The below key drivers are likely to impact investor risk sentiment and FX markets in March:
- The US/Iran conflict has escalated geopolitical uncertainty, which is pushing investors toward safe-haven currencies and adding volatility to FX markets.
- The conflict is causing disruptions to key oil and gas routes, driving higher energy costs, influencing inflation and currency performance.
- Central bank policymakers are adjusting interest rate expectations to manage inflation and stabilise currencies amid global uncertainty.
EUR | Euro
The euro has come under pressure as the US/Iran conflict disrupts energy supplies, driving up oil and gas costs and raising concerns about economic growth and potential interest rate changes in Europe.
Like most currencies, the euro has been hit by the recent US/Iran conflict. A key impact is the price of oil. With the European bloc trying to wean itself off Russian oil and gas imports, it had looked for alternative sources of fossil fuels, particularly from the Middle East. With around 20% of all oil passing through the Strait of Hormuz, the virtual closure of shipping in the region has led Brent crude to spike above $100 a barrel. There has also been a halt to LPG from Qatar which led to European Union (EU) natural gas prices to double in a week. This upswing in prices could impact growth in the EU depending on how long the conflict lasts for.
With the European Central Bank (ECB) holding interest rates steady at 2.15%, there could be calls to raise rates sooner than previously thought should the conflict rumble on for longer than expected. The next rate decision from the ECB is due on March 19 and investors will be eager for comments from ECB Bank Chief, Christine Lagarde. The impact of rising energy costs may not be felt for a few more weeks, but could also impact the German manufacturing sector which had been showing signs of recovery since the post Covid price rise shock. Due to the conflict, the future direction for the EUR is hard to predict. A swift resolution could see the EUR stabilise, but if the conflict continues, pressure could remain.
Expected ranges:
- EURUSD 1.14–1.1820
- EURGBP 0.8605–0.8740
GBP | Sterling
The pound weakened as the Bank of England kept interest rates steady despite expectations of a cut. Ongoing Middle East tensions and rising energy costs could influence future rate decisions.
The pound slipped throughout February as the Bank of England (BoE) narrowly decided to keep interest rates on hold at their February 5 interest rate decision.
The GBPUSD pair began February around US$1.38 and ended the month around US$1.34. Members of the BoE’s Monetary Policy Committee voted 5-4 in favour of holding rates at 3.75%, closer than the 7-2 that had been predicted. Many analysts expected there would be a 0.25% reduction at the March 19 meeting, however, the recent US/Iran conflict could mean Monetary Policy Committee members may tempted to hold steady again. It will depend on how high oil prices go, which would cause upward pressure on inflation. Recent data like the Retail Sales, Services and Manufacturing PMI surveys, and record tax receipts have helped improve the economic outlook of the UK, as well as inflation falling from 3.4% to 3% y/y.
Looking ahead, developments in the Middle East will be a key area of interest. Should the war cause energy prices to keep rising, then the Bank of England may decide to hold rates again when a cut was being priced in.
Expected ranges:
- GBPUSD 1.3509–1.3814
- GBPEUR 1.1440–1.1611
AUD | Australian dollar
The Australian dollar rose modestly against the US dollar, though markets remained volatile. Strong local economic data and expectations of higher interest rates helped support the currency as investors balanced global uncertainty.
Over the past month, the Australian dollar saw moderate appreciation against the US dollar In early February, trading between US$0.69–US$0.70.
Throughout February, the AUD strengthened, supported by stable domestic economic indicators and continued expectations that the Reserve Bank of Australia (RBA) would maintain a comparatively firm monetary policy stance. Stronger-than-expected inflation data also suggested that Australian interest rates would remain elevated for longer At the February meeting, the RBA increased interest rates by 25 basis points, providing a further boost to the AUD which helped push above the US$0.70 level.
By the start of March 2026, the AUDUSD pair had climbed to roughly US$0.71, a modest improvement from the levels observed at the beginning of the previous month. Overall, the Australian dollar appreciated by roughly 1–1.5% against the US dollar over the past month.
Looking ahead, the Australian dollar is likely to remain sensitive to global risk sentiment and interest rate expectations in the weeks ahead. Strong inflation and a tight labour market are keeping the possibility of further Reserve Bank tightening on the table, which could support the currency. However, safe haven demand for the US dollar during periods of geopolitical tension or rising oil prices may create bouts of volatility. Overall, the AUD may continue trading around recent levels, with direction shaped by inflation data, central bank signals, and shifts in global market confidence.
