US Dollar remains steady amid Middle East tensions
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Daily Currency Update
The US dollar held firm in volatile trading this morning, as heightened geopolitical tensions between Israel and Iran kept investors on edge. Market participants remained alert to any signs of further escalation that could ripple through global markets, particularly ahead of a busy week of central bank meetings.With both nations showing little intention of de-escalating, concerns mounted over a potential disruption to the Strait of Hormuz. Any interruption to the flow of energy from this region could trigger a spike in oil prices, raising inflationary pressures globally. This, in turn, could influence central bank policy paths and increase demand for safe haven currencies such as the US dollar, as markets price in broader economic risks stemming from the conflict.
Key Movers
Central bank policy takes centre stage this week, with markets closely watching the US Federal Reserve on Wednesday and the Bank of England on Thursday.While both central banks are widely expected to keep interest rates on hold, FX markets will be highly sensitive to any shifts in tone or forward guidance. Traders will dissect the Fed's commentary for clues on how it interprets recent signs of cooling economic activity amid persistent inflationary pressures. Any dovish signals could trigger a pullback in the US dollar, while a hawkish stance may reinforce USD strength. Similarly, the Bank of England’s outlook will influence sterling sentiment, especially as markets gauge the timing of a potential rate cut in the UK. The week could bring heightened volatility across USD and GBP currency pairs.
Expected Ranges
- GBP/USD: 1.3555 - 1.3645 ▲
- GBP/EUR: 1.1685 - 1.1765 ▼
- GBP/AUD: 2.0845 - 2.0915 ▲
- EUR/USD: 1.1565 - -0.8365 ▲