1 d - Josef Brynda
Over the past few hours, financial markets have delivered a textbook reversal in sentiment. As recently as Wednesday, optimism prevailed that geopolitical tensions in the Middle East might begin to ease. Investors reacted to earlier remarks by U.S. President Donald Trump, who suggested that U.S. involvement in the conflict with Iran could be wrapped up “fairly soon” and that the war might end within two to three weeks. Those comments helped push equity markets higher while also sending oil prices lower.
But on Thursday morning, the mood shifted sharply. In his subsequent televised appearance, Trump failed to present the calming plan or concrete timeline for ending the conflict that markets had hoped for. On the contrary, he promised further hard strikes against Iran in the coming weeks and hinted at the possibility of even more forceful escalation. As a result, hopes that the conflict was nearing its end quickly evaporated.
The market reaction was immediate. After the previous wave of gains, investors began dumping risk assets, U.S. equity futures turned lower, and European stocks fell. After rising by more than 2% on Wednesday, the pan-European STOXX 600 index was down more than 1% on Thursday. Technology companies, miners, and airlines came under particular pressure, as they are being hurt by the sharp rise in energy prices.
The reaction in the oil market was even more pronounced. Brent crude is now trading more than 10% higher and has once again moved above the $110-per-barrel mark. The market is concerned that the continuing conflict and uncertainty surrounding the Strait of Hormuz could further disrupt global commodity supplies. Oil has once again become the main channel through which geopolitical tensions are spilling over into financial markets. Skepticism also remains elevated going forward, as Trump suggested that Hormuz is “not their problem,” implying that any potential reopening might not take place with U.S. involvement, which would make the situation even more difficult.
Higher oil prices also immediately changed investors’ expectations regarding monetary policy. Rising energy prices increase inflation risks and complicate the outlook for central banks. Instead of earlier speculation about monetary easing, markets have once again started talking about the possibility that interest rates may stay higher for longer, or that room for rate cuts could become significantly more limited. This further contributed to investors moving away from equities.
The whole episode once again showed how sensitive today’s markets are to political communication from the White House. A single change in tone within a matter of hours was enough to turn a wave of bullish euphoria into a fresh sell-off. While investors were betting on a de-escalation on Wednesday, Thursday’s reality reminded them that geopolitical risk remains high and that any sign of further escalation can reverse sentiment almost instantly.
For the coming days, only one thing remains crucial: whether Trump’s rhetoric will remain limited to pressure tactics, or whether it will actually be followed by a further military expansion of operations. Until the market gets a clearer answer, continued nervousness, higher volatility, and extreme sensitivity to every new headline can be expected.
4 d - Josef Brynda
The US dollar remains the strongest currency on the market and is trading near 10 month highs. The main catalyst is the escalation of tensions in the Middle East, which increases global risk aversion and drives capital into safe haven assets. This effect is further amplified by rising oil prices, which relatively harm the US less as it has recently become a net exporter of energy. An important factor is also monetary policy, as the Fed continues to keep rates high and the market is awaiting key data from the US labor market that could determine the future direction of policy. The combination of tariff effects and an oil shock may continue to push prices higher and place the Fed in a higher for longer environment, which would support the US dollar through higher real interest rates compared to other countries.
The euro is under pressure, mainly due to its sensitivity to energy prices and the weaker economic outlook of the eurozone. It is currently trading around 1.15 EUR USD and is heading towards its weakest monthly performance since summer. The combination of expensive energy and uncertainty about growth creates a challenging environment for the ECB. The market is starting to reconsider the possibility of tighter policy, but at the same time the risk of economic slowdown is increasing. The euro therefore remains structurally weaker against the dollar.
The British pound is moving between conflicting fundamentals. On one side the Bank of England signals caution and is not willing to cut rates quickly due to inflation risks linked to energy. On the other side weaker macro data are coming in, for example a decline in industrial production compared to the previous month and lower than expected growth, which worsens sentiment towards the British economy. At the same time the pound has surprised in some aspects. Labor market data showed lower than expected unemployment and employment change increased by 84K compared to an expected decline of 4K. The pound therefore operates in a mixed environment with partial recovery.
The Canadian dollar indicates global concerns about economic slowdown and this is clearly visible on the chart against the US dollar. Initially the Canadian dollar benefited from rising oil prices and the assumption that this would only be a temporary increase. In recent days however the Canadian dollar has weakened around 1.39, signaling not just a temporary rise in oil prices but also fears of global slowdown.
