On Friday, major currency pairs including EUR/USD, GBP/USD, and AUD/USD experienced declines as the US Dollar (USD) regained strength, driven by escalating geopolitical tensions in the Middle East and hawkish signals from central banks [1][2][3]. EUR/USD hovered near 1.1542, down around 0.38% on the day, struggling to sustain a break above the 1.1600 mark, with sellers maintaining control and the pair trading below key moving averages, indicating a mildly bearish bias [1]. The US Dollar Index (DXY) recovered to 99.67 after falling about 1.10% on Thursday, showing broad USD strength against major currencies, particularly the Japanese Yen [1].
GBP/USD dropped below 1.3350, down by 0.84%, as risk aversion intensified due to the Middle East conflict and surging oil prices, which boosted demand for the Greenback [2]. The Bank of England (BoE) kept its rate unchanged with a unanimous 9-0 vote, prompting money markets to expect a 78 basis point rate hike by year-end [2]. Meanwhile, the Federal Reserve (Fed) maintained its funds rate, with Chair Jerome Powell stating, "If I don’t see inflation progress, I won’t see a rate cut," and warning that the Iran war could drive up inflation [2]. Fed Governor Christopher Waller noted that inflation is now his main concern, while Governor Michelle Bowman expects three rate cuts this year but still sees a weak labor market [2]. Money markets currently assign only a 13% chance of a Fed rate hike at the next meeting [2].
AUD/USD traded lower around 0.7040, down 0.68%, despite supportive domestic factors such as the Reserve Bank of Australia (RBA) raising its Official Cash Rate by 25 basis points to 4.10% and strong labor market data [3]. RBA Governor Michele Bullock warned about potential second-round effects from rising energy costs amid Middle East tensions [3]. However, risk-off sentiment and safe-haven flows into the USD overshadowed these positives. Analysts at Scotiabank and Nordea highlighted that the Greenback is regaining strength as markets reassess geopolitical risks and central bank trajectories, with rising bond yields and persistent uncertainty supporting USD demand [3].
Technical analysis across the pairs shows persistent selling pressure, with EUR/USD and GBP/USD both trading below key resistance levels and moving averages, and AUD/USD pressured despite solid domestic fundamentals [1][2][3]. The market is closely watching upcoming US and UK economic data releases, including Flash PMIs, Jobless Claims, and inflation figures [2].
Currency heat maps from the sources confirm the USD's broad strength, with notable gains against the EUR, GBP, and JPY, and the AUD showing relative strength only against the JPY [1][3].
CONCLUSION
The US Dollar has strengthened across major currency pairs, driven by heightened geopolitical risks and hawkish central bank outlooks. Despite supportive domestic factors in Australia and the UK, risk-off sentiment and safe-haven flows continue to dominate, keeping cyclical currencies under pressure. Market participants remain focused on upcoming economic data and central bank signals for further direction.