[MARKET ANALYSIS] Choppy trade across FX with G10s mixed against the USD

• DXY is choppy within a 98.902-99.329 range and well within Tuesday's 98.435-99.683 parameters. Focus remains on the Middle Eastern conflict, which continues to expand across the region. Analysts at ING highlight that near term drivers of risk will probably be whether energy prices can reverse lower if the Straits of Hormuz can somehow reopen, and also whether central banks will be able to cut rates to support activity, or at least not tighten policy. Elsewhere, the data calendar for the US is very light, although ISM Services is scheduled later, while there were recent Fed speakers, in which the main message was that policy was well-positioned, and it is too soon to gauge the impact of the war in Iran on inflation.
• EUR is flat against the USD and trades on either side of 1.1600 (1.1575-1.1628 range), with the single currency not helped by President Trump threatened to halt all trade with Spain, citing the country's refusal to allow American military forces to use joint air bases for operations against Iran. Meanwhile, no EUR move was seen on on the final PMIs, which are outdated amid the geopolitical developments since the survey period.
• GBP is also flat following recent underperformance, not helped President Trump publicly expressing frustration with UK PM Starmer, stating "I'm not happy with the UK" and "This is not Winston Churchill that we're dealing with," after Britain refused to join offensive strikes. Meanwhile, analysts at Goldman Sachs pushed back the timing of the next BoE rate cut to April from March. GS says policymakers are more likely to wait for more information on how the conflict in the Middle East evolves. GS expects an April cut to be followed by two more in July and November as the energy shock eases; GS previously forecast reductions in March, June and September. GBP/USD trades in a 1.3303-1.3376 range.
• CHF is off best levels in choppy trade, with USD/CHF recouping from intraday lows of 0.7790 in the aftermath of hotter-than-expected Swiss CPI and ahead of the SNB meeting on March 19th. On that note, SNB Vice Chair said they are ready to intervene in the FX market - echoing similar commentary on Monday.
• JPY outperforms amid the ongoing geopolitical woes. USD/JPY was choppy overnight amid a quiet calendar for Japan and ongoing uncertainty regarding the Iranian conflict and effects on inflation, as well as the ramifications for BoJ monetary policy. The pair is subdued within a 157.16-157.86 range vs yesterday's 157.15 low.
• Antipodeans are mixed with the AUD lagging despite the above-forecast GDP overnight and a rise in base metals after commentary from China. Delving into GDP, Analysts at Westpac suggest productivity rose more than expected, helping slow labour-cost growth to near pre-pandemic levels, though a tighter labour market could reverse this improvement - "So far, though, this re-tightening is not yet in evidence."

The choppy trade in G10 currencies against the USD signals a market in flux, largely influenced by geopolitical tensions in the Middle East and expectations surrounding central bank policies. The volatility highlights potential shifts in risk appetite, particularly as central banks weigh impacts from ongoing conflicts, with specific focus on the Fed's stance, expected BoE rate cuts, and SNB interventions, which could lead to significant currency movements depending on future developments.