The Australian dollar and the New Zealand dollar are among the most affected currencies. Both are typical risk on currencies and therefore weaken in an environment of geopolitical uncertainty and capital outflows to safety. AUD and NZD recorded significant losses in March. Another negative factor is their strong linkage to the Asian economy, which is significantly affected by the conflict. These currencies are also not helped by the recent escalation involving the Yemeni Houthis. The Houthis control a large part of the Yemeni coastline along the Red Sea and have the capability and have previously demonstrated it in the years 2023 to 2025 to block or threaten shipping in the Bab el Mandeb strait. In the event of a closure, ships would have to sail around Africa, which would dramatically increase import and export costs for countries such as China, India, Japan and Korea and cause global disruption to supply chains.
Overall it can be said that the current forex market is driven by three main catalysts.
As long as these factors persist, continued dominance of the dollar and pressure on risk sensitive and European currencies can be expected.
This week important information from the US labor market is expected. Data on unemployment and the very important NFP indicator will be released. Any positive surprises in the labor market would further anchor the Fed in a higher rate environment and potentially lead to a rate hike if price levels increase significantly while the labor market remains stable. At the same time unemployment data from Europe and CPI will also be released.
15 d - Josef Brynda
Yesterday evening was partly devoted to the meeting of the world’s most important central bank, the American Fed. As is usually the case, it is far more important than watching how rates move, which are often priced in unless the decision surprises the market, to focus on what Powell says afterward in his speech. The Fed kept rates in the range of 3.50 to 3.75.
In his speech, the Fed chairman once again mentioned that inflation is still above its target of around 2% and even raised the outlook for core inflation for 2026. This is crucial, not because inflation is newly a problem, but because the Fed is signaling that the disinflation process is not linear. Exogenous shocks are coming into play, especially in energy. The rise in oil prices above 100 USD due to geopolitics means that the Fed is once again starting to view inflation risk as “sticky” rather than transitory. This statement alone to some extent rules out any further rate cuts if the labor market shows resilience.
The latest labor market data do show a slight rebound upward, but they still remain weaker and do not match the increase in inflation, which may raise concerns about stagflation within the Fed. Therefore, the main question is whether the Fed will continue cutting rates due to the weaker labor market or focus on inflation, which it would try to contain by raising rates.
The third key point is the dot plot and forward guidance. The projection remains at roughly one rate cut in 2026. This is extremely important, as the market had until recently been pricing in more aggressive easing. However, Powell emphasized during the press conference a high level of uncertainty and the fact that no rate cut is a “commitment” but only a conditional scenario. The result is repricing: the probability that rates will remain unchanged throughout the year has significantly increased.
The most important thing, however, is the market reaction, as it is always the purest reading. The sell-off in equities, the rise in yields, and the strengthening of the dollar all say one thing: the Fed was interpreted as more hawkish than expected. Not because of the decision itself, but because of the combination of higher inflation projections, weak willingness to cut, and emphasis on uncertainty. This is a textbook example of a “hawkish hold”.
The result is that the Fed is becoming somewhat more hawkish, which typically supports the US dollar and weakens US indices due to expectations of higher rates and reduced investment activity and aggregate demand.
In today’s developments, we can therefore expect the following. If the labor market were to weaken significantly and inflation were more stable, the Fed would most likely be willing to cut rates later this year. However, if inflation continues to rise and the labor market remains stable, the Fed will have to stay rhetorically hawkish. Given that price stability has become the main objective of most central banks around the world since the 1980s and 1990s, as a response to the high inflation of the 1970s, it is more likely under current conditions that the Fed will be more cautious when it comes to easing monetary policy.
18 d - Josef Brynda
In recent days, the Forex market has experienced high volatility, with developments in the Middle East acting as the primary catalyst. The future trajectory of this situation, particularly concerning the transit through the Strait of Hormuz, is crucial. Oil prices have the power to influence global economic growth and could contribute to a stagflationary environment a highly toxic situation for the markets where economic stagnation is accompanied by rising price levels. Essentially, the markets find themselves in a scenario where inflation is not matched by economic growth, further complicating matters.
The following scenarios can be expected in the coming days:
At this moment, the dollar is acting as the ultimate "safe-haven," capitalizing on market fears.
