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FX Week Ahead: DXY firms as Iran tensions shake FX
The United States dollar index (DXY) began the week on a stronger footing, rising 0.5% as geopolitical tensions and resilient inflation data underpinned demand for the greenback. The move follows a 1.5% decline last week, when optimism around U.S.-Iran negotiations boosted risk appetite. However, sentiment reversed after talks collapsed, with U.S. Vice President JD Vance confirming that negotiations had ended without agreement. “We have been at it now for 21 hours, and we’ve had a number of substantive discussions with the Iranians. That’s the good news,” he said. “The bad news is that we have not reached an agreement.” Vance said the key sticking point remained Iran’s refusal to abandon its nuclear ambitions. “We need to see an affirmative commitment that they will not seek a nuclear weapon, and they will not seek the tools that would enable them to quickly achieve a nuclear weapon,” he said. “They have chosen not to accept our terms.” Last week, minutes from the Federal Reserve’s March meeting reinforced a cautious stance, with policymakers adopting a wait-and-see approach while acknowledging that inflation risks linked to rising oil prices are becoming more balanced. Recent data highlighted the impact of the conf
Currencies
FX Week Ahead: DXY finds support below 10mth highs
The United States dollar index (DXY) enters the week below 10-month highs, easing 1% last week as escalating conflict in the Middle East and growing inflation risks weigh on currency markets. Although the Greenback briefly dipped below the 100 mark, it has since stabilised as rising U.S. Treasury yields and safe-haven demand underpin the currency. The shift suggests the U.S. dollar is no longer trading purely on rate differentials, but rather a broader mix of positioning, expectations and geopolitical developments. The Federal Reserve left its benchmark rate unchanged at 3.50%–3.75%, while signalling a cautious stance. Updated projections showed higher inflation expectations, and Chair Jerome Powell warned that rising energy prices could complicate the disinflation process. The central bank’s message remains clear - if inflation does not ease convincingly, rate cuts may be delayed. According to the CME Group FedWatch Tool, markets are now pricing a 55.2% chance that Federal Reserve policymakers will hold rates steady through January 2027.Euro capped below 1.1600The EUR/USD currency pair remains under pressure, trading near 1.1540 after failing to sustain a move above 1.1600 last week. The pair continues to sho
Currencies
FX Week Ahead: DXY at 10mth high amid Iran war
The United States dollar index (DXY) strengthened broadly last week, climbing 1.7% to 100.494, its highest level in around ten months, as escalating tensions in the Middle East drove investors toward safe-haven assets. Demand for the Greenback has increased amid the ongoing U.S.-Iran conflict, with investors rotating out of several G10 currencies and into the highly liquid U.S. Dollar during a period of heightened geopolitical risk. At the same time, the disruption of energy shipments through the Strait of Hormuz has pushed crude oil prices sharply higher. Because global oil trade is largely denominated in U.S. dollars, rising energy prices can indirectly increase demand for the currency. Higher oil prices have also intensified inflation concerns, reinforcing expectations that the Federal Reserve may delay cutting interest rates. Markets have significantly scaled back easing expectations in recent weeks, with traders now pricing in roughly 25 basis points of interest rate cuts by December, according to the CME Group FedWatch Tool. Earlier forecasts had anticipated more than 50 basis points of easing before the escalation of the Iran conflict. Economic data released last week painted a mixed picture for the U.S. econ
Currencies
FX Week Ahead: DXY slips as hot PPI jolts markets
The United States dollar index (DXY) eased 0.2% last week as a hotter-than-expected inflation print deepened concerns that price pressures remain sticky, complicating the Federal Reserve’s policy outlook and fuelling stagflation fears. The DXY settled 0.1% lower on Friday at 97.646 after January’s producer price index (PPI) rose 0.5% month-on-month, well above the 0.3% consensus forecast. The reading followed a downwardly revised 0.4% increase in December and left producer prices up 2.9% year-on-year. Although much of the upside surprise was concentrated in trade services – a volatile category that does not always reflect real-time price shifts – the broader takeaway for markets was that wholesale inflation is not cooling as quickly as hoped. The data feeds into the Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) gauge, and is likely to reinforce the central bank’s cautious stance after it held rates at 3.50% to 3.75% in January. Minutes from the Fed's most recent meeting showed policymakers divided, with some officials flagging the possibility of renewed tightening should inflation fail to moderate. Money markets have since pushed the first fully priced rate cut to J
Currencies
FX Week Ahead: DXY gains 0.9% on week amid tariff shock
