The currency is receiving moderate support amid investors’ unjustified expectations of a near-term peaceful resolution of the Middle East crisis. Yesterday, President Donald Trump mentioned talks with representatives of the Islamic Republic, but no details on their progress have so far emerged, while official Tehran has completely denied any diplomatic contacts and at the same time emphasized its readiness to carry out retaliatory strikes against the energy and oil sectors of Gulf countries. Meanwhile, it has become known that Saudi Arabia and the United Arab Emirates have granted the Pentagon access to their military bases, which could contribute to a widening of the conflict, making the situation even more uncertain. It is also worth noting the latest comments from Federal Reserve officials, who continue to discuss the outcome of the March meeting. San Francisco Fed President Mary Daly stated yesterday that if the confrontation with Iran is not resolved soon, the regulator will not be able to ignore a temporary rise in oil prices and may be forced to adjust monetary policy. At the same time, it is still impossible to say with confidence in which direction borrowing costs may move. Her Chicago Fed counterpart Austan Goolsbee noted that inflation is already elevated even without taking into account the possible long-term shock from higher automotive fuel prices. Under these conditions, changing interest rates would be inappropriate.
Eurozone
The euro is losing ground against the US dollar, strengthening against the pound, and showing mixed dynamics against the yen.
Preliminary March business activity data published today came in mixed. In the eurozone manufacturing sector, the index rose from 50.8 points to 51.4 points, compared with preliminary estimates of 49.4 points, while the services sector indicator fell from 51.9 points to 50.1 points, a sharper decline than analysts had expected at 51.1 points, bringing it close to stagnation. The composite index also declined from 51.9 points to 50.5 points. A similar picture emerged in Germany, the largest economy in the EU: the manufacturing PMI increased from 50.9 points to 51.7 points, although traders had expected 49.6 points, while the services PMI fell from 53.5 points to 51.2 points against expectations of 52.5 points, and the composite indicator adjusted from 53.2 points to 51.9 points. Overall, the pace of European economic growth has slowed significantly amid rising inflation expectations linked to the escalation of the Middle East crisis, as well as disruptions in the supply of energy and raw materials.
United Kingdom
The pound is losing value against both the euro and the US dollar, while showing mixed dynamics against the yen.
Preliminary March business activity data released today were generally weak. In the manufacturing sector, the index declined from 51.7 points to 51.4 points, though less sharply than expected at 50.0 points, while the services sector index dropped from 53.9 points to 51.2 points versus expectations of 52.8 points. The composite indicator adjusted from 53.7 points to 51.0 points instead of the forecasted 52.8 points. The pace of UK economic growth slowed to a six-month low, mainly due to higher raw material costs. Businesses also reported that they had raised prices for goods and services at the fastest pace since April 2025. Overall, these data confirm ongoing uncertainty over the Bank of England’s next steps, as it remains unclear whether the regulator will continue lowering borrowing costs amid a cooling economy. In addition, markets are focusing today on the Confederation of British Industry (CBI) industrial order expectations report, which continued to decline from –43.0 points to –52.0 points, compared with preliminary estimates of –40.0 points. Retail executives said current conditions are putting pressure on consumer spending, forcing households to postpone purchases as they expect the economic situation to worsen further.
Japan
The yen is weakening moderately against the US dollar and showing mixed performance against the euro and the pound.
Investors and forex traders remain focused on inflation data. The nationwide consumer price index slowed from 1.5% to 1.3%, while the core indicator fell from 2.0% to 1.6%, a larger decline than experts had expected at 1.7%. As a result, price pressure in the Japanese economy has fallen below the Bank of Japan’s 2.0% target for the first time in nearly four years, largely because government subsidies offset higher energy prices. According to analysts, these figures could complicate decisions on further monetary tightening, although they are unlikely to force policymakers to fully abandon the prospect of rate hikes in the medium term. Meanwhile, Japan’s economy also slowed in March: preliminary data showed the manufacturing PMI falling from 53.0 points to 51.4 points, while the services PMI declined from 53.8 points to 52.8 points. It is also worth noting the latest comments from Bank of Japan Governor Kazuo Ueda, who stated today that the government’s proposed suspension of the sales tax on food products would have only a limited effect on long-term inflation expectations.
Australia
The Australian dollar is losing ground against its main rivals — the euro, the pound, the yen, and the US dollar.
Preliminary March business activity data in Australia were also released today. In the manufacturing sector, the index declined from 51.0 points to 50.1 points, while the services sector index fell from 52.8 points to 46.6 points, moving into stagnation territory. The composite indicator corrected from 52.4 points to 47.0 points, virtually eliminating the likelihood of continued hawkish rhetoric from the Reserve Bank of Australia in the near term. It is also worth noting that the EU and Australia have concluded a trade agreement under which Brussels will remove around 98.0% of tariffs on Australian exports, including wine, dairy products, wheat, barley, and seafood, while Australia will abolish more than 99.0% of tariffs, including those on dairy, automobiles, and chemicals. This, in turn, is expected to result in a 33.0% increase in exports to Australia over the next decade.
Oil
Oil prices are making moderate attempts to move higher today amid fears of further escalation in the US-Iran conflict after reports that Saudi Arabia and the United Arab Emirates granted US armed forces access to their military bases. Analysts do not rule out that Iran could respond with renewed attacks on oil-producing facilities in Gulf countries, which would become a catalyst for higher crude prices.
Today at 22:30 (GMT+2), investors will monitor the weekly American Petroleum Institute (API) inventory report. Stocks are expected to decline by 1.300 million barrels, and if this scenario is confirmed, energy prices may receive additional support.
