- Global stress. Stocks and bonds tumbled globally as a fresh surge in energy prices deepened fears that a protracted Middle East war will stoke inflation and choke growth. US equity indices fell to four-month lows and bond yields soared.
- Energy sites hit. Brent crude spiked toward $120 and European natural gas jumped as much as 35% as escalating attacks in the Persian Gulf raised fears of lasting damage to key energy infrastructure. Prices recoiled towards week-end amid tentative signs of de-escalation.
- Costs set sail. War‑risk costs have sent container rates soaring up to fourfold, with congestion now rippling from the Gulf to Asia and North Africa. Meanwhile, the global supply‑chain pressure index has climbed to its highest level since 2023
- Rate and see. Easing bets have been squared – the Fed, BoC, BoE, ECB, BoJ and SNB all held rates. The Fed offered little guidance, while the BoE’s unanimous vote triggered the sharpest Sonia selloff since 2022. The ECB stayed cautious despite energy‑driven risks, while the RBA delivered its second hike of 2026.
- Metals melt down. The hawkish shift of central banks has hammered precious metals — gold is on track for a record monthly dollar‑loss and silver has tumbled almost 30% this month, over 10% down in a week.
- Dollar drops 1%. The US dollar index has given back some of its conflict‑driven gains, slipping around 1% this week vs a basket of major currencies. But the move looks more like a technical clean‑up than any meaningful shift in conviction as the war in Iran rages on – keeping the dollar’s petro-haven bid alive.
Global Macro
Global reset in interest-rate pricing
Fed. The Fed held rates at 3.5%–3.75%, with a meeting revealing a central bank uncertain if current rates are actually restrictive enough. While the “dot plot” shows little desire to cut, Powell’s admission that supply shocks complicate policy suggests the Fed feels boxed in. Consequently, markets pushed back easing expectations, not due to economic strength, but because the Fed lacks the clarity to pivot.
ECB. The European Central Bank validated inflation fears by hiking its 2026 forecast to 2.6%. While the bank didn’t fully endorse the market’s aggressive pivot toward 2026 rate hikes, it didn’t push back either. By failing to rebuke the hawkish narrative, the bank has given markets “free rein” to continue pricing in higher rates.
BoE. The Bank of England delivered a surprisingly hawkish shift, with the committee voting unanimously to hold rates at 3.75% and signaling a readiness to “act” that went beyond previous warnings. The primary driver is the energy shock linked to the conflict in Iran, which the Bank warns will push near-term inflation toward 3.5%. Most notably, even historically dovish members pivoted, with both now acknowledging that a rate hike could be necessary if these second-round inflationary effects become embedded.
BoC. Bank of Canada’s tone around domestic demand has clearly softened relative to January, with the Bank characterizing growth as weaker than it had previously expected. That shift reflects a run of slower data: momentum that faded sharply after Q3, a labor market that has lost earlier traction, and signs that excess supply is persisting rather than narrowing.
RBA. The Reserve Bank of Australia delivered a second consecutive 25bp hike this week, bringing the cash rate to 4.10%. While the move was expected by many, the internal divide and the rationale behind it painted a picture of a bank losing patience with sticky domestic demand.
Week ahead
When optimism collides with shock
Sentiment check. A raft of PMI releases is due next week. The indicators had begun to show a more upbeat momentum toward the end of 2025 and into early 2026, but the new year brought a series of sentiment‑dampening shocks that now cast doubt on the durability of that improvement. From renewed trade uncertainty following the Supreme Court’s ruling that Trump’s tariffs were illegal, to the outbreak of conflict in the Middle East, businesses may be heading into months of softer demand and higher energy costs.
UK inflation: relevant but already outdated. UK inflation will draw interest, though markets may largely discount the outcome. The release covers February, while the conflict erupted on 28 February. The print will still offer insight into the BoE’s expected disinflation path prior to the conflict, but it ultimately feels outdated given how the geopolitical shock has drastically repriced inflation risks – and, with them, the BoE’s policy outlook in the short to medium term.
Momentum meats reality. We will also monitor Germany’s IFO Business Climate indicators. Hopes for a sharp rebound in Germany’s economy – previously tied to the release of significant government spending – have faded as a result of the conflict, and we will watch closely to see whether sentiment has begun to reflect that shift. That said, early‑year macro data (such as retail sales and industrial production) may already be signalling a weaker start for the German economy, irrespective of the geopolitical escalation.
