Looking at the weekly chart, the US Dollar has traded in a choppier, more volatile fashion, struggling to build on the strong gains seen the previous week. As has been the case lately, markets have remained cautious, with uncertainty around the Middle East conflict still front and centre, compounded by the lack of a clear and consistent signal from the White House.
EUR/USD edges lower to near 1.1500 as robust US jobs data, Middle East tensions support US Dollar
The EUR/USD pair trades with mild gains around 1.1515 during the early Asian session on Monday. The stronger-than-expected US jobs data and heightened uncertainty in the Middle East boost demand for the US Dollar (USD) as a safe-haven.
US President Donald Trump on Sunday appeared to set a new deadline for Iran to reopen the Strait of Hormuz on Tuesday. This came as Trump issued a profane message renewing threats to bomb power plants and other infrastructure if Tehran does not lift its effective blockade on the vital waterway.
Iranian officials noted that Iran will reciprocate attacks on its infrastructure and target similar infrastructure owned by the US or related to it. Tehran added that the strait will remain blocked until Iran receives pay for war damages.
The US economy added 178,000 jobs in March 2026, the US Bureau of Labor Statistics (BLS) reported on Friday. This figure followed a 133,000 decline (revised from -92,000) and came in above the market consensus of a 60,000 gain. Meanwhile, the Unemployment Rate edges lower to 4.3% in March from 4.4% in February, better than the estimates.
Hawkish tone of the European Central Bank (ECB) might help limit the EUR’s losses. The ECB has maintained a firm commitment to combating inflation. President Christine Lagarde and other Governing Council members have delivered consistent messages, emphasizing that policy will remain restrictive until inflation sustainably returns to the 2% target.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
United States CFTC Gold NC Net Positions down to $163.2K from previous $168.3K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
United Kingdom CFTC GBP NC Net Positions up to £-52.7K from previous £-58.4K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
United States CFTC Oil NC Net Positions fell from previous 233.6K to 213.5K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
Eurozone CFTC EUR NC Net Positions down to €0.5K from previous €9.3K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
United States CFTC S&P 500 NC Net Positions rose from previous $-80.9K to $-42.5K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
Japan CFTC JPY NC Net Positions: ¥-72.9K vs previous ¥-62.8K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
Australia CFTC AUD NC Net Positions: $81.5K vs $70.9K
When a currency weakens too quickly, central banks often step in. The objective is clear: stabilise markets, restore confidence, and if possible, reverse the move. But history suggests the reality is more complex. Intervention can slow a trend, and at times trigger sharp reversals; but it rarely changes direction unless the underlying macro forces shift as well.
US Dollar Weekly Forecast: Supported by policy, tested by geopolitics
The week that was
Looking at the weekly chart, the US Dollar (USD) has traded in a choppier, more volatile fashion, struggling to build on the strong gains seen the previous week.
As has been the case lately, markets have remained cautious, with uncertainty around the Middle East conflict still front and centre, compounded by the lack of a clear and consistent signal from the White House.
Against that backdrop, the US Dollar Index (DXY) has edged slightly lower, although it continues to hold comfortably above the key 100.00 psychological level.
The modest pullback in the Greenback has broadly tracked a softer tone in US Treasury yields across the curve, reflecting the back-and-forth nature of headlines surrounding the geopolitical situation.
Fed speakers: comfortable on hold, but inflation risks creeping back
This week’s Fed rhetoric leans toward patience, but with a subtle shift in tone. Policymakers are broadly comfortable with where rates are, yet they are increasingly aware that the inflation story, particularly through energy, is not fully behind them.
Powell and Williams anchored the centre. Both signaled that policy is in good shape and that there is no urgency to move. Inflation is still expected to return to target; the labour market is cooling but stable, and the Fed can afford to wait and watch how the data evolve.
But around that steady core, the message becomes more nuanced.
On one side, Miran struck a clearly dovish note, pushing back against inflation fears and pointing instead to signs of softening in the labour market. His message was simple: the Fed may already be doing enough, and there could be room to ease if conditions weaken further.
On the other side, Schmid and Logan kept the inflation debate alive. Both warned that price pressures may prove stickier than expected, especially if higher energy costs begin to feed through more broadly. Schmid, in particular, pushed back against the idea that inflation will smoothly glide back to 2%.
In between, Musalem and Goolsbee highlighted the growing complexity of the outlook. Policy is well-positioned, but risks are now clearly two-sided. Energy shocks, tariffs and geopolitical tensions are adding uncertainty, making it harder to find a clean policy path.
The common thread is clear.
The Fed is not rushing to act, but it won’t declare victory over inflation.
Inflation remains elevated
The US started the year with a slightly softer inflation backdrop. Headline Consumer Price Index (CPI) rose 2.4% YoY in February, matching January’s pace, while the core measure held steady at 2.5% YoY.
At first glance, that suggests inflation is moving in the right direction, even if it is still running above the Fed’s 2% target.
For markets, that has been enough to keep the disinflation narrative alive, gradually reviving expectations that rate cuts could come into view later on. But from the Fed’s perspective, this looks more like progress than victory, especially with the full impact of tariffs on prices still uncertain.
The Fed’s preferred gauge, the Personal Consumption Expenditures (PCE) index, tells a similar story, but with a slightly more cautious tone. January data showed inflation easing to 2.8% YoY from 2.9%, still comfortably above target.
Looking ahead, the inflation path could become more complicated. Rising Oil prices, driven by Iran’s closure of the Strait of Hormuz, risk feeding quickly into fuel and transport costs. If those pressures persist, the disinflation trend could start to look less straightforward in the months ahead.
And the labour market gives no signs of further cooling
Indeed, the latest data from the Bureau of Labor Statistics (BLS) showed the economy added 178K jobs in March, crushing initial estimates and making for quite the reversal from February’s revised 133K drop. Adding to these figures, the Unemployment Rate ticked lower to 4.3%, while the Average Hourly Earnings, a proxy for wage inflation, rose 3.5% over the last 12 months, although easing from the previous month’s 3.8% reading.
USD positioning: tentative rebuild of longs
The US Dollar is quietly regaining favour. After holding a small net short position earlier in the month, speculative accounts have flipped back into modest net longs, which have held broadly stable into the latest week.
At the same time, open interest has picked up, pointing to fresh positioning rather than just short covering. That shift fits perfectly with the broader resilience in the Greenback, supported by firm US yields and persistent geopolitical uncertainty.
The implication is that the Dollar may be in the early stages of a broader positioning rebuild. Although positioning is not yet stretched, the current trend reinforces the recent bullish price action and indicates that dips could begin to attract buyers more consistently, particularly if yields remain supported and risk sentiment remains fragile.
What’s next for the US Dollar
Next week, the US docket will be mostly focused on inflation, with the releases of prices tracked by the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE). In addition, investors are expected to closely follow the publication of the FOMC Minutes after the hawkish hold at the March 18 meeting.
Bottom line
It is worth keeping in mind that the US Dollar’s rally, which began in late January, was initially driven by a run of stronger US data and a more consistent, steady message from the Fed.
That move gathered further momentum when President Trump nominated Kevin Warsh as Jerome Powell’s successor, a signal markets read as potentially less dovish than expected. Recently, rising geopolitical tensions have provided additional support, a dynamic that the recent FOMC meeting further reinforced.
At the same time, inflation remains just a bit too high for comfort. If the disinflation process starts to lose momentum, markets could quickly scale back expectations for early or aggressive rate cuts.
In that scenario, the Fed would likely double down on patience, maintaining a steady stance that could, over time, offer fresh support to the Dollar.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.