Escalation Scenario: A sharp surge in the DXY. Investors will pull capital from emerging markets and riskier assets, flocking primarily to USD cash due to its supreme liquidity the US dollar can be exchanged almost instantly and anywhere. The yield curve may flatten.
De-escalation Scenario: An immediate sell-off of the safe-haven premium. The USD would begin to weaken, and the market would quickly shift its focus back to fundamentals (such as the timing of the Fed's next moves). However, the longer the conflict lasts, the less likely this scenario appears. There are opinions that if the Strait of Hormuz is closed for more than a month with oil prices around $100 per barrel, returning to normal market conditions will be a long-term process.
Summary: As recent weeks have perfectly illustrated, further escalations will drive the US dollar higher, whereas a hopeful and swift resolution could see the dollar erase its gains.
The CAD holds a unique position. It is a "high-beta" currency, but simultaneously a petrocurrency with close ties to prices of oil and US economy.
Escalation Scenario: It will exhibit mixed behavior. It is likely to weaken against the USD due to general risk aversion. However, it could massively appreciate against European, Australian, and Asian currencies if breaking news triggers a spike in Brent and WTI crude oil prices.
De-escalation Scenario: A drop in oil prices will drag the CAD down slightly, but an overall improvement in market sentiment will help it recover losses against the US dollar.
Summary: The Canadian dollar might initially be more resilient than other currencies. However, if the conflict drags on and the threat of stagflation looms, the CAD could weaken significantly (similar to the situation in 2022 during the onset of the Russia-Ukraine conflict). Furthermore, recent fundamental data is not helping the CAD's strength. Canada's YoY inflation for February dropped to 1.8% (against a forecast of 1.9%), with Core CPI-Trim at 2.3%. Another unfavorable fundamental was unemployment, which rose to 6.7% from the previous 6.5%, accompanied by a drop in employment change by 83.9K—the steepest decline since February 2022.
For the Eurozone, an escalation in the Middle East represents a potential stagflationary shock. The continent is extremely sensitive to energy security and the prices of imported raw materials.
Escalation Scenario: Significant weakening. Any news of restricted oil or LNG supplies from the Middle East will spark fears of another inflationary wave coupled with an economic downturn in Europe (especially in German industry). The EUR/USD pair could sharply test lower supports.
De-escalation Scenario: Partial relief. Easing fears of an energy shock would allow the euro to catch its breath and reflect the ECB's current stance on interest rate changes. Everything would depend on how quickly energy prices could erase their gains. However, oil is often subject to the "rockets and feathers" effect it shoots up like a rocket but falls like a feather which presents a challenge for Europe.
Summary: Recent trends show that the Euro reacts very negatively to the Middle East situation, as Europe is highly sensitive to expensive inputs and cannot generate wealth from them. LNG and oil at such elevated levels are highly toxic for the EU. A prolonged conflict will directly impact the European continent. Any dragging out of the conflict will put exponential downward pressure on the Euro, with some predictions even pushing EUR/USD below 1.10.
The Pound faces a problem similar to the Euro, although the GBP is partially tied to the USD's trajectory through the financial sector and a somewhat similar economic structure.
Escalation Scenario: Further sell-off of the currency. Rising energy prices could damage the British economy, pushing the central bank into a toxic environment where it must balance growth and inflation. A decline against the USD is expected.
De-escalation Scenario: A bounce upward. The Pound tends to react very elastically to the return of risk-on sentiment and could outperform the euro once the situation calms down.
Summary: The current environment of rising energy prices highlights structural differences between the European and British economies, favoring the GBP. The British economy is heavily service-oriented, accounting for roughly 80% of its GDP. London remains a global financial hub, giving Britain immense strength in banking, insurance, and technology. Industry makes up only a small fraction. In contrast, the European Union, particularly its engine Germany, relies much more heavily on manufacturing and heavy industry.
Although Australia is a commodity exporter, the AUD primarily functions as a barometer of global growth, risk appetite, and the health of Asian (specifically Chinese) trade.
Escalation Scenario: A heavy sell-off, which is currently clearly observable on the AUD/USD currency pair. Despite its commodity nature (Australia exports LNG, but primarily iron ore and coal), a pure panic flight to safety will prevail. Fears of disrupted global supply chains will drag the AUD down against both the USD and CAD.
