USD

After rising through the first half of Thursday trading, the dollar stabilised through the afternoon, leaving the DXY around 98.3 early this morning, with the index having drifted sideways overnight. A lack of new developments when it comes to Middle East peace talks, a sparse data calendar, and little meaningful steer from a packed roster of Fed officials have all combined to leave the dollar relatively untroubled so far today. Looking ahead, the calendar is light yet again, with no top-tier US releases scheduled. Markets will instead focus on speeches from Daly, Barkin, and Waller later in the session. But barring a fresh escalation in the ongoing Middle East hostilities, we expect the dollar to remain range-bound into the weekend.

EUR

The euro has continued to trade well this week, with EURUSD holding in the upper portion of the roughly 1.16–1.18 range we have been tracking. Yesterday’s final eurozone HICP reading for March confirmed an upward revision to 2.6%, from the preliminary estimate of 2.5%, a hawkish development at the margin. Despite the hotter-than-expected print, we interpret ECB officials speaking in Washington as maintaining a wait-and-see stance, characterising the energy-driven inflation surge as temporary rather than a reason to rush toward tightening – consistent with the messaging we outlined earlier this week. That limits the impetus for the euro, at least for the time being. With no major eurozone data due today, the single currency’s direction will hinge on broader risk sentiment and Middle East diplomatic developments. We continue to see sustained de-escalation as a prerequisite for a decisive break above 1.18.

GBP

Thursday saw a notable break lower for sterling, albeit not for the reasons we anticipated earlier in the week. Much of the domestic focus was expected to centre on Bank of England speakers, and we think it is significant that even the MPC’s more hawkish voices have struck a notably cautious tone on further tightening in recent days. This aligns with our view that markets may have overpriced additional rate hikes – a theme we first flagged several weeks ago, where we noted that rates and politics were likely to weigh on the pound. But it was the latter dynamic that underpinned yesterday’s sterling sell-off, with PM Keir Starmer coming under renewed pressure, as further developments in the Peter Mandelson appointment scandal emerged. With no major UK releases due today, any new political developments are likely to be key for sterling direction. That aside, our focus shifts to next week, when March CPI data should provide the clearest steer on the Bank of England’s likely course at its May policy meeting.

CAD

The Canadian dollar has found modest support this week from the improvement in global risk appetite, though gains have been capped by a pullback in energy prices – oil having slipped back below $100 per barrel earlier in the week on de-escalation hopes. That was enough to take USDCAD below 1.37 yesterday, though absent any new catalysts, we see limited scope for further downward progress. Indeed, with no major Canadian releases due today, a call between BoC Governor Macklem and reporters this afternoon is the main event to watch ahead of the weekend. But with CPI due Monday, traders may already be looking ahead to the coming week, given the limited likelihood of a meaningful policy steer from the Governor later today.

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