FX views
Hawkish leanings offer support
USD Supported on two fronts. The dollar index shed some of its conflict‑driven gains this week, down about 1%. The move looks more like a technical washout after the strong directional trading earlier in the month than any real shift in conviction (still up ~2% MTD). Early‑week tentative optimism over potential de‑escalation also helped ease the dollar. Oil prices then pushed higher again – now near $107 a barrel – as attacks on key energy infrastructure across the Persian Gulf escalated. That renewed tension supported the greenback, helping it bounce off 99.200 and maintain the higher‑high/higher‑low pattern in place since 28 February. Markets are increasingly looking past verbal reassurances on energy prices and instead focusing on developments around the Strait of Hormuz, particularly Iran’s stance, given its leverage over regional supply. With no signs of de‑escalation, the upward pressure on oil – and the dollar – remains intact. The dollar also drew support from a hawkish Fed at the March meeting. Persistent inflation has challenged the Fed’s easing bias, now further complicated by the conflict. Markets rushed to price out almost any cut by year-end.
EUR Finds its hawkish backbone. EUR/USD gained 1.4% into the week’s close, trimming part of its monthly losses, though the pair remains about 2% lower month‑to‑date. A steadier oil backdrop and a hawkish tilt from the ECB at the March meeting helped drive the rebound beyond what a technical clean‑up alone would suggest. Lagarde stayed non‑committal, but she noted that inflation risks are not skewed to the upside and that the bar for tightening has fallen. The tone was reinforced by several ECB officials signaling they would be ready to raise rates as early as April if inflation drifts too far above target. Markets repriced sharply, now expecting more than two quarter‑point hikes by 2026. With this hawkish backbone supporting the euro, we see EUR/USD range‑bound in the near term, with 1.1411 as a floor and 1.1667 as a ceiling. Downside risks remain more pronounced, however, given the lack of de‑escalation in the conflict and the continued dominance of energy prices in the FX playbook.
GBP Hawkish lift off. Sterling has staged an impressive rebound this week, rising more than 1% against the US dollar, but the rally is now running into familiar resistance around the 200‑day moving average near $1.3435. The move has been powered largely by an aggressive repricing in UK yields, with markets leaning hard into a hawkish BoE narrative. The Bank’s 9–0 vote to hold rates — and firmer inflation projections — effectively validated that speculative bias, giving GBP a tactical lift via the rates channel. But the broader backdrop still argues for caution. The UK remains exposed to the global terms‑of‑trade shock, and the pound’s resilience ultimately hinges on whether the current energy surge fades. Although it’s true the pound has been supported by a hawkish BoE response, the market’s aggressive repricing risks flipping from a GBP tailwind to a drag as investors question how much tightening the economy can realistically absorb. Options markets are already signalling scepticism: downside protection on GBP remains materially more expensive than upside, consistent with a market that sees the balance of risks skewed toward renewed underperformance if the conflict drags on.
CHF Dovish signals weigh. The franc suffered its biggest weekly loss against the euro in a year, with EUR/CHF climbing nearly 1% after a wave of central‑bank decisions highlighted the SNB’s more neutral stance. As expected, the Swiss National Bank kept its policy rate at 0%, a position made easier by Switzerland’s exceptionally low inflation — just 0.1% y/y in February — which gives policymakers room to stay relaxed despite rising global energy prices. The SNB also reiterated that its willingness to intervene in FX markets has increased, echoing its early‑March communication. Crucially, it clarified the direction of intervention: it stands ready to counter excessive appreciation of the franc to protect price stability. This marks a clear contrast with 2022, when the SNB actively bought francs to strengthen the currency and contain imported inflation. The shift signals that the SNB is now more concerned about the deflationary risks stemming from the conflict in the Middle East, which could drive safe‑haven inflows — than about the inflationary impact of higher energy prices.
CAD Two-sided oil test. The Bank of Canada kept its overnight rate at 2.25%, where it has sat since October, signaling caution as growth cools and slack persists. The tone around domestic demand has clearly softened relative to January, with the Bank characterizing growth as weaker than it had previously expected. That shift reflects a run of slower data: momentum that faded sharply after Q3, a labor market that has lost earlier traction, and signs that excess supply is persisting rather than narrowing. With demand softening, financial conditions tightening, and the economy operating below capacity, a sustained rise in energy prices is more likely to be interpreted through the lens of pressure on consumers and potential demand destruction than through the income boost from Canada’s commodity exposure. Against this backdrop, the USD/CAD has moved up this week from 1.365 to 1.372 on erratic trading, and likely to maintain the trading range of 1.35 to 1.37 seen over the last two months. 1.38 is a short-term ceiling if the domestic outlook prevails over terms of trade.
