Geopolitical tensions in the Middle East, particularly the closure of the Strait of Hormuz and the extension of the US-Iran ceasefire, have dominated currency market sentiment this week, impacting major pairs such as GBP/USD, USD/JPY, NZD/USD, and AUD/USD [1][2][3][4]. The US Dollar has maintained a firm tone, benefiting from safe-haven demand as risk sentiment remains fragile due to ongoing disruptions in the Strait of Hormuz and rising oil prices [3][4].
In the GBP/USD market, the pair held near 1.3510 after a volatile session, with UK inflation data showing headline CPI rising 0.7% MoM in March (above the 0.6% consensus) and 3.3% YoY, while core CPI cooled to 3.1% YoY (below the 3.2% expected) [1]. Upcoming UK data includes flash PMIs, expected to show contraction in Manufacturing (49.9) and Composite (49.8), and GfK Consumer Confidence forecast to deteriorate to -25 from -21. UK Retail Sales are projected to rebound 0.2% MoM after a -0.4% drop in February [1]. Technicals indicate GBP/USD remains above key moving averages, suggesting a bullish medium-term bias, though overbought conditions hint at stretched upside momentum [1].
USD/JPY traded near 159.50, consolidating after Japan's March trade surplus came in at ¥667 billion, well below the ¥1,106 billion consensus, as imports surged 10.9% YoY versus a 7.1% forecast and exports rose 11.7% YoY [2]. Elevated crude prices, driven by the Hormuz closure, have inflated Japan's energy import bill and weighed on the Yen [2]. Japan's National CPI is due, with core CPI expected at 1.8% YoY (up from 1.6%), which could fuel Bank of Japan rate hike speculation if realized [2]. Technicals show USD/JPY holding a bullish bias above key EMAs, though momentum has cooled [2].
NZD/USD hovered around 0.5910, with the New Zealand Dollar struggling to extend gains as USD demand persists amid safe-haven flows [3]. The pair stabilized after recent losses, supported by lower US yields, but upside remains limited as markets reassess the Federal Reserve's policy outlook, with expectations for rate cuts still cautious [3]. Technicals show NZD/USD above short- and medium-term SMAs, with modest bullish momentum [3].
AUD/USD traded near 0.7160, up 0.12%, but remained rangebound as geopolitical risks overshadowed macroeconomic data [4]. US President Trump extended the ceasefire to allow Iran to present a proposal, while both the US and Iran seized ships in the Strait of Hormuz [4]. Despite these tensions, the S&P 500 reached an all-time high, and the Greenback recovered some ground [4]. Upcoming US data includes Initial Jobless Claims (forecast 212K vs. 207K prior) and S&P Global Flash PMIs (Manufacturing 52.5, Services 50), while Australia's PMIs are also awaited after prior contractions [4]. Technicals for AUD/USD indicate a constructive bullish bias above key SMAs, with dips likely to attract buyers [4].
CONCLUSION
Currency markets remain highly sensitive to developments in the Middle East, with the closure of the Strait of Hormuz and shifting US-Iran relations driving safe-haven demand for the US Dollar. While technicals for major pairs show underlying support, upside is capped by geopolitical uncertainty and cautious central bank outlooks. Upcoming economic data from the US, UK, Japan, and Australia will be closely watched for further direction.