The escalating conflict in Iran and the wider Middle East this week triggered a classic risk-off response, including renewed dollar demand. Meanwhile, energy-importing currencies like the euro, are feeling the pressure. Sterling remains on the defensive amid soft UK data and rate cut expectations. Safe-haven flows and policy divergence are currently driving near-term FX direction.
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Current rates
| Currency pair | Rate |
|---|---|
| gbp usd | 1.3401 |
| eur usd | 1.1733 |
| gbp eur | 1.1421 |
Rates correct as of 12:00pm on Monday 2 March but may now have changed.
The Big 3
A deeper look at the performance of major currency pairs this week. Become a subscriber to receive the full reports.
Safe-haven flows lift USD amid Middle East strikes
The primary driver for GBP/USD is the ongoing conflict in the Middle East although the pair remains contained. Sterling has struggled to build momentum amid renewed political pressure and lingering expectations of a BoE rate cut. The Spring Statement this week is unlikely to shift the dial materially. US strikes in Iran have supported oil and triggered safe-haven dollar demand, with the US energy-export advantage reinforcing USD resilience. With NFP ahead, the dollar bias remains supported, though volatility may stay elevated.
Geopolitics drive downside as euro feels oil impact
EUR/USD has moved lower as the Iran conflict triggers a classic risk-off reaction: higher oil, firmer gold and renewed dollar demand. As a net energy importer, the euro is particularly exposed to sustained oil strength, leaving the near-term bias skewed lower. While eurozone inflation and US Non-Farm Payrolls are due this week, price action is likely to remain headline-driven. With the US benefiting from its energy-export status and safe-haven inflows building, the dollar remains the dominant force in shaping direction here.
Risk-off tone favours euro over sterling
GBP/EUR softened as Labour’s by-election loss added fresh political pressure to an already vulnerable pound. With broader risk-off conditions linked to escalating Middle East tensions, sterling’s cyclical sensitivity has left it underperforming relative to the steadier euro backdrop. With little domestic data and no major surprises expected from the Spring update, external headlines are likely to remain the primary driver, leaving risks skewed modestly against sterling in the near term.
Looking forward
Key dates for your calendar.
- Monday: US manufacturing data. Turkey and Italy GDP.
- Tuesday: Eurozone CPI. UK Spring Statement.
- Wednesday: The Fed publishes its Beige Book. China manufacturing data. Japan consumer confidence. US ISM services PMI.
- Thursday: AUS Balance of Trade.
- Friday: Eurozone GDP. US jobs data including Non-Farm Payrolls and Retail Sales. Canada Ivey PMI.
Here’s what we’re talking to our clients about
We’re always here to support. Here are some of the conversations we’re having:
- Iran conflict impact
- UK Spring Forecast
- UK political uncertainty
The contents of this article do not constitute financial advice and are provided for general information purposes only. While the content is based on information believed to be accurate at the time of publication, no guarantee is provided.