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Market Insight 02-03-2026

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  • Market Insight 02-03-2026

Daily Currency Market Update – Monday, 2 March 2026

Market Overview

A dramatic escalation in the Middle East has triggered a powerful wave of safe‑haven flows, sending Oil, Gold and the US Dollar sharply higher to start the week. The US and Israel launched coordinated strikes on Iran over the weekend, killing Supreme Leader Ayatollah Ali Khamenei and senior IRGC officials. Iran retaliated with missile attacks across the Gulf, targeting US assets and Israeli cities, while Hezbollah struck Israeli defence sites. Explosions were reported in Bahrain, Dubai and near the US embassy in Kuwait.

Markets are firmly in risk‑off mode.

  • WTI crude surged above $75, its highest since June, before easing to $72 (+7% on the day).
  • Gold jumped more than 2%, trading above $5,400.
  • US equity futures are down 1.3%–1.8%, while the USD Index trades near 98.35, up 0.75%.

GBP/EUR

GBP/EUR ~1.1385

The cross breaks lower as UK political instability intensifies and BoE easing expectations grow.

Drivers

  • The Green Party’s shock victory in the Gorton & Denton by‑election has dealt a major blow to PM Starmer.
  • Analysts warn the result could trigger leadership speculation and weigh on GBP ahead of May’s local elections.
  • UK labour data remains soft and inflation continues to ease, reinforcing expectations of a March or April BoE rate cut.
  • ECB President Lagarde reiterated that Eurozone inflation should stabilise near 2%, but elevated wage pressures keep the ECB cautious.
  • German Retail Sales due later today; a downside surprise could limit EUR upside.

Outlook: GBP/EUR remains under pressure; political fallout in the UK will dominate near‑term direction.

GBP/USD

GBP/USD ~1.3360–1.3400

Sterling declines sharply as geopolitical tensions and BoE easing bias collide.

Drivers

  • GBP/USD loses nearly 1% as safe‑haven flows lift the Dollar.
  • Middle East conflict intensifies risk aversion, pushing investors into USD and CHF.
  • BoE Chief Economist Pill warned that the disinflation trend has been slower than expected, but still sees scope for cuts.
  • Markets price a high probability of a March BoE cut, contrasting with reduced expectations of Fed easing.
  • ISM Manufacturing PMI (expected 52.3) will be the key US release today.

Outlook: GBP/USD remains vulnerable; a break below 1.3350 would expose the February lows.

EUR/USD

EUR/USD ~1.1720–1.1750

The Euro slumps to a five‑week low as risk aversion boosts the Dollar and German data disappoints.

Drivers

  • German Retail Sales fell 0.9% MoM, far worse than the expected –0.2%, weighing on EUR.
  • Eurozone PMIs improved, but not enough to offset the negative retail shock.
  • USD strengthens as geopolitical tensions escalate and inflation concerns rise.
  • Fed officials warn that tariff‑driven price pressures could delay rate cuts.
  • ISM Manufacturing PMI and US inflation dynamics remain key for USD direction.

Outlook: EUR/USD remains pressured; a sustained break below 1.1700 would open the door to 1.1650.

AUD/USD

AUD/USD ~0.7080

The Australian Dollar rebounds despite risk aversion as RBA tightening expectations dominate.

Drivers

  • AUD/USD fills its bearish gap and retakes 0.7100 after testing support near 0.7030.
  • Stagflation fears in the US limit USD upside despite safe‑haven flows.
  • Hot Australian CPI last week reinforced expectations of a May RBA hike.
  • RBA Governor Bullock speaks Tuesday; Australian GDP and US NFP later this week will be key.
  • Geopolitical tensions cap AUD upside but do not derail its broader uptrend.

Outlook: AUD/USD remains biased higher; dips toward 0.7050 likely to attract buyers.

USD/CAD

USD/CAD ~1.3650–1.3660

The pair holds steady as surging oil prices offset USD strength.

Drivers

  • WTI crude jumped above $75 before easing, supporting CAD.
  • Iran’s IRGC Navy halted shipments through the Strait of Hormuz, a chokepoint for 20% of global oil flows.
  • USD supported by safe‑haven demand and strong PPI data.
  • Canada GDP (Q4) due today; expected to show modest growth.
  • Middle East tensions remain the dominant driver.

Outlook: USD/CAD likely to stay range‑bound; oil strength limits upside toward 1.3700.

USD/CHF

USD/CHF ~0.7695–0.7700

The Dollar firms but CHF remains supported by safe‑haven flows.

Drivers

  • USD/CHF rises modestly as strong US PPI reinforces expectations of no near‑term Fed cuts.
  • CHF remains well‑bid amid escalating Middle East conflict.
  • Iran refuses to negotiate with the US; further strikes remain possible.
  • Swiss GDP due this week; SNB expected to keep policy unchanged.

Outlook: USD/CHF remains capped by safe‑haven demand; upside limited unless ISM PMI surprises strongly.

Final Summary

A coordinated US–Israel strike on Iran has triggered a global flight to safety, lifting Oil, Gold and the US Dollar while pressuring risk‑sensitive currencies. Sterling and the Euro weaken sharply, with UK political turmoil adding to GBP downside. The Australian Dollar remains resilient on RBA tightening expectations, while CAD benefits from surging oil prices. CHF remains supported by safe‑haven flows. Today’s ISM Manufacturing PMI, German Retail Sales and Canada GDP will shape intraday volatility, but geopolitical headlines remain the dominant driver.