Geopolitical Tensions and Economic Data Shape Currency Markets: USD, GBP, and EUR Outlook.

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USD: Markets are jittery ahead of key events; geopolitical tensions in the Strait of Hormuz and Iran’s actions are boosting energy prices, while non-farm payrolls data could shift expectations on Fed rate cuts.

GBP: Sterling is edging higher against the euro, while steadying against the dollar; markets are reducing expectations for Bank of England rate cuts, despite ongoing concerns over inflation.

EUR: European gas and crude prices are rising, shifting market expectations toward an ECB rate hike; Q4 GDP estimate and ECB speakers Cipollone and Schnabel are today’s highlights

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USD:

Markets remain twitchy as we head into a key couple of days for the market. Marine traffic through the Strait of Hormuz has all but stopped, Iran continues to strike energy infrastructure in the region, and the war may be about to ramp up further. US’ Hegseth warned that bombing could intensify, and Iranian state TV announced plans to use their newer missiles in the coming days. Brent crude has risen through the $84 per barrel level, and while natural gas is slightly down from its peak, it remains significantly higher compared to last week. There are efforts from the US to ease the pain, with India temporarily allowed to buy Russian oil stranded at sea, and further measures are expected today. Amidst the chaos, the highlight of the US data calendar today is non-farm payrolls. It is expected to contract from 130K to 55K in February, while the unemployment rate is expected to hold steady at 4.3%. With energy prices edging higher, markets have reduced their bets on Fed cuts this year to just one, although any surprise weakness in the labor market could shift that higher today.

GBP:

Sterling is inching higher again versus the battered euro while steadying against the dollar. The repricing of the Bank of England rate path continues, with markets now assigning only a 75% probability of any rate cuts at all this year, given the expectation that the Iran war might slow UK disinflation. The quiet calendar today might allow the pound to pick up some gains.

EUR:

With European natural gas and Brent crude heading higher, market pricing for the ECB has shifted towards betting on a rate hike this year—something that has helped ease the pain in EURUSD over the past couple of days. The only data on the calendar today is the third estimate for Q4 GDP, and from the ECB, we hear from Cipollone and Schnabel.

Economic Calendar