De-escalation Scenario: The AUD will be the main winner of easing tensions. Money will flow back into carry trades and riskier assets.
Summary: The domestic economic situation is also a crucial factor. The Australian dollar could benefit the most from a calming of the situation, as the Australian economy is currently in an overheating phase. The labor market is at historic lows, economic growth has rebounded, and inflation is above 3%, forcing the central bank to tighten its belt via monetary restrictions. This typically supports the currency. Overall, however, the AUD will primarily depend on developments in the Middle East. If the conflict cools global aggregate demand, it would drag down iron ore prices (similar to 2022), and the Australian dollar could lose even more of its strength.
The NZD shares most of its characteristics with the AUD but suffers from lower liquidity, which translates to higher volatility.
Escalation Scenario: The New Zealand dollar often reacts to geopolitical crises in the same way as the Australian dollar; in the event of a global crisis, it faces a broad sell-off.
De-escalation Scenario: The New Zealand dollar would similarly experience relief and erase a portion of its losses, though this would heavily depend on the speed of the de-escalation.
Summary: An interesting scenario to watch is its movement against the Australian dollar. The AUD is currently at very optimistic levels from a yearly perspective. Any domestic disappointment in the Australian economy whether a sudden spike in unemployment, surprisingly lower inflation, or a slowdown in productivity and growth could trigger a faster sell-off of the Australian dollar compared to the New Zealand dollar.
25 d - Josef Brynda
The beginning of the week brought one of the biggest energy shocks of recent years. Brent crude oil briefly surged to nearly 120 dollars per barrel after the market opened, before giving up part of its gains on news that the G7 countries are preparing to release oil reserves of 400 million barrels and stabilised slightly lower. This is the highest level since 2022 and at the same time one of the fastest movements in the oil market in recent years. Markets are reacting mainly to another escalation of the conflict in the Middle East, which is beginning to have direct impacts on global energy supplies.
A key point of tension is primarily the area of the Persian Gulf and tanker transportation through the Strait of Hormuz. This narrow maritime corridor is one of the most important energy arteries of the world economy, because approximately one fifth of global oil consumption normally passes through it. Any disruption of operations in this area immediately triggers a sharp reaction in commodity markets. Concerns about the limitation of export flows and attacks on energy infrastructure are among the main factors pushing oil prices significantly higher.
The energy shock is beginning to have immediate macroeconomic impacts. If oil prices were to remain above the level of 100 dollars per barrel for a longer period, roughly another 2–3 weeks, it would mean a new inflationary impulse for the global economy. Markets only a few weeks ago were counting on a gradual easing of monetary policy and interest rate cuts mainly in the United States, and in Europe there was speculation about a possible single rate cut. Oil approaching 120 dollars, however, significantly complicates these scenarios. Higher energy prices may accelerate inflation again and central banks may therefore be forced to keep interest rates at higher levels for longer than the market expected.
Foreign exchange markets are reacting with a classic “risk-off” scenario. The US dollar strengthened at the beginning of the week, because investors traditionally move capital into more liquid and safe assets such as the US dollar during periods of geopolitical tension. The euro and the British pound weakened against the dollar and pressure is also visible on other riskier currencies. The current situation creates a relatively strong combination of factors for the dollar – on the one hand it functions as a safe haven, and on the other hand higher energy prices increase the probability that the US Fed will not cut interest rates as quickly as was expected only recently.
Tension in the energy market is immediately reflected also in equity markets. Futures on US indices weakened at the beginning of the week and a similar development can be seen in European markets. The greatest pressure is visible in sectors sensitive to energy costs, especially industrial companies, banks and technology companies. On the contrary, energy companies and commodity producers are performing relatively better, as they directly benefit from rising oil prices.
One of the most affected continents is Europe, primarily because of its structural dependence on energy imports. Another reason is lower flexibility in the short-term adjustment of energy sources. In recent years Europe has significantly invested in renewable energy sources, which is strategically important in the long term, but at the same time it means that during the transition period it still requires large volumes of imported gas and oil as a stabilising source. The DAX, which is the index of the 40 largest German companies, even fell by 4% after the weekend, and EURUSD was also nearly one percent lower after the open. These facts indicate strong concerns in the case of a prolonged conflict and the stability of the European economy.
