The British pound drifted toward $1.32, lingering near its lowest since early December and on track for a monthly decline of over 1% against the US dollar. Risk aversion dominated markets as traders assessed the economic risks from the protracted Middle East conflict, with reports of US troop preparations for a potential ground operation overshadowing Washington’s claims of progress in Iran negotiations. Meanwhile, Bank of England policy expectations underwent a dramatic shift: markets now anticipate at least two rate hikes in 2026, with a possible third, reversing earlier bets on two cuts.
NZD/USD recovers early losses and turns flat around 0.5745 as investors’ risk appetite improves.
Middle East conflicts have intensified following the Iran-backed Houthis’ entry.
The US Dollar ticks down ahead of Fed Powell’s speech.
The NZD/USD pair claws back its early losses and flattens around 0.5745 during the early European trading session on Monday. The Kiwi pair bounces back from its over two-month low of 0.5725, the lowest low seen in over two months. The pair attracts bids as the New Zealand Dollar (NZD) bounces back due to the revival of the risk-on impulse.
During the European trading session, S&P 500 futures have recovered their opening losses and turned slightly positive around 6,375.
Investors’ risk appetite has improved despite the war in the Middle East intensifying. Conflicts between the United States (US), Israel, and Iran have escalated due to a report from the Wall Street Journal (WSJ) claiming that the Pentagon is preparing to send 10,000 additional military troops for the ground invasion on Iran.
In addition to potential US ground military action, the entry of Iran-backed Houthis in the ongoing war has also widened geopolitical tensions.
Meanwhile, the US Dollar (USD) trades marginally lower ahead of the Federal Reserve’s (Fed) Chair Jerome Powell’s speech at 14:30 GMT. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks down to near 100.10.
NZD/USD technical analysis
In the daily chart, the NZD/USD pair maintains a bearish near-term bias as price holds below the 20-day Exponential Moving Average (EMA), which is bending lower and tracking the recent sequence of lower highs.
Momentum confirms selling pressure, with the RSI slipping toward the mid-30s and extending its decline from neutral territory, indicating sellers keep control while avoiding oversold conditions for now.
Initial resistance emerges at the 20-day EMA near 0.5840, and a daily close above this area would be needed to ease immediate downside pressure and open 0.5920 as the next upside level. On the downside, minor support sits at 0.5700, followed by a lower band around 0.5650, where a break would extend the current downtrend and expose the 0.5600 area as the next bearish target.
USD/CHF appreciated after the Swiss KOF Leading Indicator fell to 96.1 in February.
SNB may intervene in FX markets to curb excessive CHF strength and maintain price stability.
The US Dollar may strengthen on rising safe-haven demand amid fears of a potential US ground invasion in Iran.
USD/CHF continues its winning streak for the fifth successive day, trading around a two-month high of 0.8000 during the early European hours on Monday. The pair recovers its daily losses following the release of the Swiss KOF Leading Indicator, which fell to 96.1 in February, from 103.8 (revised from 104.2) in January.
However, the downside of the USD/CHF pair could be restrained as the Swiss Franc (CHF) may face challenges as Swiss National Bank (SNB) Chair Martin Schlegel expressed the SNB’s readiness to intervene in FX markets to curb sharp and excessive currency swings and safeguard price stability. Additionally, SNB board member Petra Tschudin also emphasized the central bank’s increased willingness to step in and limit further strength in the Swiss Franc.
Moreover, the US Dollar (USD) may regain its ground against the major peers amid increased safe-haven demand, which could be attributed to fears of a potential United States (US) ground invasion in Iran.
A Wall Street Journal (WSJ) report suggested last week that the US Pentagon could deploy 10,000 additional troops to Iran. In response, Ebrahim Zolfaqari issued a stark warning on Iranian state TV, stating that “US troops will be good food for sharks of the Persian Gulf.”
