A renewed focus on the Middle East could drive fresh volatility in the currency market this week, with the latest push for a peace deal looking set to be complicated by new US strikes on southern Iran.
Last week's key rate movements
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GBP/EUR – Up 1% on the week
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GBP/USD – Up 0.8% on the week
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EUR/USD – Down 0.2% on the week
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AUD/USD – Down 0.3% on the week
Pound (GBP)
Notable UK economic data is in short supply this week, likely leading to a renewed focus on Labour’s leadership crisis and its impact on the UK bond market, with a continued fall in gilt yields potentially helping to extend the pound’s (GBP) recent recovery.
Euro (EUR)
In the spotlight for EUR investors this week will be the publication of Germany’s latest inflation figures. If inflation in the Eurozone’s largest economy continues to accelerate, it’s likely to reinforce European Central Bank (ECB) interest rate hike bets and boost the euro (EUR).
US dollar (USD)
While the US dollar (USD) will remain sensitive to Middle East developments, USD sentiment will also be influenced by the latest core PCE price index this week, with the ‘greenback’ likely to firm if the Federal Reserve’s preferred indicator for inflation rose in April.
Australian dollar (AUD)
The Australian dollar (AUD) may be dented by the release of Australia’s latest CPI indicator this week, as a slowing of inflation is likely to further dent bets for another Reserve Bank of Australia (RBA) interest rate hike in June.
South African rand (ZAR)
The focus for ZAR investors this week will be the South African Reserve Bank’s (SARB) latest interest rate decision, with an expected rate hike potentially boosting the South African rand (ZAR) in the latter half of the week.
Canadian dollar (CAD)
The Canadian dollar (CAD) is likely to face resistance later this week as Canada’s quarterly GDP figures are expected to report growth remained weak in the first quarter of 2026.
New Zealand dollar (NZD)
While the Reserve Bank of New Zealand (RBNZ) isn’t expected to alter its monetary policy following its latest meeting this week, any hawkish signals from the bank could provide a boost for the New Zealand dollar (NZD) in mid-week trade.
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