That this is a geopolitical crisis is also confirmed by the behaviour of US bonds relative to the US dollar. Higher energy prices increase inflation expectations and the market begins to count on the fact that the Fed will not be able to cut rates as quickly as was expected recently, or that it will keep them high for longer. Higher US yields and geopolitical uncertainty increase demand for the dollar as a liquid and relatively safe currency. The strengthening of the dollar is also due to its liquidity, investors institutions banks reps participants in the market are forced to hold cash in dollars, because dollars can be exchanged the fastest of all currencies, they are the most liquid.
For markets in the coming days, three factors will be key above all. First, the development of the situation in the area of the Strait of Hormuz and the stability of tanker transportation. Second, a possible reaction of governments and coordinated release of strategic oil reserves, which some G7 countries have already begun discussing. And third, a reassessment of expectations regarding monetary policy, because higher energy prices may significantly change the inflation outlook in the major world economies.
4. 3. 2026 - Josef Brynda
The current escalation of tensions between the United States and Iran has caught the global economy in a phase of extreme sensitivity regarding the trajectory of interest rates. After a long period of restrictive monetary policy, markets had anticipated a continuation of the easing cycle just a few days ago; however, current developments have practically erased this vision, at least for the upcoming rate adjustment. From the perspective of economic theory, this conflict is specific in that it does not only attack geopolitical stability but directly impacts inflationary expectations through a supply shock in the energy sector. Given that core inflation in the US remained at elevated levels around 3% in early March 2026, any further impulse in the form of more expensive oil forces the Fed and other central banks to keep rates "higher for longer," or even consider further hikes to reanchor price stability.
The main transmission mechanism at the moment is the price of Brent crude oil, which in the last 24 hours attacked the $84 per barrel mark, representing a 12% increase in just two days. A key risk remains the disruption of transit in the Strait of Hormuz, through which approximately one-fifth of global oil and liquefied natural gas (LNG) production flows. Should a more permanent blockade occur, economic models predict a sudden jump in fuel prices, which would immediately translate into logistics costs and final consumer goods prices.
Central banks thus find themselves in a profound dilemma. Lowering rates would support potentially weak economic growth but would simultaneously add fuel to the fire of inflation. Conversely, raising rates dampens price pressures but risks slowing down the economy. Under current conditions, it seems more likely that banks will resort to restrictive policies to prevent an inflationary spiral from spinning out of control. Everything will depend on the duration of the conflict and its impact on fundamental data in the coming weeks.
The reaction of financial markets in recent hours corresponds to a typical "risk-off" regime, from which the US dollar primarily benefits as a safe haven. However, the market is extremely sensitive to news. For example, when the New York Times recently published information about a possible diplomatic agreement between Iran and the US, the dollar weakened instantly and oil corrected its gains. For active trading, this volatility is ideal, as the market is currently driven almost exclusively by news headlines, allowing for the opening and closing of speculative positions with high potential.
In the long term, this conflict could signify a structural break where cheap credit becomes a thing of the past. A potential prolongation of the war will force a recalibration of global supply chains with an emphasis on energy security, a process that is extremely capital intensive. This would mean that the "floor" for interest rates would shift higher. The dollar benefits from this situation, and thanks to oil exports, the Canadian dollar also remains stable. Conversely, currencies such as the EUR, AUD, and NZD are losing their strength. The Euro is suffering due to Europe's energy dependence and proximity to the conflict, where gas has risen by more than 50%, while the Australian and New Zealand dollars, typical "commodity and risk" currencies are suffering due to capital outflow toward safer assets and concerns over a global trade slowdown, upon which these export economies depend.
2. 3. 2026 - Josef Brynda
Saturday morning, Central European Time, brought a dramatic escalation of tensions in the Middle East. A joint military operation by Israeli and American forces targeted strategic locations in Iran, a direct consequence of the long-standing failure of diplomatic talks regarding the country's nuclear program. According to allies, Tehran has crossed a critical threshold in uranium enrichment intended for the production of a nuclear arsenal. This strike immediately triggered a domino effect across global financial markets, as investors began a panicked reassessment of their portfolios.
The current behavior of market participants serves as a fascinating case study in crisis management. So far, assets labeled as "safe havens" where capital retreats during times of peak uncertainty have benefited the most from the conflict. This dominant position is held by gold, the US dollar, and the Swiss franc. The logic behind this movement is rooted in a deep distrust of risky assets; while the fiat currencies of developing nations may devalue in times of chaos, gold is perceived as a universal store of value independent of governments. Similarly, the US dollar, as the world's most liquid currency, offers investors necessary stability and immediate access to funds.