Iran-backed Houthi forces in Yemen launched their first strikes on Israel over the weekend, widening the regional conflict and warning that attacks will continue until operations against Iran and its allies cease. The group also threatens Red Sea shipping routes and key Saudi energy infrastructure, heightening risks to global supply.
US economic data releases this week, including various labor market-linked indicators, particularly the Nonfarm Payrolls (NFP), as well as the ISM Purchasing Managers’ Index (PMI), are expected to influence market expectations for the Federal Reserve (Fed) monetary policy outlook.
AUD/USD rebound from 0.6842 lows fails to find acceptance above 0.6870.
The risk-averse mood weighs on the Aussie as the Iran war complicates.
Analysts at UOB contemplate a further decline towards 0.6765.
The Aussie Dollar (AUD) is trimming losses against the US Dollar (USD) on Monday. The pair bounced from two-month lows around 0.6840 but is struggling to rise above 0.6870, as negative market sentiment keeps weighing on any significant Aussie recovery.
Investors’ mood remains sour on Monday, as the Middle East War gets messier by the day. The irruption of the Iran-backed Houthis in Yemen this weekend has added a new variable to an already complicated scenario, blurring any swift end to the conflict. The Houthis have launched missiles at Israel from Yemen, and threatened to close the Strait of Bab el Mandab, another bottleneck for Saudi Oil supply, which might trigger a further escalation in Crude prices.
Scepticism about Trump’s “negotiations”
Meanwhile, US President Donald Trump has reiterated that there are direct and indirect talks with the Iranian leaders, praising their “very reasonable” attitude, and Pakistan offered to hold talks between the US and Iran.
Investors, however, have taken these comments in stride, as Tehran remains sceptical. Iran’s Parliament Speaker, Mohammed Baqer Qalibat, accused the US of sending messages about negotiations while preparing a ground invasion, and other Iranian leaders threatened with a bloodbath if that invasion finally takes place.
Bearing this in mind, rallies in the risk-sensitive Aussie are likely to find sellers. Technical analysts at UOB see the pair in a bearish trend with 0.6765 as a potential target: “While the weekly MACD remains in positive territory, it has been heading steadily lower over the past few weeks (…) The overall technical picture suggests that AUD/USD could continue to head lower. A clear break below the 0.6850/0.6870 support zone could potentially trigger a sharp decline toward 0.6765.”
EUR/USD rebounds as the US Dollar eases from intraday highs.
Weak US consumer sentiment contrasts with rising inflation expectations.
Markets reassess interest rate outlook amid elevated Oil prices and geopolitical risks.
EUR/USD edges higher on Friday after early weakness, as the US Dollar (USD) pulls back from intraday highs, offering some support to the Euro (EUR). At the time of writing, the pair trades around 1.1545, recovering from a daily low at 1.1501.
The pullback in the US Dollar appears largely technical, as buyers take a breather following a strong rally earlier this week that pushed the US Dollar Index (DXY) above the key 100.00 psychological level.
The index, which tracks the Greenback against a basket of six major currencies, is currently hovering near 99.85, reflecting a modest pause in upside momentum. However, it remains on track for weekly gains, staying broadly supported amid ongoing Middle East tensions.
On the data front, the University of Michigan figures came in weaker than expected. The Consumer Sentiment Index fell to 53.3 in March, down from the preliminary estimate of 55.5. The Consumer Expectations Index also declined to 51.7 from 54.1.
At the same time, inflation expectations moved higher. The 1-year outlook rose to 3.8% from 3.4%, while the 5-year expectation stayed at 3.2%.
Richmond Fed President Thomas Barkin said higher gasoline prices are weighing on consumer sentiment and could crowd out other spending. He added that even before the recent oil shock, progress on inflation was at risk of stalling. Barkin also noted that while the unemployment rate remains low, the labor market still feels fragile, highlighting risks to both sides of the Fed’s dual mandate.
On the geopolitical front, the lack of fresh headlines has kept trading conditions relatively calmer on Friday compared to earlier this week, when conflicting signals around potential US-Iran negotiations drove volatility. US President Donald Trump announced a delay in planned military strikes targeting Iran’s energy infrastructure. The deadline, initially set to expire on Friday, has now been extended by 10 days.
