USD

The dollar’s early morning respite proved short-lived on Wednesday, seeing the DXY index bounce from its Monday lows, despite a lack of data to dictate overall market direction. Instead, it was central bank speak that caught our attention, with a number of officials in Europe rowing back slightly on last week’s post-meeting hawkishness. The upshot was a modest but sustained softening across the G10 complex, all to the dollar’s benefit. Looking at the day ahead, US jobless claims top the docket of significant data prints, accompanied by a raft of Fed communications later this evening, giving traders plenty to digest.

EUR

After Tuesday’s flash PMIs underscored the eurozone’s vulnerability to the energy shock from the Gulf conflict, yesterday’s focus was on ECB speak. And notably, President Lagarde seemed to moderate her prior comments, sounding distinctly less hawkish than she did following last Thursday’s ECB meeting. Combined, this mix has helped to push EURUSD back into the mid-1.15s with the pair tracking sideways around that level so far this morning. Unless peace talks gain traction, we suspect the single currency is likely to stay defensive, with any bounce capped by concerns that higher energy costs could embed stagflation.

GBP

Sterling’s early‑week resilience faded on Wednesday, with CPI data failing to spark much interest. February inflation held at 3.0% YoY and core CPI edged up to 3.2%; though, as we flagged in our week‑ahead report, these dated figures mattered little given the looming energy‑price shock. Traders quickly shifted their focus back to the war‑driven outlook, with comments from the BoE’s Greene notable. Despite her position on the hawkish wing of the MPC, in our view, she sounded cautious on the prospect of rates, relative to present market pricing. That should help keep sterling under pressure, with no major UK releases today. We expect any gains to be hard‑won while the energy backdrop remains volatile, and still see downside risks if MPC speakers continue to caution against premature tightening despite market hopes for further rate hikes.

CAD

The Canadian dollar spent Wednesday in retreat against the US dollar, failing to find meaningful support from oil prices to see USDCAD nudging above 1.38 overnight. With little domestic data of note on the immediate horizon, attention now turns to today’s speech by BoC Senior Deputy Governor Carolyn Rogers. Markets will look for confirmation that the Bank remains on a patient, data‑dependent footing after holding rates at 2.25% earlier this month. We expect Rogers to acknowledge the inflationary impact of higher energy costs while reiterating the need for evidence of durable demand strength before contemplating tightening. Provided oil stays above $100, and risk appetite remains fragile, we remain cautious on the prospect of further USDCAD gains, with oil likely to climb in the medium term barring a resolution to the conflict in the Middle East.

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