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USD
The dollar retreated again on Wednesday as markets looked past the present US naval blockade of Iranian ports towards the possibility of renewed diplomacy. Risk appetite firmed, oil prices slid, and the DXY drifted into the low‑98s, continuing an unwind of its recent run higher. Even a crowded slate of Fed speakers did little to interrupt the risk‑on tone, while the data calendar offered no challenge. Looking ahead, today’s US data includes weekly jobless claims, which are expected to remain near 220k, while a fresh round of Fedspeak – including remarks by Williams and Miran – could shape expectations around the April FOMC. Nevertheless, Middle East headlines remain the primary driver; any flare‑up would quickly re‑anchor the dollar and support safe‑haven flows.
EUR
The single currency extended its recovery on Wednesday, rising to test 1.18 by the end of the session. A softer energy backdrop and hints of rapprochement between Washington and Tehran removed one of the eurozone’s key headwinds, given its heavy energy import bill. The move was aided by hawkish commentary from ECB officials in Washington, although President Lagarde stopped short of signalling a shift in policy, consistent with our expectation that the Governing Council will take its cue from energy markets and approach any change in policy stance with caution. Today’s euro‑area calendar is again light on data, but the speaking diary is busy. ECB governors, including Kazaks, Schnabel, Rehn, and Lane, are scheduled to speak in Washington throughout the day. But barring a major escalation in the Gulf or a surprise from US jobless claims, we look for EURUSD to consolidate around recent highs.
GBP
Sterling joined the risk‑on rally on Wednesday, seeing cable stabilise in the mid-1.35s, buoyed at the margin by firmer global sentiment and continued unwinding of dollar longs. Domestically, Bank of England officials remained cautious, albeit that sentiment was not reflected across initial headlines – the details of yesterday’s MPC commentary, however, suggested to us a high bar to hike rates in the near term. This morning has seen February GDP data, which surprised to the upside, showing a MoM rise in activity of 0.5%, versus 0.1% expected. Even so, this is also not quite as positive as initial appearances might suggest, with GDP figures continuing to prove erratic, and at least some of that surprise upside stemming from a downward revision to prior figures, helping to explain why the pound is little moved post-release. That aside, sterling traders will have to navigate a host of central‑bank speakers, including a rare joint appearance by ECB chief economist Lane and BoE’s Taylor later in the day, with Governor Bailey also due to speak again in Washington. Against the backdrop of a fragile Middle East ceasefire, our base case remains for GBPUSD price action to remain subdued for now.
CAD
The Canadian dollar rose on Wednesday, pushing USDCAD toward the 1.37 level, near a three‑week low for the pair. Risk assets rallied as investors grew more confident that back‑channel diplomacy might avert a prolonged Gulf blockade, even as oil prices continued to slide, somewhat tempering gains for the loonie. Canadian data remains thin on the ground, with the day ahead seeing only March home sales, and the April CFIB business barometer scheduled. As such, traders will likely take their cue from US jobless claims, risk conditions, and any further developments in oil markets. With Middle East hostilities still unresolved and crude oscillating in the mid‑$90s, we continue to expect USDCAD will remain contained, with the pair likely to struggle with any push below 1.37, absent a new directional catalyst.