EUR – Faces pressure from higher energy prices, though expectations of further ECB rate hikes are providing some support.

GBP – Is holding relatively steady, but remains driven by UK political developments and broader market sentiment.

USD:

The dollar continues to strengthen as markets react to renewed Middle East tensions after President Trump announced tighter measures against Iranian shipping. Brent crude has climbed to around $85 per barrel, while rising US Treasury yields reflect increasing expectations of another Federal Reserve rate hike, with markets now pricing around a 42% chance at the next meeting. Today’s US CPI report will be the key event, with stronger-than-expected inflation likely to reinforce expectations for tighter monetary policy. Markets will also be watching comments from several Fed officials alongside Chair Warsh’s testimony.

EUR:

The euro has come under pressure as higher oil prices weigh on the energy-dependent eurozone economy. However, expectations that the European Central Bank could still deliver two further rate hikes this year are helping to offset some of that weakness. With little major eurozone data due today, EUR/USD is likely to be driven primarily by US inflation and developments in the Middle East.

GBP:

Sterling is weaker against the dollar but remains relatively stable against other major currencies. Markets continue to focus on Andy Burnham’s expected appointment as Labour leader on Friday and Prime Minister shortly afterwards, alongside Thursday’s UK GDP release. However, today’s key drivers are likely to be the US CPI report and geopolitical developments, while Bank of England Governor Andrew Bailey’s Treasury Committee testimony may also provide insight into the UK’s interest rate outlook.