Geopolitics Lift Dollar as Sterling Slides on Weak UK Jobs Data.

USD – Firming modestly on geopolitical tensions, though gains remain measured as markets await Fed guidance.

EUR – Softer against a stronger dollar, with sentiment data in focus to gauge the region’s economic outlook.

GBP – The weakest of the majors, pressured by slowing wage growth and rising unemployment, reinforcing rate-cut expectations.

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USD:

The dollar has been ticking higher this week, supported in part by renewed US-Iran tensions and a lift in oil prices. Iranian military drills in the Strait of Hormuz have raised concerns around the key shipping route, while the US and Iran meet in Geneva for a second round of nuclear talks. President Donald Trump is reportedly sending a second aircraft carrier to the region to strengthen US leverage.

There is no major US data today, so attention turns to comments from Fed officials Michael Barr and Mary Daly ahead of Wednesday night’s release of the January FOMC minutes. In Canada, January CPI is due after last month’s softer 2.4% reading reduced expectations of a Bank of Canada rate hike this year.

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EUR:

The euro weakened yesterday as the dollar strengthened. Today’s focus is on the ZEW investor sentiment surveys for Germany and the wider eurozone.

Expectations are likely to remain cautiously optimistic, but with sentiment around the current economic situation still subdued — highlighting the fragile recovery backdrop across the bloc.

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GBP:

Sterling is the worst-performing G10 currency this morning, down around 0.4% after headline wage growth slowed sharply from 4.7% to 4.2% in the three months to December.

Unemployment has risen to 5.2%, its highest level in a decade outside of the pandemic spike. January payrolls fell by 11K, slightly better than expected but still negative. Markets are now largely convinced the Bank of England will cut rates again in March, with a second cut fully priced in by November — keeping pressure on the pound.

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