USD

The dollar advanced on Wednesday, extending the safe‑haven bid that has characterised trading as tensions between the US and Iran have started to build anew. Brent crude prices pushed back above $100 per barrel on reports that cargo vessels were attacked in the Strait of Hormuz, while US gasoline inventories unexpectedly fell. This combination of renewed hostilities and firmer energy prices has nudged Treasury yields higher and encouraged investors to rebuild long‑USD positions, with the dollar index rising about a quarter of a percent yesterday, seeing EURUSD slip toward 1.17. That looks set to continue as a theme, accompanied today by flash PMIs across Europe and the US, along with weekly US jobless claims. Barring a major data surprise, the dollar looks set to continue its uptrend.

EUR

The euro retreated against the dollar on Wednesday, slipping from the upper end of its recent range as risk aversion returned. Wednesday’s sell‑off mirrored our expectations from earlier in the week. Without a clear improvement in euro‑area activity or a sustained pullback in US yields, rallies are likely to fade. German ZEW expectations dropped sharply on Tuesday, and energy prices spiked following attacks on Hormuz shipping, underscoring Europe’s vulnerability to supply shocks. Looking ahead, flash April PMIs are due this morning. Consensus expects the eurozone composite index to slip from 50.7 to 50.1, while services activity may dip back below the 50-threshold. Our focus, however, will be on any signs that rising energy costs are translating into broader price pressures, a dynamic that will determine the next steps for policymakers. Unless the PMI surveys show a sharp acceleration in prices paid or charged, we think the ECB will stick with a wait‑and‑see stance, leaving EURUSD vulnerable to a possible pullback in policy rate expectations.

GBP

Sterling weakened on Wednesday even though UK inflation printed in line with expectations. After trading firmer early in the week, GBPUSD slipped back below 1.35 overnight. Official data showed UK consumer price inflation accelerated to 3.3 % YoY in March, up from 3 % in February. The rise primarily reflected higher fuel costs linked to the Iran war, while core inflation ticked down to 3.1 %, supporting the view we set out in our week‑ahead preview – that pass-through to broader prices would be limited. Looking ahead, UK flash PMIs this morning are forecast to show the composite index dipping back below 50. In our view, downside risks dominate, given soft labour‑market trends and political uncertainty. Retail sales on Friday will provide another gauge of consumer resilience. For now, sterling should continue to trade as a hybrid of domestic rate expectations and global risk sentiment, with Middle East headlines likely to continue driving intraday swings.

CAD

The Canadian dollar drifted lower on Wednesday as renewed geopolitical tension kept oil prices volatile. After losses earlier in the week, USDCAD rebounded toward 1.37 as the dollar found support and Brent crude climbed back above $100 per barrel. Markets remain focused on the ceasefire in the Gulf and reports of attacks on shipping; absent a clear de‑escalation, safe‑haven flows into the greenback look set to outweigh Canadian domestic considerations. In any case, today’s calendar is light for Canada, leaving the loonie at the mercy of external drivers until Friday’s retail sales figures. We think USDCAD will trade rangebound for now; any signs of progress toward a durable Gulf peace could see CAD test lower levels, while further disruptions to Hormuz shipping would push the pair higher.

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