Expected ranges:
- AUDUSD 0.6944–0.7168
- AUDEUR 0.5975–0.6147
- AUDGBP 0.52302–0.53193
- AUDNZD 1.1797–1.2031
NZD New Zealand dollar
Stronger global market sentiment lifted the New Zealand dollar against the US dollar. The NZD gained as investors became more confident and local conditions remained steady.
The New Zealand dollar showed moderate strengthening against the USD in February. As global market sentiment improved and demand for risk-sensitive currencies increased, the New Zealand dollar gradually moved higher, stabilising above the US$0.60 level through much of February.
Throughout the month, the NZD benefited from broader foreign exchange dynamics that weakened the US dollar and supported commodity-linked currencies. Often considered a risk-sensitive currency, the NZD tends to appreciate when global economic expectations strengthen and investors shift toward higher-yielding assets. As a result, periods of improved risk appetite in global markets which saw the NZD trading between US$0.603–US$0.605 for much of February.
Domestic economic conditions contributed to the currency’s resilience, as investors monitored inflation trends and expectations surrounding the monetary policy outlook of the Reserve Bank of New Zealand (RBNZ). Stable domestic data and expectations that interest rates would remain relatively firm supported demand for the currency in international markets.
Looking ahead, the New Zealand dollar may face continued pressure in March as escalating Middle East tensions and rising oil prices drive safe-haven demand for the US dollar. Domestically, economic conditions appear stable, but the RBNZ’s stance and delayed rate-hike expectations may see the NZDUSD trade cautiously.
Expected ranges:
- NZDUSD 0.5836–0.6005
- NZDEUR 0.5052–0.5117
- NZDGBP 0.4387–0.4464
- NZDAUD 0.312–0.8477
USD | United States dollar
The US dollar has strengthened as investors seek safety during global uncertainty. Strong economic outlook and higher interest rate expectations continue to support the currency, keeping the dollar central to global markets.
The US dollar has strengthened in recent weeks as global capital searches for safe havens amid renewed geopolitical tensions and volatility in the energy markets. The sharp rise in crude prices following the escalation in the Middle East has revived concerns that the final phase of the global disinflation cycle may prove uneven. This has tempered expectations for near-term Federal Reserve easing and pushed US Treasury yields modestly higher. At the same time, the structural resilience of the US economy continues to attract international capital. Growth expectations remain stronger than in most developed markets, while the depth and liquidity of US financial markets reinforce the dollar’s central role during periods of global uncertainty.
Looking ahead, we’re likely to see the relative growth for the US dollar, and policy divergence rather than isolated economic data. Many major banks, including Goldman Sachs, note that while the US dollar remains structurally well supported in the short term, the broader global cycle may gradually narrow the US growth advantage over time. As other economies stabilise and monetary policy differentials begin to converge, capital allocation could slowly diversify beyond US assets. For now, geopolitical uncertainty, energy volatility and the continued depth of US capital markets suggest the dollar is likely to remain a central anchor within global currency markets.
Expected ranges:
- DXY 97.561–99.695
JPY | Japanese yen
The yen has been volatile amid political developments and shifting expectations for Japan’s monetary policy. While uncertainty has eased, the currency may remain choppy as markets weigh economic signals and global risks.
In February, the Japanese yen (JPY) experienced significant volatility as markets navigated shifting political developments and evolving monetary policy expectations. Early in the month, the currency weakened as markets positioned ahead of Japan’s February 8 snap election, amid concerns that Prime Minister Sanae Takaichi’s fiscal stimulus agenda could weigh on Japan’s already high debt levels and keep monetary policy accommodative. Following the election, where Prime Minister Takaichi’s Liberal Democratic Party secured a decisive supermajority, market uncertainty eased and the yen rebounded after an initial dip. As the month progressed, the yen gradually stabilised and traded within a broad range as investors balanced Japan’s fiscal outlook with expectations that the Bank of Japan (BoJ) will continue gradually normalising monetary policy. This direction is likely to continue as Tokyo’s CPI inflation data fell to 1.8% y/y, below BoJ’s 2% target and signals from Bank of Japan officials, including Governor Kazuo Ueda. Softer Japanese GDP (0.1% QoQ growth) revealed that the economy narrowly avoided a technical recession.
The yen is expected to remain volatile as markets reassess recent global risk factors alongside expectations for gradual BoJ policy normalisation. Geopolitical tensions may trigger intermittent safe haven flows into the currency, but such moves are unlikely to establish a sustained trend without a clear catalyst. Overall, the yen is expected to trade within a broad range, with meaningful directional shifts dependent on fresh economic or policy developments.
