Heightened geopolitical tensions in the Middle East have driven a surge in safe-haven demand for the US Dollar (USD), impacting major currency pairs including USD/CAD, NZD/USD, and GBP/USD [1][2][3]. US President Donald Trump has set a Tuesday deadline for Iran to reopen the Strait of Hormuz, threatening to target Iranian power plants and bridges if the waterway remains closed. Iran has responded with threats to retaliate against US infrastructure and has stated the strait will stay closed until compensation for war-related damages is secured [1][2][3].
The conflict has triggered a sharp rise in energy prices, notably Crude Oil, which reached a nearly four-week high. This has limited losses for the Canadian Dollar (CAD) despite its overall weakness against the USD, as elevated oil prices typically support commodity-linked currencies like the CAD [1]. Similarly, the Pound Sterling (GBP) remains under pressure due to concerns about a potential energy shock to the UK economy, which is vulnerable because of its reliance on energy imports and fragile public finances [3]. The New Zealand Dollar (NZD) is also on the defensive, trading near 0.5695, as the Greenback strengthens amid global uncertainty [2].
US economic data released on Friday showed the economy added 178,000 jobs in March 2026, reversing a revised net loss of 133,000 jobs in the previous month. The unemployment rate unexpectedly fell to 4.3%, surpassing market expectations [1][3]. These robust figures, combined with inflation fears from rising energy prices, have removed near-term pressure on the Federal Reserve (Fed) to cut rates and have instead fueled speculation about potential rate hikes. Elevated US Treasury yields continue to support the USD [1][3].
Looking ahead, market participants are awaiting the Federal Open Market Committee (FOMC) Meeting Minutes for further guidance on US monetary policy [3]. In New Zealand, the Reserve Bank of New Zealand (RBNZ) is set to announce its interest rate decision on Wednesday, with markets widely expecting the Official Cash Rate (OCR) to remain steady at 2.25%. However, RBNZ Governor Anna Breman indicated the bank might "look through" temporary energy-driven inflation but could hike if long-term expectations are threatened. Westpac analysts suggest future hikes are possible if inflation persists, with markets pricing in a nearly 40% probability of a rate hike by September 2026 and a full 25 basis points move by December [2].
According to [1], the USD/CAD pair is trading just below mid-1.3900s, near a four-month high, but further gains may be capped by bullish oil prices. Meanwhile, GBP/USD hovers around 1.3190, subdued for the third consecutive day [3].
CONCLUSION
The US Dollar has strengthened across major pairs due to escalating Middle East tensions and robust US jobs data, while surging energy prices have limited losses for commodity-linked currencies like the CAD. Market focus now shifts to upcoming central bank decisions and policy signals, with further volatility expected as geopolitical and inflation risks persist.