Today, US President Donald Trump said that the White House is holding negotiations with Iranian representatives and that, in his view, significant progress has already been made in the bilateral dialogue. However, he stressed that if a final agreement cannot be reached and the Strait of Hormuz is not reopened, the US armed forces will destroy all energy and oil infrastructure on Iranian territory.
Naturally, Tehran would respond with “mirror” measures by attacking US military bases as well as facilities belonging to allies in the region, as it has done repeatedly before. It should be recalled that on March 29, Iran’s Islamic Revolutionary Guard Corps (IRGC) carried out missile and drone strikes on two aluminum plants — EMAL, part of Emirates Global Aluminium in the United Arab Emirates, and ALBA in Bahrain — which could accelerate consumer price growth in the future, since not only energy costs but also aluminum raw materials are now becoming inflation drivers.
Against this backdrop, market participants continue to increase dollar purchases, while the US currency is also receiving additional support from the likelihood that the Federal Reserve will keep its current policy settings in place for longer, helped by the state of the domestic economy. Inflation pressure in the United States was already well above the 2.0% target before the US-Iran confrontation began, with annual inflation at 2.4% and core inflation at 2.5% in February, and it is now likely to accelerate further. Richmond Federal Reserve President Thomas Barkin said on Friday that the Middle East crisis and the rapid adoption of artificial intelligence technologies make it reasonable to keep borrowing costs fixed in the 3.50–3.75% range, while his colleague from the Philadelphia Fed, Anna Paulson, warned that a prolonged period of high inflation could become a serious problem for the global economy.
Eurozone
The euro is strengthening against the pound, but losing ground against the US dollar and the yen.
Investors are focused on the release of Germany’s preliminary March inflation data. On a monthly basis, the consumer price index rose from 0.2% to 1.1%, while on an annual basis it accelerated from 1.9% to 2.7%. At the same time, the harmonized indicator increased from 0.4% to 1.2% month-over-month and from 2.0% to 2.8% year-over-year, respectively, mainly due to the sharp rise in energy and food prices. Analysts note that because of the Middle East conflict, the risks of stronger price pressure are once again becoming relevant, and the longer the US-Iran confrontation continues, the more arguments the European Central Bank will have to raise borrowing costs again. In this regard, it is worth noting comments made by Bank of France Governor François Villeroy de Galhau in an interview with the Italian newspaper La Stampa. He emphasized that monetary authorities are fully determined to prevent a new acceleration in inflation caused by higher oil prices, but said it is still premature to predict the timing of any possible adjustments.
United Kingdom
The pound is weakening against its main peers — the euro, the yen, and the US dollar.
According to data published today, the number of approved mortgage loans increased by 62.58K versus preliminary estimates of 61.00K, while the volume of this type of borrowing rose from £4.21 billion to £4.84 billion compared with forecasts of £4.10 billion. Overall, the figure increased from £1.828 billion to £1.935 billion against expectations of £1.600 billion, although experts are convinced that the positive trend will slow in March under the influence of the Middle East crisis. Tomorrow at 09:00 (GMT+2), fourth-quarter gross domestic product data will be released. On a quarterly basis, GDP is expected to come in at around 0.1%, while on an annual basis it may slow from 1.2% to 1.0%, which could still provide some support to the national currency.
Japan
The yen is gaining against its main counterparts — the euro, the pound, and the US dollar.
Today, the summary of opinions from Bank of Japan officials was published. At the March monetary policy meeting, they discussed the prospects for further tightening, and some participants pointed to the possibility of a stable or accelerated increase in borrowing costs, since the military conflict between the United States and Iran has already led to a sharp rise in energy prices and is acting as a driver of faster inflation.
Some board members expressed concern that rising costs could lead to economic stagnation, but the majority still supports a hawkish course, while emphasizing that it should be implemented at a moderate pace. It is also worth noting recent comments from Bank of Japan Governor Kazuo Ueda, who said today that the regulator will closely monitor movements in the yen. He suggested that rising import costs caused by a weak national currency could justify higher interest rates in the coming months.
Australia
The Australian dollar is gaining against the euro and the pound, but weakening against the yen and the US dollar.
In the absence of major economic releases, price movements are being driven by external factors. It is worth noting comments from Australian Prime Minister Anthony Albanese, who said that the government will halve excise duties on gasoline and diesel and cancel road user charges for heavy transport for three months in order to help households cope with the sharp increase in expenses caused by the US-Iran confrontation. According to the official, the tax adjustment will reduce automotive fuel prices by 26.3 Australian cents per liter.
Tomorrow at 03:30 (GMT+2), investors and forex traders are expecting the release of minutes from the latest Reserve Bank of Australia meeting, where they will look for clues about the next steps by monetary authorities. It should be recalled that on March 17, the regulator raised the interest rate by 25 basis points for the second consecutive time, bringing it to 4.10%, the highest level in ten years. Speaking to journalists after the meeting, RBA Governor Michele Bullock said that all board members generally agree on the need to continue the hawkish cycle and differ only on the timing of future adjustments.
Oil
Oil prices are making moderate attempts to rise today.
They are being supported by the entry of Ansar Allah forces into the Middle East conflict. The group may attempt to block the Bab el-Mandeb Strait, the second most important waterway for oil transportation, which would force crude oil and other goods to be shipped around Africa, significantly increasing delivery times and, of course, sharply raising cargo costs.
On the other hand, stronger upward momentum is being restrained by reports from Pakistani authorities that they are preparing to hold “substantive negotiations” in the coming days aimed at resolving disagreements between the United States and Iran. It is also worth noting comments from analysts at JPMorgan Chase & Co., one of the world’s largest multinational financial conglomerates, who said that if the Strait of Hormuz remains closed for another month, oil prices could rise to 150.00, causing energy supply restrictions for industrial companies.
Conclusion:
Geopolitical risks and persistent inflation continue to shape currency market dynamics, supporting the US dollar in risk-off conditions. However, stronger yen demand and central bank divergence may create mixed performance across major pairs. Markets will remain highly sensitive to geopolitical developments and monetary policy signals.
