On Tuesday, the US Dollar (USD) advanced against major currencies, including the Canadian Dollar (CAD) and British Pound (GBP), supported by firm energy prices and rising US Treasury yields [1][2]. USD/CAD traded around 1.3765, reaching fresh two-month highs, while GBP/USD slipped by 0.16% to 1.3400 after hitting a daily high of 1.3445 [1][2]. The US Dollar Index (DXY) hovered near 99.39, just below its intraday high of 99.50 during the European session [1].
The release of preliminary S&P Global PMI data showed a slowdown in US business activity, with the Composite PMI falling to 51.4 from 51.9 and the Services PMI dropping to 51.1 from 51.7, both marking an 11-month low [1][2]. However, US manufacturing PMI improved to 52.4 from 51.6, exceeding forecasts [1][2]. In the UK, business activity slowed the most in six months, with the Composite Flash PMI sinking to 51 in March from 53.7 in February, and the Services PMI dipping from 53.9 to 51.2 [2]. UK manufacturing input prices reached their highest level since the 1992 Sterling crisis [2].
Geopolitical tensions in the Middle East, particularly the US-Israel conflict with Iran, continued to underpin demand for the Greenback [1][2]. Gulf states such as Saudi Arabia and the United Arab Emirates are reportedly weighing military options against Iran, raising the risk of a broader regional conflict, though both remain cautious [1]. Reports also indicated that Iran is charging some ships for safe passage through the Strait of Hormuz, and the Iranian Foreign Minister stated the strait is open but not to countries at war with Iran [2].
Rising oil prices have reinforced inflation concerns, boosting expectations that the Federal Reserve will keep interest rates higher for longer, which has further supported the US Dollar and lifted Treasury yields [1][2]. Despite elevated crude oil prices offering some support to the CAD, broader US Dollar strength and risk aversion have dominated price action [1]. The US Dollar was the strongest against the New Zealand Dollar, gaining 0.66% on the day, and was up 0.29% against the CAD and 0.36% against the GBP [1].
Looking ahead, a relatively light US economic calendar and the absence of major Canadian data suggest USD/CAD will remain driven by US Dollar dynamics and evolving geopolitical developments [1]. Markets are not expecting the Federal Reserve to cut rates in 2026, according to the GBP/USD article [2].
CONCLUSION
The US Dollar's strength, fueled by rising oil prices, higher Treasury yields, and persistent geopolitical tensions, has pressured both the Canadian Dollar and British Pound. PMI data from the US and UK indicate slowing business activity, reinforcing risk aversion and supporting the Greenback. Market sentiment remains positive for the USD, with expectations for sustained higher US interest rates and continued volatility driven by geopolitical developments.