Oil Surge & Geopolitics Drive Dollar Strength, GBP and EUR Mixed.

USD – The dollar is firmer as rising oil prices and renewed geopolitical tensions boost demand, though confidence in the ceasefire keeps gains in check, leaving it sensitive to developments and central bank signals.

EUR – The euro is under mild pressure from the oil-driven dollar strength but holding steady, with rising ECB rate expectations offering some support despite a cautious outlook.

GBP – Sterling is mixed, recovering from early losses but weighed by weak UK sentiment and growth concerns, limiting upside despite improved risk conditions.

USD:

The US dollar opened stronger as oil prices surged and equity futures declined, following the collapse of US-Iran peace talks and Trump’s announcement of a naval blockade of the Strait of Hormuz, restricting Iranian supply. This escalation has added fresh uncertainty to energy markets and supported the dollar. However, confidence in the broader ceasefire remains, with the dollar index still around 1.2% below pre-ceasefire levels, limiting more aggressive upside.

Focus this week shifts to the IMF Spring Meetings in Washington, where a wide range of central bankers are expected to address the oil price shock and its implications for global monetary policy. The dollar remains sensitive to both geopolitical headlines and policy signals.

EUR:

The euro initially weakened on the back of the oil price surge but has since stabilised, with EUR/USD returning to levels seen late last week. Price action remains closely tied to energy markets, with further escalation likely to weigh on the single currency.

On the policy side, ECB rate expectations have increased again, with markets now pricing in up to three hikes. ECB speakers at the IMF meetings are expected to strike a cautious tone as they assess the inflationary impact of rising energy costs. Meanwhile, political developments in Hungary, where Viktor Orbán suffered a landslide defeat, could offer longer-term support to the euro through closer alignment with the EU.

GBP:

Sterling fell around 0.6% against the dollar at the open but has gradually recovered through the session. Despite this rebound, underlying sentiment remains weak. A report from the Resolution Foundation suggests the median UK working-age household will be £480 worse off this financial year due to the Iran conflict, with much of the economic impact already absorbed.

Additionally, a Deloitte survey shows confidence among large UK firms has dropped to a six-year low amid the geopolitical backdrop. With limited domestic data, focus turns to BoE commentary, including remarks from Alan Taylor, for further direction