In sharp contrast to precious metals, equity indices have recorded significant losses. The primary culprit is the threat of an oil shock, which a conflict in this key region inevitably triggers. Rising oil prices do not function merely as an isolated energy issue; they act as dangerous cost push inflation. Unlike demand pull inflation, this form of price growth is toxic for markets because it increases input costs for companies while simultaneously draining consumer purchasing power. This creates a dual pressure on corporate margins and future earnings.
A very specific development can be observed in commodity currencies. The Australian dollar, heavily tied to the global economic cycle and export channels to China, initially weakened sharply due to its "risk-on" character. Although it managed to recover some losses following reports of US willingness to negotiate, this optimism was quickly dampened by Iranian officials, who categorically rejected any dialogue with Washington. Even though commodity prices are rising, it is not a positive signal for the Australian currency. This is not a natural demand impulse driven by economic growth, but rather speculative growth fueled by fears of supply disruptions. The Canadian dollar is in a similar position, showing losses that are less drastic only because it is partially supported by high oil prices. However, this support lasts only until the crisis fully transforms into a broader global economic downturn.
Our risk model prepared strategies for this scenario in advance, and current market movements precisely align with our predictions. In the coming days, it will be crucial to monitor the duration of the conflict. Should the situation stabilize, markets will breathe a sigh of relief; however, a protracted conflict could lead to deep economic crises, similar to those seen after the outbreak of the war in Ukraine, when energy prices cooled global growth.
Beyond geopolitics, this week will be extremely important from a fundamental data perspective, as a "packed" economic calendar awaits us. On Monday, we will monitor the February ISM Manufacturing PMI data, which will reveal more about the health of the US industrial sector. Wednesday brings important labor market figures in the form of the ADP Employment report for February. On Thursday, attention shifts to the regular weekly Initial Jobless Claims data. The week will then culminate on Friday with the release of January Retail Sales data and, most importantly, the closely watched government February Jobs Report. This combination of wartime tension and pivotal macroeconomic data will dictate the direction of the markets for the remainder of the month.
18. 2. 2026 - Josef Brynda
Global tensions between the United States and Iran reached an extremely sensitive phase as of February 18, 2026, following the expiration of the previous deadline on February 17 and the simultaneous paradox of “diplomatic progress vs. military demonstrations.” Indirect talks in Geneva concluded with a potential framework agreement on “guiding principles” and a two-week pause to finalize the specific terms. At the same time, however, the U.S. has visibly increased military readiness in the CENTCOM area of responsibility, while Iran has demonstrated its capacity for escalation through exercises simulating the closure of the Strait of Hormuz, which we witnessed yesterday. This has created a situation of a “fragile truce with a live fuse” for markets and allies alike, where outcomes may hinge on days and incidents.
Arguments in favor of an immediate strike rest on operational indicators and the non-negotiability of red lines. Particularly important in this context is Vice President JD Vance’s statement following the Geneva meetings that Iran still refuses to acknowledge and engage with the president’s key “red lines.” Vance also indicated that if diplomacy reaches its “natural conclusion,” the president reserves the full right to pursue a military option to prevent the emergence of a nuclear-armed Iran. This framing shifts the crisis into a binary structure: either an agreement meets U.S. security requirements, or the probability of coercive force increases.
On the other hand, the very existence of a two week window argues against an immediate strike, serving as a procedural brake. Trump’s style typically relies on maximum economic pressure as a negotiating lever rather than a willingness to enter into a prolonged conflict with the risk of an oil shock. The greatest threat lies in the economy and oil prices: escalation in the Strait of Hormuz could trigger an energy shock, a resurgence of inflation, and renewed pressure on central banks politically and macroeconomically toxic outcomes.
In currency markets, the key transmission channels are risk sentiment, energy, and yields. In an escalation scenario, the U.S. dollar typically strengthens, while risk-sensitive currencies (such as AUD and NZD) and those exposed to global growth tend to weaken. For the euro, the conflict is a double-edged sword: an oil shock harms Europe through higher energy import costs and a deterioration in terms of trade, which generally pressures the euro lower; however, the euro may temporarily hold up against more risk-sensitive currencies. Escalation can also benefit “oil currencies” (such as CAD and NOK) due to higher oil prices at least until fears of a global slowdown begin to dominate.
