Pound (GBP) uncertain despite hawkish BoE bets
Trade in the pound (GBP) was mixed yesterday amid concerns over the dramatic surge in European energy prices following the effective closure of the Strait of Hormuz over the weekend.
While GBP investors fear rising gas prices could curtail UK economic growth just as it was gaining momentum, the potential inflationary impact also slashed the odds of the Bank of England (BoE) cutting interest rates later this month.
Chancellor Rachel Reeves will deliver her Spring Statement later today. While no major policy announcements are expected, if the accompanying forecasts from the Office for Budget Responsibility (OBR) are revised higher in light of recent data, Sterling may strengthen.
Euro (EUR) punished by energy price surge
The euro (EUR) was also undermined by the spike in European energy prices on Monday, as continental gas prices surged around 40%.
Adding to the pressure on the euro was the release of Germany’s latest retail sales figures, which reported a much larger-than-expected contraction in consumer spending at the start of 2026.
The Eurozone’s latest consumer price index will be in focus today. If February’s preliminary figures report inflation remains below the European Central Bank’s (ECB) 2% target, it may start to strengthen the case for a more accommodative policy stance.
US dollar (USD) bolstered by safe-haven demand
The US dollar (USD) raced higher at the start of this week as the dramatic escalation of tensions in the Middle East stoked demand for traditional safe-haven assets.
Aiding the US dollar’s ascent was America’s relative energy independence, which should help to limit the US economy’s exposure to soaring oil and gas prices.
Turning to today’s session, a further appreciation of the ‘greenback’ is likely if we see tensions in the Middle East continue to escalate.
Canadian dollar (CAD) bolstered by rising oil prices
The Canadian dollar (CAD) rallied on Monday, with the commodity-linked currency tracking oil prices higher.
Expect the ‘loonie’ to enjoy further gains through today’s session if oil prices continue to strengthen.
Australian dollar (AUD) buoyed by perceived energy dividend
The Australian dollar (AUD) held its ground overnight on Monday, with an ongoing decline in market risk appetite offset by the view that, as an exporter of LNG and coal, Australia will benefit from a spike in global energy prices.
New Zealand dollar (NZD) slides amid bearish trading conditions
The New Zealand dollar (NZD) remained firmly on the back foot in overnight trade as skittish investors shunned the risk-sensitive currency amid ongoing geopolitical uncertainty.
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