However, with no clear signs of a resolution yet and the Strait of Hormuz largely closed, Oil prices remain elevated, continuing to fuel inflation concerns. This is prompting markets to reprice the interest rate outlook, with traders now pricing in 2-3 European Central Bank (ECB) hikes by year-end, while expectations for Federal Reserve (Fed) rate cuts are being trimmed, with some even seeing the possibility of a hike later this year.
GBP/USD clings to 1.3300 as haven demand keeps the US Dollar supported.
UK Retail Sales slump and BoE caution weigh on Sterling sentiment.
Markets now see both the Fed and BoE leaning further hawkish.
The British Pound (GBP) holds firm during the North American session on Friday, clings above the 1.3300 figure, yet seems poised to finish the week with 0.20% losses against the US Dollar (USD). Risk aversion due to an energy shock caused by the Middle East conflict and the haven appeal of the Greenback keep GBP/USD on its way to monthly losses of more than 1%.
Sterling eyes weekly loss as Oil, war worries sour sentiment anew
On Thursday, US President Donald Trump announced a delay in attacks on Iran’s energy facilities for 10 days, until April 6. Initially, the markets cheered the move as Oil prices fell. Nevertheless, WTI reversed the initial drop as traders faded the news.
Hence, sentiment remains dismal, with Wall Street posting losses and the Greenback poised to finish the week with gains of over 0.45%, according to the US Dollar Index (DXY). The DXY, which tracks the buck’s performance versus six other currencies, is at 99.94, virtually unchanged for the day.
Adding to the sour mood was the fact that the Islamic Revolutionary Guard Corps (IRGC) shut off the Strait of Hormuz.
Data from the US showed that American consumers had grown pessimistic about the economy, as the University of Michigan Consumer Sentiment Index dipped from 55.5 to 53.3, below forecasts of 54. Inflation expectations for the next twelve months jumped from 3.4% in February to 3.8%, while for the five years were unchanged at 3.2%.
In the UK, Retail Sales fell in February following January’s strong performance, coming in at -0.4% MoM, a collapse from the previous month’s 2% growth.
Aside from this, Bank of England’s Alan Taylor said the bar for hiking interest rates is quite high, revealing that holding rates is preferable until the central bank assesses the impact of Iran’s war on the economy.
Traders expect further tightening by central banks
This week, money markets had priced out the possibility of rate cuts by the Federal Reserve and the Bank of England. Instead, they see the Fed raising rates by 5 basis points towards year-end. The BoE is projected to increase rates by 78 basis points, according to Prime Market Terminal data.
Fed interest rate probabilites – Source: Prime Market Terminal
(This story was corrected on March 27 at 16:25 GMT to say that the University of Michigan Consumer Sentiment Index dipped to 53.3, not 53.5, that 5-year inflation expectations remained unchanged at 3.2% and that UK Retail Sales for January came in at 2%, not 1.8%.)
GBP/USD Price Forecast: Technical outlook
In the daily chart, GBP/USD trades at 1.3311. The near-term bias is mildly bearish as spot holds below the clustered simple moving averages near 1.35 and remains capped by the descending resistance line from 1.3869, which has contained every rebound since the recent 1.38 area highs. Price slipping back inside the broad contracting formation between that downtrend line and the still-rising support line from 1.3035 signals fading upside momentum, while the latest downtick in the Fed Sentiment Index above 119.000 hints that relative policy expectations continue to favor the dollar at the margin.
Immediate resistance stands at the descending trend line currently intersecting just above 1.3400, followed by the 1.3500/1.3520 zone where the daily moving averages converge and prior swing highs cluster. A daily close above that confluence would weaken the bearish bias and expose the 1.3700 region, ahead of the 1.3869 high. On the downside, initial support emerges at 1.3220, the latest swing low, with further traction expected around 1.3100 aligned with the rising trend line from 1.3035. A break beneath that structural floor would confirm a deeper bearish extension toward the psychological 1.3000 handle.
