Pound (GBP) supported by firmer BoE expectations
The pound (GBP) was volatile yesterday as markets reacted to the sharp rise in European energy costs after the Strait of Hormuz was effectively shut over the weekend.
Although investors are wary that higher gas prices could undermine the UK’s fledgling economic recovery, the inflationary implications have also reduced expectations of a Bank of England (BoE) rate cut later this month.
Chancellor Rachel Reeves is due to present her Spring Statement today. While sweeping policy changes are not anticipated, an upgrade to the Office for Budget Responsibility’s (OBR) forecasts could lift Sterling.
Euro (EUR) pressured by soaring energy costs
The euro (EUR) came under pressure on Monday as a spike in European energy prices saw gas costs jump by roughly 40%.
Further weighing on the single currency were Germany’s latest retail sales figures, which revealed a sharper-than-expected fall in household spending at the start of 2026.
Markets will now turn to the Eurozone’s preliminary inflation estimate. Should February’s reading show price growth remains below the European Central Bank’s (ECB) 2% objective, it could reinforce arguments for a looser policy stance.
US dollar (USD) lifted by haven flows
The US dollar (USD) surged at the beginning of the week as escalating Middle East tensions prompted investors to seek out traditional safe-haven assets.
The currency also drew support from America’s relative energy independence, which may cushion the US economy from the impact of higher global oil and gas prices.
Looking ahead, the ‘greenback’ could extend its advance if geopolitical strains in the region intensify further.
Canadian dollar (CAD) strengthened by oil rally
The Canadian dollar (CAD) climbed on Monday, as commodity-linked currency was buoyed by the sharp rise in oil prices.
Should crude continue to trend higher, the ‘loonie’ may post additional gains during today’s session.
Australian dollar (AUD) steadies on energy export outlook
The Australian dollar (AUD) traded steadily overnight on Monday, with concerns over weaker risk appetite offset by expectations that Australia’s LNG and coal exports could benefit from elevated global energy prices.
New Zealand dollar (NZD) retreats amid risk aversion
The New Zealand dollar (NZD) stayed under pressure in overnight trading as nervous market conditions dampened demand for the risk-sensitive currency.
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