[MARKET ANALYSIS] DXY regains some composure after retreating yesterday alongside the hawkish G10 central bank theme

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Goldman Sachs now expects BoE to remain on hold throughout 2026 vs. prior forecast of quarterly cuts from July

[MARKET ANALYSIS] Asia-Pac stocks are mostly subdued, but with downside limited as the region reacts to oil swings, deluge of central bank announcements and mixed geopolitical headlines

[MARKET ANALYSIS] DXY regains some composure after retreating yesterday alongside the hawkish G10 central bank theme

[MARKET ANALYSIS] T-notes remain afloat amid declines in oil but with upside capped after the recent central bank deluge and with overnight cash treasuries trade shut

[MARKET ANALYSIS] Oil prices declined after Israeli officials confirmed that the attack on Iran's South Pars gas field will likely not be repeated, and Israeli PM Netanyahu said that the war will end sooner than people think

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DXY: +0.2%

  • Nurses some losses after retreating yesterday amid a slew of G10 central bank rate announcements, where the theme was similar to that of the Fed on Wednesday: hold for now, until gaining further clarity on economic impacts from the Middle East conflict. Furthermore, comments from Israeli PM Netanyahu, who stated that the war will end much sooner than people think, spurred risk appetite and a further deterioration in the USD.

EUR/USD: -0.2%

  • Mildly pulled back overnight after briefly returning to above the 1.1600 level in the wake of the ECB announcement in which the central bank kept rates on hold, as expected, although the announcement was somewhat skewed hawkish, given the significant upgrade to inflation projections, while ECB source reports noted officials see the need for possible rate hike talk to start in April, but added that a move would be more likely in June.

GBP/USD: -0.1%

  • Takes a breather after strengthening in the aftermath of the BoE to decision to keep rates unchanged, as expected, but in a more hawkish fashion with the vote unanimous at 9-0 (exp. 7-2), and the statement removed language suggesting further cuts, while it was also reported that UK ministers are to visit European capitals next week in a bid to deepen ties with the EU on financial services.

USD/JPY: +0.3%

  • Partially rebounded after slumping to briefly below the 158.00 handle, with the mild recovery facilitated as the dollar regained composure but with further momentum contained amid the absence of Japanese participants.

Antipodeans: AUD/USD -0.1% / NZD/USD +0.2%

  • Price action is mixed with trade rangebound overnight amid the cautious risk appetite in the absence of tier-1 data releases.

Context

The DXY has gained some stability after a retreat, aligning with a broader hawkish sentiment from G10 central banks, which indicates a wait-and-see approach amid economic uncertainties from geopolitical tensions. The slight strength in the dollar against some currencies reflects a balancing act between risk appetite and central bank guidance, especially with the ECB and BoE signaling potential future tightening. Traders should watch for how these dynamics unfold against upcoming economic developments, particularly in the context of inflation and growth outlooks.

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