USD

Safe-haven flows surged early on Monday after US–Iran talks in Islamabad collapsed over the weekend, prompting US threats to blockade the Strait of Hormuz. Oil spiked above $100 per barrel, and the DXY jumped above 99 at the open, precisely the scenario we had cautioned could unfold if hostilities escalated. However, with the US Navy’s blockade of Iranian ports yet to be contested and reports of backchannel diplomacy emerging, markets found their footing through the session. The dollar index closed around 98.4, marginally below Friday’s level, as both equities and Treasuries steadied. Today’s data docket is light, seeing NFIB Small Business Optimism and PPI releases, but a heavy slate of Fed speakers should help to keep markets engaged.

EUR

EURUSD recovered to close in the mid-1.17s on Monday, after opening in the mid-1.16s as the collapse of US–Iran talks triggered a flight to safety immediately out of the gates. As risk appetite cautiously returned, the single currency retraced to multi-week highs, though European equities lagged their American counterparts. At the margin, Sunday’s decisive victory for Hungary’s centre-right Tisza party should lend some support to the euro, removing a longstanding obstacle to EU decision-making. Still, looking ahead, with no meaningful eurozone data due today, the single currency remains at the mercy of geopolitical headlines. ECB speakers, including Lane and Lagarde, are scheduled, though we doubt either will shift the dial materially. We continue to see EURUSD range-bound between roughly 1.16 and 1.18, with sustained de-escalation in the Gulf needed for a break higher.

GBP

Sterling reversed early losses on Monday, finishing up 0.3% against the dollar after a volatile session shaped by Middle East developments. Domestically, the March REC report on jobs published overnight showed little impact from the conflict on hiring, offering modest reassurance. Today brings a packed roster of Bank of England speakers: Catherine Mann, Governor Bailey, and Megan Greene. As we noted in late March, even the MPC’s more hawkish voices have sounded cautious on further rate rises relative to market pricing, and any repeat of that tone today could weigh on the pound. That aside, we continue to expect GBPUSD to trade in a wide range until greater geopolitical clarity emerges.

CAD

The Canadian dollar started the week under pressure despite somewhat more encouraging domestic fundamentals. Friday’s March labour force survey delivered the first job gain of the year, with employment rising 14k, the unemployment rate holding at 6.7%, and average hourly wages for permanent employees accelerating to 5.1% YoY. Ordinarily, this combination, alongside oil’s jump above $100, would bolster the loonie, but escalating Middle East tensions swiftly overshadowed local positives. USDCAD spiked early Monday toward the top of its recent 1.37–1.39 range before easing back below 1.38 as risk appetite cautiously returned on hopes of renewed diplomacy. With no major Canadian releases scheduled today, the loonie will likely take its cues from oil and Gulf developments yet again. We expect USDCAD to remain within its established range, with a durable peace needed for the loonie’s domestic tailwinds to reassert themselves.

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