Across commodities and equities, the most sensitive channel is energy. Any signal of a real disruption in the Strait of Hormuz quickly increases the geopolitical risk premium in oil and raises volatility across markets. Oil has an asymmetric profile (sharp spikes on incidents versus gradual unwinding of the premium under diplomacy), while gold functions as a barometer of fear (risk-off -> gains; easing tensions -> correction). In equities, higher energy prices translate into higher inflation expectations and upward pressure on yields, which typically weigh on the broader market while benefiting the energy sector; defensive sectors tend to hold up relatively better. Until the two-week window expires, pricing across FX, commodities, and equities will remain heavily driven by headline risk and Vance’s emphasis on “red lines” ensures that markets will interpret every new statement from Washington and Tehran as a direct signal of direction.
2. 2. 2026 - Josef Brynda
The Australian economy enters February 2026 at a critical turning point. Following 2025, during which the Reserve Bank of Australia eased monetary policy three times to a level of 3.60%, the tide is turning. The upcoming board meeting, scheduled for the night of February 2nd to 3rd, is viewed by markets as the catalyst for a new "fine-tuning" phase. The primary driver for this shift is unexpectedly rigid inflation in the final quarter of 2025, where the trimmed mean reached 3.4%. For Governor Michele Bullock, this sends a clear signal: the path to the 2–3% target range is thornier than models predicted, and current rates are likely no longer sufficient to anchor inflation expectations.
Current market sentiment speaks volumes. The probability of a 25-basis-point hike to 3.85% climbed to 72% at the end of January. This sharp rise in expectations reflects a "hawkish" cocktail of domestic labor market data, where the unemployment rate fell to 4.1% and job advertisements jumped by a record 4.4% in January. Australia is thus grappling with capacity constraints, where demand for labor, alongside investments in energy transition and data centers, is exerting upward price pressure.
While a February hike is largely priced in, the real battle among analysts centers on the outlook for the remainder of 2026. Major banking institutions such as CBA and Westpac are betting on a "one-and-done" scenario, arguing that given the high debt levels of Australian households, even a modest shift to 3.85% will be sufficiently restrictive. Conversely, National Australia Bank (NAB) warns that if inflation in services and government levies does not subside, we will witness a further tightening to 4.10% in May. For borrowers with an average mortgage of AUD 600,000, every 25-point hike represents an increase in repayments of approximately $90 a politically and socially sensitive issue in the context of the rising cost of living.
For the AUD/USD currency pair, the RBA meeting represents a key test of resilience. While the Australian dollar touched two-year highs above 0.7090 in late January, a strong US dollar and cooling in the iron ore market have created significant resistance. If the RBA confirms a hawkish stance in its accompanying commentary, the AUD could return to an upward trend targeting 0.7200. However, if the bank adopts a cautious tone and labels the hike as a "preemptive step," there is a risk of a "sell the fact" sell-off. On Tuesday night, we await more than just a change in numbers; we await the definition of the monetary narrative for the entire first half of 2026.
Crucially, the broader perspective on the USD will be paramount. Donald Trump’s nomination of Kevin Warsh as Fed Governor is having a positive impact on the USD. Warsh intends to utilize a strong dollar to dampen inflationary pressures, which would subsequently allow the new Governor to lower interest rates. This would provide relief to both consumers and manufacturers, and most importantly reduce the servicing costs of the massive US national debt while increasing the purchasing power of Americans abroad. Furthermore, in a context where the USD has been undergoing a period of instability, any stabilization combined with persistent positive fundamentals like labor market stability and GDP growth above the inflation target could trigger a return of investors to the Greenback.
It will therefore be vital to monitor Governor Bullock’s accompanying commentary as well as the emerging rhetoric regarding the future leadership of the Fed.
27. 1. 2026 -
The dollar slumped to a four-month low on the news of a possible yen intervention. Japanese Prime Minister Sanae Takaichi herself said that her government would “take necessary steps against speculative or very abnormal market moves” to support the yen.
Tokyo intervened in the market a few times, last being the 2024 interventions, which saw roughly $100 billion spent trying to keep USD/JPY below 160, the level almost reached on Friday. After the Fed contacted the BOJ, pair declined to todays 153.
If the Fed decided to intervene, we see even more dollar weakness, for which we are preparing.