Current market dynamics are being shaped by rhetoric from leading US officials. Over the weekend, President Donald Trump issued a 48-hour ultimatum to Iran demanding the full reopening of the Strait of Hormuz, warning that otherwise energy facilities of the Islamic Republic would be targeted. In response, Tehran announced plans to destroy similar infrastructure in Israel and the Gulf states, as well as fully close the waterway, where shipping had recently only partially resumed. Analysts suggested that a fresh escalation could push oil prices to 150.00, which initially supported the US dollar. However, today the White House said it would postpone any decision on strikes against Iranian power plants for five days, while peace talks are currently under way, leading to short-term weakness in the dollar. It is worth noting that Iranian officials denied Trump’s claims, arguing that his rhetoric is aimed solely at slowing the rise in hydrocarbon prices. Meanwhile, Federal Reserve Governor Christopher Waller said policymakers need to remain cautious, since the full impact of higher fuel prices is still difficult to assess. If they lead to a significant acceleration in consumer inflation, the Fed will respond accordingly; otherwise, rate cuts could resume by the end of the year.
Eurozone
The euro is strengthening against the US dollar, weakening against the pound, and showing mixed dynamics against the yen.
Investors and forex traders are closely watching the latest comments from senior European Central Bank officials. ECB Vice President Luis de Guindos said today in an interview with El Mundo that the central bank cannot prevent a sharp rise in inflation caused by surging energy prices, but will take action if there are signs that inflation is becoming entrenched in the economy. He also reassured markets by stating that, despite current challenges, the eurozone is not facing recession. A similar view was expressed by Slovak central bank chief Peter Kazimir, who said the ECB would act without hesitation if consumer inflation remained above the bank’s 2.0% target. Meanwhile, analysts at Morgan Stanley and Deutsche Bank AG revised their outlook for EU monetary policy and now expect two 25-basis-point rate hikes, potentially in June and September.
United Kingdom
The pound is strengthening against the euro and the US dollar, while showing mixed performance against the yen.
Today, Prime Minister Keir Starmer called a nationwide emergency meeting to address the economic fallout from the escalation of the US-Iran conflict, as UK government borrowing costs have climbed to their highest level since the 2008 global financial crisis. The meeting is expected to take place later today and, alongside government ministers, Bank of England Governor Andrew Bailey will also attend. Starmer said officials would discuss all tools available to address the cost-of-living crisis. The Treasury confirmed that energy security, industry, and logistics will also be on the agenda.
Japan
The yen is strengthening against the US dollar, while showing mixed dynamics against the euro and the pound.
According to Rengo, Japan’s largest labor union federation representing more than 7.0 million workers, it has reached an agreement with employers for another wage increase this year averaging 5.26%. This would mark the third consecutive annual rise in pay and, according to analysts, could help support inflation at the 2.0% level required by the Bank of Japan. Relevant data will be published tomorrow at 01:30 (GMT+2), though current inflation figures remain below the desired threshold: the consumer price index is expected to ease from 1.5% to 1.3% year-on-year, while the core reading may fall from 2.0% to 1.7%. That would reduce the likelihood of further monetary tightening and could weaken the national currency.
Australia
The Australian dollar is weakening against the euro and the pound, while showing mixed dynamics against the yen and the US dollar.
Tomorrow at 00:00 (GMT+2), preliminary March business activity data will be released. The manufacturing PMI is expected to rise from 50.0 to 51.6, while the services PMI may increase from 52.8 to 54.7. If confirmed, these figures would reinforce the view that the Australian economy remains resilient despite a strong labor market and elevated inflation, which could increase the probability of further tightening by the Reserve Bank of Australia.
Oil
Oil prices are actively correcting lower after US President Donald Trump said strikes on Iranian energy infrastructure would be postponed for five days, as negotiations are currently under way with Iranian officials aimed at ending the military conflict. Although Tehran has denied this, investor hopes for a ceasefire and the reopening of the Strait of Hormuz, through which up to 20.0% of global hydrocarbon supplies pass, have pushed crude prices lower.
Additional pressure on the sector came from comments by International Energy Agency Executive Director Fatih Birol, who said the organization is consulting with governments in Asia and Europe about releasing additional fuel reserves if needed. He added that no fixed price threshold would be set for such measures.
