The rallied strongly during the Federal Reserve’s press conference yesterday as rates jumped in response to what was widely seen as a hawkish hold, especially given Chair Powell’s framing. There has been limited follow-through dollar sales today, but the technical damage inflicted on many pairs has not been reversed. The Bank of Japan, the Swiss National Bank, and Sweden’s Riksbank have announced unchanged policies, as expected, and now attention turns to the Bank of England and the European Central Bank. Neither will move, but how they view the risks is important. We expect both will indicate the lack of urgency.
The war appears to have been extended with the attack on the South Pars gas field jointly run by Iran and Qatar. News reports say that President Trump is urging restraint, but the horse seems to have bolted already. Given the feints and attack on Iran during negotiations and after the US claimed to have destroyed Iran’s nuclear capability last June, it is difficult to know what is real and what is a war tactic. May is within yesterday’s range, but the front-month contract made new highs today.
Prices
G10
• The reversed quickly from the session high (~$1.1555) in early North American activity and fell to new session lows near $1.1450 during Fed Chair Powell’s press conference. Follow-through selling was less than a tenth of a cent, and the euro stabilized in Europe. Still, the technical damage inflicted is notable. It must re-establish a foothold above $1.15 to blunt it and there are options for a little more than 2 bln euros struck there that expire today and another 1.3 bln euros of options that expire tomorrow.
• The dollar firmed against the . It pushed gently above the recent highs (~JPY159.75) to JPY157.90, arguably with the help of the 6-10 bp increase in US rates. There was no follow-through dollar buying today and the dollar pulled back to almost JPY159. Options for around $410 mln at JPY159.50 expire today and another stack for almost $690 mln at JPY159. The JPY160 level is so obvious that perhaps there are no significant stops or optionality struck there. The greenback may need to rise through the JPY160.40 area to signal the breakout.
• hit a brick wall yesterday in front of the $1.3380 technical target we noted previously. After reaching the four-day high, sterling was sold to almost $1.3250. Follow-through selling was limited to a few hundredths of a cent. It stabilized in European turnover but looks to be stalling ahead of the outcome of the BOE meeting around $1.3300. Options for GBP885 mln struck at $1.3350 expire today.
• The market showed little reaction to the Bank of Canada’s decision to stand pat, but the greenback strengthened back to new sessions highs, near CAD1.3740, after the FOMC meeting and press conference. It edged up a little more today but drew back from almost CAD1.3750. Clearing it, would target the CAD1.3800 area.
• The ’s price action was poor. It reached a four-day high near $0.7125, where options for A$885 mln expire today, before turning-tail and settling below Tuesday’s low (~$0.7050). It slipped below $0.7020 in late dealings. This area held today and the Aussie has poked above $0.7060 in Europe. It may need to push above $0.7075 to ease the negativity of yesterday’s bearish outside down day. Failure to do so could signal a return to the lower end of this month’s range, around $0.6945-55.
EM
• The was thumped yesterday. The combination of the risk-off and jump in US rates took a toll. After initially falling to MXN17.60 in the early going in North America, a five-day low, by the end of the session, the dollar was probing above MXN17.87. It settled above Tuesday’s high (~MXN17.74). This technically bullish outside up day may signal a test on the MXN18.00 area seen earlier this month. Here too there was no follow-through dollar buying and the greenback eased to slightly below MXN17.78. Lastly, as expected, late yesterday, Brazil’s central bank cut the Selic rate by 25 bp to 14.75%.
• The US dollar broad strength in the North American afternoon saw it push above Tuesday’s high against the to approach CNH6.90. The outside up day is technically bullish. Follow-through buying today lifted the greenback to CNH6.9075. A move above the CNH6.9100 area could signal a move to the upper end of this month’s range near CNH6.9350. The PBOC set the dollar’s reference rate at CNY6.8975 (CNY6.8909 yesterday).
• Indian markets are closed today for a national holiday. The dollar rose to a record INR92.6350 yesterday. Between foreign selling of Indian equities and importer dollar-demand, the looks vulnerable. It may have already been in a precarious position before the war, but the energy and fertilizer shock is significant.
Other Markets
• Equities are heavy. The MSCI Asia Pacific Index snapped a three-day advance as all the large bourses tumbled 1.5%-3.4%. A few smaller markets, such as Singapore, Malaysia, and the Philippines escaped with less than 1% losses. Europe’s Stoxx 600 is off around 1.7%, which if sustained, would be the second-largest loss since the war began. US index futures are nursing small losses after yesterday’s slide.
• Bonds are offering no haven today. Yields jumped 6-9 bp in the Asia Pacific regions and are up 4-9 bp in Europe. After rising almost seven basis points yesterday, the US Treasury yield is slightly firmer today. When everything has been said and done, around 4.27%, it is little changed on the week. The two-year yield is also a little firmer after jumping 10 bp yesterday. It is slightly above 3.80%, around nine basis points higher on the week and more than 40 bp higher since the start of the war.
• and are under pressure. The yellow metal is lower for the seventh consecutive session. After falling 3.75% yesterday, it is down about 2.5% today to its lowest level since early February. Silver fell to almost $70, its lowest level since early February, as well.
• May WTI is consolidating within yesterday’s roughly $91.45-$99.75 range. June Brent rose to a new high today slightly above $112 before steadying. Before yesterday, it had not settled above $100.
Data
• With the FOMC meeting behind us, and the war disruption yet to filter into the data, today’s US reports are unlikely to have much impact outside of the headline effect. Weekly are close to a real-time assessment of the labor market. They have been little changed in the past three weeks (213k-214k). The March Philadelphia Fed Business survey likely deteriorated but still too early to pick up much of the war’s impact. January are expected to have fallen for the second consecutive month. Mortgage ratees are now near the highest in a year. Household net worth hardly elicits a market reaction. In Q4 25, equities rallied, note and bond yields rose slightly, and house prices dipped.
• Sweden’s Riksbank and the Swiss National Bank have already announced their decisions, which surprised no one, to leave policy unchanged. The swaps market expected Sweden to hike rates over the next 12 months and the Riksbank indicated that rates are on hold for an extended period, and it does not anticipate a hike until closer to the middle of the year. The Swiss National Bank kept is key rate at zero and warned it was prepared to intervene in the foreign exchange market if necessary.
• The Bank of England’s announcement is at 8:00 AM ET and the ECB’s decision will be announced at 9:15 AM ET. Neither is expected to move. Both are likely to note the two-way risk.
• The UK’s labor market report showed greater employment growth than expected (84k in the three months through January). Economists had projected a decline. The claimant count rose to almost 25k in February, but the January count was revised to 4.7k from 28.6k. Payrolled employees rose by 20k in February after January’s 11k loss was revised to a 6k gain. Earnings slowed.
• The Bank of Japan did not surprise anyone and left the target rate at 0.75%. The swaps market has about a 60% chance of a hike next month. It was closer to 70% before the war began. Separately, after a 16.1% (revised from 19.1%) surge core machine orders in December 2025, they tumbled 5.5% in January. More notable, January industrial output jumped 4.3% instead of 2.2% of the initial estimate.
• Australia’s labor market was mixed in February. It created almost 49k jobs, but it was part-time positions that offset the 30.5k loss of full-time positions. The unemployment rate ticked up to 4.3% from 4.1%, partly as a result of the increased participation rate (66.9%vs. 66.7%). Australia created an average of almost 8.5k full time jobs a month last year and in January, they surged to 54.6k, following a nearly 57k increase in December.