The Euro remains practically flat around 0.8650, following UK Retail Sales data.
Markets pay little attention to February’s UK consumption figures, as they predate Iran’s war.
Inflation in Spain accelerated in March to its highest level since 2024.
The Euro (EUR) keeps trading sideways against the British Pound (GBP) on Friday, oscillating within a tight range around the 0.8650 level for the fourth consecutive day, on track for a 0.25% weekly decline. The stronger-than-expected UK Retail Sales figures released earlier on the day have failed to provide any significant support to the Sterling.
Data released by National Statistics earlier on Friday revealed that retail consumption fell for the first time in the last three months in February, by 0.4%, following a 2% increase in January. The market consensus had anticipated a sharper, 0.8% decline.
Excluding fuel, sales of all other items have shown a similar pattern, falling 0.4% on the month after a 2.2% gain in January, yet remaining above the -0.8% market consensus. Year on year, Retail Sales growth eased to 2.5%, from an upwardly revised 4.8% growth in the previous month, while the Core Retail Sales slowed down to 3.4% from 5.9% in January.
These figures have had a limited impact on the market as they predate the start of the war in Iran. Data from March, which will show the impact of a sharp decline in consumer confidence and a sharp uptick in prices due to the surge in Oil prices, is likely to have more relevance.
The Euro, on the other hand, remains on its back foot, also weighed by the pressure of higher Oil prices in the Eurozone economy. Spain’s Consumer Price Index (CPI) accelerated to 3.3% year-on-year in March, its highest level in 14 months, adding pressure on the European Central Bank (ECB) to hike interest rates in April.
EUR/USD trades marginally lower around 1.1520 as the US Dollar remains firm amid Middle East conflicts.
Peace mediators dismiss Trump’s claim that the 10-day halt to attacks on Iranian energy plants was ordered as per Tehran’s request.
ECB’s Lagarde warns of persistent energy supply risks due to significant damage to Gulf energy infrastructure.
The EUR/USD pair trades subduedly around 1.1520 during the European trading session on Friday. The major currency pair faces slight selling pressure as the US Dollar (USD) trades firmly with hopes of a de-escalation in the Middle East war easing, which involves the United States (US), Israel, and Iran.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 100.00.
Investors turn doubtful over Mideast optimism amid the conflicting statements from peace mediators on US President Donald Trump’s claim that he ordered a pause on planned military strikes on Iran’s power plans as per Tehran’s request.
According to the Wall Street Journal (WSJ), peace talks mediators dismissed claims that Iran had requested a 10-day pause on strikes on its energy plants.
On the Euro (EUR) front, the major currency is expected to remain under pressure amid fears of persistent energy supply disruption in the wake of damage to Gulf energy infrastructure amid the war.
European Central Bank (ECB) President Christine Lagarde said in an interview with the Economist that the negative energy shock to the world economy from the Mideast war would be larger than current projections, as too much energy infrastructure has been damaged.
EUR/USD technical analysis
EUR/USD trades lower at around 1.1520 as of writing. The pair holds just above the 200-day EMA near 1.1540 while extending a sequence of lower highs below the 20-day EMA around 1.1590, keeping the near-term bias modestly bearish within a broader sideways context.
The 14-day Relative Strength Index (RSI) struggles to hold its recovery move into the 40.00-60.00 zone, signifying heavy selling pressure at higher levels.
Immediate resistance emerges at the 20-day EMA around 1.1590, with a daily close above this barrier needed to ease bearish pressure and open a move toward 1.1690. A stronger recovery would then target the 1.1810/1.1850 area, where prior highs cluster and the recent breakdown began. On the downside, initial support is located at 1.1500, guarding the late pullback low at 1.1415. A decisive break below 1.1415 would confirm a continuation of the downswing and expose the next support zone closer to 1.1350, where longer-term buyers would be expected to re-emerge.
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