in the Middle East leads to a more durable improvement in sentiment.

GBP

Sterling rallied almost 1% against the dollar on Monday as optimism over a temporary lull in the Gulf conflict spurred a more risk-on tone, with this dynamic also triggering a notable swing in Gilt yields over the course of the session. As on the continent, PMIs later this morning should offer a steer on just how concerned firms are by the ongoing conflict in the Middle East, overshadowing tomorrow’s February CPI report, which is likely to be seen as dated by traders. With growth risks mounting and the conflict keeping oil and gas prices volatile, we expect sterling to remain trading in line with shifts in risk sentiment, resisting sustained rallies unless there is clear de‑escalation or evidence of resilient domestic demand.

CAD

USDCAD whipsawed on Monday as headlines out of the Gulf drove big swings in oil and risk appetite. WTI prices tumbled more than 10% to roughly $88 a barrel after Trump delayed airstrikes, alleviating some inflation fears, but this was offset by an equities rally and falling haven demand for the dollar. With little domestic data before Wednesday’s SEPH payrolls readings, CAD will take its cue from energy markets and general risk tone. We expect the loonie to remain range‑bound around the mid‑1.37s, with strength capped by uncertainty over global growth and weakness cushioned by elevated oil prices and prospects for tighter BoC policy.

Disclaimer

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