Markets end the week with the U.S. Dollar remaining firmly supported as geopolitical tensions in the Middle East continue to dominate sentiment. Rising oil prices and disruption to shipping through the Strait of Hormuz have pushed investors toward safe-haven assets and raised concerns about inflation returning. The Dollar Index has climbed toward 100, its strongest level in several months, while risk-sensitive currencies have come under pressure.
Energy prices have been the key driver. Brent crude surged sharply earlier in the week as attacks on shipping and energy infrastructure raised fears of supply disruption. Higher oil prices increase inflation risks globally, which has forced markets to reassess expectations for interest rate cuts. Traders now believe the Federal Reserve may delay easing until later in the year, a shift that has helped support the Dollar.
In the UK, newly released data showed the economy recorded no growth in January, missing expectations for a 0.2 percent expansion. The figures suggest spending is currently being driven more by necessity than discretionary demand, with vehicle repairs one of the few areas showing growth. Services returned to modest growth over the previous three months but stagnated during January, while construction activity continued to contract
Higher energy prices create a difficult backdrop for central banks. Rising inflation pressures reduce the room policymakers have to cut interest rates, which has helped support the Dollar in recent sessions. Currency markets are therefore likely to remain highly sensitive to developments in energy prices and geopolitical headlines in the coming weeks.
GBP/EUR 1.1563 GBP/USD 1.3260 GBP/AED 4.8725
GBP/AUD 1.8837 GBP/CHF 1.0445 GBP/CAD 1.8126
GBP/NZD 2.2784 EUR/USD 1.1453 GBP/ZAR 22.3121