Expected ranges:
- USDJPY 145–165
CAD | Canadian dollar
February saw the Canadian dollar supported by higher oil prices but pressured by a firm US dollar. Looking ahead, its direction will likely continue to track energy markets, US policy, and global economic conditions.
Over the past month, two competing macro forces are influencing the Canadian dollar: global energy prices and pressure from a stronger US dollar.
Rising global energy prices have provided an important fundamental support given Canada’s position as a major crude exporter, with the surge in oil prices improving the country’s terms of trade and reinforcing export revenues. At the same time, global risk dynamics have strengthened the US dollar, which often acts as a counterweight to commodity-linked currencies during periods of geopolitical stress.
Domestically, Canada’s economic backdrop remains relatively stable but modest. Inflation has eased closer to the Bank of Canada’s target range while growth has moderated, leaving policymakers inclined toward a cautious and measured policy stance.
Looking forward, the Canadian dollar’s direction will likely continue to reflect the interaction between energy markets, US monetary policy and broader global financial conditions. Many economists expect commodity demand to remain structurally firm as global supply constraints persist, which provides a supportive backdrop for Canada’s external balance. However, given Canada’s deep economic integration with the United States, shifts in Federal Reserve policy and US growth expectations may continue to exert a powerful influence on currency dynamics. As a result, the Canadian dollar is increasingly viewed by macro strategists as a leveraged expression of the North American economic cycle rather than a purely domestic story.
Expected ranges:
- CADUSD 0.7271–0.7393
SGD | Singapore dollar
The USDSGD pair stabilised in February as the dollar recovered following the announcement of new Fed leadership, while the SGD remained firm on the back of solid domestic growth and steady MAS policy.
The USDSGD pair consolidated in February, following January’s dramatic plunge to an 11-year low of 1.2584. The primary driver of this stabilisation was a shift in Federal Reserve leadership, which helped the US dollar to recover some ground after previous “de-dollarisation” concerns. Despite the USD recovery, the Singapore dollar remained strong, supported by the ongoing global AI investment cycle and a resilient domestic macro backdrop.
Recent domestic economic data underscores this strength, with finalised figures showing Singapore’s economy expanded by 5.0% in 2025, capped by a powerhouse 6.9% growth in Q4. On the policy front, the Monetary Authority of Singapore (MAS) maintained the S$NEER slope in January but signalled a “tighter for longer” stance by revising its 2026 core inflation forecast upward to 1%–2%. This direction persists even as January’s core inflation eased to 1.0%, while headline inflation edged up to 1.4% due to higher housing costs.
Looking ahead, geopolitical developments remain fluid as the broader US/Iran conflict stays in focus, with uncertainty regarding the endgame and duration of the escalation. The risks could go two ways: while a quick resolution should support a SGD recovery, a prolonged escalation could spill over into Asian FX and risk-proxies, leaving the SGD vulnerable to regional weakness. Consequently, price action will likely stay highly sensitive to these geopolitical developments.
Expected range:
- USDSGD 1.2550–1.2850
HKD | Hong Kong dollar
The US dollar has edged higher against the Hong Kong dollar within its fixed trading band. Strong local economic conditions support stability, but global tensions and market sentiment may influence short-term currency moves.
Throughout February, the USDHKD pair steadily drifted upward its 7.75–7.85 peg. This movement was largely driven by carry trade activity, as the HKD funding remained relatively inexpensive compared to the US dollar despite local official rates being slightly above US levels. Ample local liquidity effectively allowed the pair to drift toward the upper end of its permitted trading band.
Hong Kong’s economic fundamentals remain on a firm footing, with finalised data confirming 2025 GDP growth at 3.5%, the fastest annual expansion since 2021, supported by a record HK$5.24 trillion in merchandise exports. This momentum carried into early 2026, with January 2026 exports surging 33.8% y/y and inflation remaining mild at 1.1%. In line with the Federal Reserve’s early 2026 stance, the HKMA held its Base Rate at 4.00%, while the Exchange Fund’s record HK$331 billion investment income for 2025 continues to provide a massive liquidity buffer for the currency peg.
For March, the pair is expected to stay sensitive to carry trade flows which currently favour the US dollar. However, regional sentiment remains clouded by the ongoing conflict in Iran, and while the HKD peg provides stability, a significant escalation could dampen broader risk appetite across Asian markets. Conversely, any signs of a quick resolution or the implementation of new fiscal measures from the February 25 Budget may provide intermittent support for the HKD, potentially pulling the pair back from the upper end of the peg.
Expected range:
- USDHKD 7.7800–7.8350
Impacts of US/Iran conflict on markets. Read the article.
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