The United States dollar index (DXY) ended Friday modestly lower, surrendering earlier gains but still finishing 0.9% higher on the week, after the Supreme Court of the United States struck down President Donald Trump’s sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The ruling, delivered in a 6–3 decision, concluded that the IEEPA does not authorise the president to impose tariffs. The decision invalidates the so-called “Liberation Day” reciprocal tariffs and the 25% IEEPA-based duties on Canada, China and Mexico, although measures introduced under other trade statutes remain intact. Among data releases, U.S. fourth-quarter gross domestic product (GDP) expanded at an annualised 1.4%, sharply below the 3.0% expected and decelerating markedly from the previous quarter’s 4.4% pace. The government shutdown during Q4 is estimated to have shaved up to 1.5 percentage points off headline growth, compounding concerns over slowing momentum. At the same time, inflation data offered little comfort. The personal consumption expenditures (PCE) price index rose 2.9% year-on-year in December, slightly above expectations. Core PCE accelerated to 3.0% from 2.8%, exceeding the 2.9% forecast. On

Currencies
ECB expands Euro liquidity backstop globally
The European Central Bank has announced plans to expand and permanently establish its euro liquidity backstop, opening access to central banks worldwide in a move designed to strengthen the single currency’s global standing. Speaking at the Munich Security Conference, ECB President Christine Lagarde said the central bank must adapt to a more uncertain global environment. It marked the first time an ECB chief has addressed the high-profile forum. “The ECB needs to be prepared for ⁠a more volatile environment,” Lagarde said. “We must avoid a situation where that stress triggers fire sales of euro-denominated securities in global funding markets, which could hamper ‌the transmission of our monetary policy,” she said in announcing the new facility. Under the revised framework, the ECB’s repo lines, previously limited to a small number of mostly Eastern European countries, will become globally available and permanent from the third quarter of 2026. Access will be open to all central banks, unless excluded for reputational reasons such as money laundering, terrorist financing or breaches of international sanctions. The facility will provide standing access of up to €50 billion, replacing earlier arrangements that requi
Currencies
FX Week Ahead: US dollar slips on softer CPI
The United States dollar index (DXY) ended the week on a softer footing after inflation data reinforced expectations that the Federal Reserve could begin easing policy later this year. The DXY, which tracks the greenback against six major currencies, settled below the 97 mark after January’s consumer price data showed inflation easing more than expected. The index, which had held positive territory for three straight sessions earlier in the week, lost momentum as Treasury yields extended their decline following the release. Headline U.S. inflation slowed to 2.4% year-on-year in January, down from 2.7% previously and below expectations of 2.5%. On a monthly basis, the consumer price index rose 0.2%, easing from December’s 0.3% pace. Core inflation, which strips out food and energy, came in at 2.5% annually, the lowest level since April 2021 and in line with forecasts. The data provided tentative evidence that price pressures continue to moderate, despite a resilient labour market. Markets are now pricing in two rate cuts in 2026, with the first likely in the second half of the year. According to the CME FedWatch Tool, traders see a roughly 91% probability that the Federal Reserve will leave rates unchanged at its
Currencies
FX Week Ahead: DXY ticks up after two weeks of decline
The United States dollar index (DXY) ticked up after two consecutive weeks of declines, finishing the week 0.6% higher despite softer labour market data reinforcing expectations of the Federal Reserve easing rates later this year. While the Greenback attempted a brief recovery midweek, renewed dovish bets ultimately capped gains and kept the broader tone defensive. Markets are now pricing in two rate cuts in 2026, beginning as early as June, as evidence of cooling employment conditions continues to accumulate. According to the CME FedWatch Tool, traders see a 77.3% probability that the Fed will leave rates unchanged at its March meeting, before pivoting to easing in the middle of the year. U.S. economic data painted a mixed but generally softer picture. Initial jobless claims rose to 231,000 in the week ending January 31, exceeding forecasts of 212,000 and the previous reading of 209,000. Meanwhile, ADP reported that private payrolls increased by just 22,000 in January, well below expectations of 48,000 and the prior 37,000. Although the preliminary University of Michigan Consumer Sentiment Index improved to 57.3 in February from 56.4 in January, beating expectations of 55.0, the index remains roughly 20% below its
Currencies
FX Week Ahead: DXY weakens; Fed pick caps losses
The United States dollar index (DXY) extended its decline for a second consecutive week, pressured by a cautious Federal Reserve stance and persistent political noise, even as rate markets attempted to stabilise following fresh signals on central bank leadership and inflation dynamics. While the Greenback managed to recover from its worst levels after the latest Federal Open Market Committee (FOMC) meeting, broader sentiment towards the currency remains fragile. The DXY slid towards the 95.23 region during the week, a level last seen in early 2022, before paring losses. The rebound followed the Fed’s decision to leave interest rates unchanged and President Donald Trump’s nomination of Kevin Warsh as successor to Jerome Powell, developments that temporarily steadied U.S. yields and the currency. Meanwhile, the Fed held benchmark rates steady in the 3.50%–3.75% range, in line with expectations last week. Chair Jerome Powell described the current stance as appropriate, pointing to labour market stabilisation and gradual progress on services inflation. He stressed that policy decisions would remain meeting by meeting and that rate hikes are not the base case. However, officials acknowledged that inflation remains abo