AUD A divided RBA and unsettled energy set the pace. FX moves were shaped by two forces: the RBA’s split rate decision, the biggest domestic event for the Aussie, and fresh swings in energy prices tied to Middle East tension. The RBA’s narrow 5–4 vote to raise rates exposed deep divisions over timing and risk. Governor Michele Bullock warned inflation remains too high and that inaction risked a second wave of price pressures, even as some members urged caution. Meanwhile, US signals on short‑term oil supply eased near‑term price fears but uncertainty lingered. AUD/USD remains hostage to the cautious global mood and now more than 1% below its recent high of 0.7187, last seen on 11 March. Key support lies at the 50‑day EMA of 0.6984, followed by the 100‑day EMA at 0.6859. Focus turns to upcoming CPI releases and S&P Global manufacturing and services PMIs.
CNH China’s year opens bright, clouds linger. China opened 2026 with stronger-than-expected momentum. Early-year data beat forecasts across the board. Fixed-asset investment rose 1.8% in January–February, defying expectations for a 5.1% fall. Retail sales grew 2.8% from a year earlier, ahead of the 2.5% consensus. Industrial output jumped 6.3%, well above the 5.3% forecast. China’s statistics bureau said the pickup in activity points to a solid start to the year. It also cautioned that a rapidly shifting global backdrop and rising geopolitical risks could still weigh on the outlook. The drag from the property sector remains an unresolved headwind. USD/CNH is about 1% above its late-February low of 6.8267.
The next resistance sits near the 50‑day average at 6.9205, followed by the 100‑day measure at 6.9725. Attention centres on upcoming Chinese industrial profits data.
JPY BoJ sounds firm, keeps April live. The Bank of Japan left policy unchanged in March, pointing to elevated global risks. During the press conference, officials struck a confident tone on prices, citing encouraging spring wage talks as a supportive factor. Several policymakers flagged Middle East tensions as a potential source of upward pressure on prices. BoJ avoided closing the door on an April move, while stressing that underlying inflation, though close to 2%, has yet to show enough staying power. Market is currently pricing in 61% likelihood of rate hike in April. USD/JPY has pulled back circa 1% from its recent high of 159.90, reached on 18 March. Initial support is near the 50‑day average at 156.77, with the 100‑day level next at 155.50. Upcoming national CPI prints, S&P Global services PMI, and the latest monetary policy meeting minutes take focus.
MXN Risk sensitive. The Mexican Peso, is navigating a tricky landscape as an energy importer facing heightened global uncertainty. The recent risk-off environment has hit the USD/MXN, sparking intense selling pressure that erased most of its early-year gains and pushed trading levels from the lower 17s up past 18, before recently stabilizing near 17.7. Domestically, the Mexican economy remains quite stable, with inflation in check and the government expected to use oil revenue windfalls to smooth out consumer gas prices. Ultimately, the Peso’s primary vulnerability is external. It remains highly sensitive to risk-on environment, but if broader market conditions manage to stabilize, the MXN looks like a candidate to bounce back from these recent dips.
BRL. Inflation focus. The Brazilian real has stabilized around 5.25 per US dollar as the market digests the central bank’s 25-basis-point cut to 14.75%. Although the currency briefly weakened following the decision, it quickly found support as investors pivoted toward the committee’s cautious stance on price stability. The prevailing narrative is currently dominated by “intensified” upside inflation risks, which have created a significant gap between current levels and official targets. This focus on a potential inflationary spike has effectively anchored the currency, as the market keeps the local swap curve priced for a very shallow and defensive easing cycle of around ~105bps over the next year. This market narrative suggests that the real’s performance is being buoyed by high-interest rate differential rather than a robust growth story. By prioritizing upside inflation risks, amplified by the Fed’s own stagnant “Dot Plot” and global skepticism, over the cooling effects of weaker domestic demand, the USD/BRL has maintained an attractive “carry” profile. Even as growth risks emerge, the market’s focus on the “inflation boost” has pushed 10-year local rates past 14%.
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
