The reopening of the Strait of Hormuz following a ceasefire agreement in Lebanon has triggered significant movements across major currency pairs, as reported by all three sources [1][2][3]. Iran’s Foreign Minister Abbas Araghchi announced that the Strait is now fully open for commercial vessels during the US-Iran ceasefire, though military ships or those from countries hostile to Tehran remain barred [1][2][3]. US President Donald Trump stated that the US military blockade will stay in place until a deal is reached with Tehran, with talks expected to begin as soon as this weekend [1][3].
The news led to a sharp decline in the US Dollar, with the Dollar Index (DXY) falling to multi-week lows around 97.80 [2]. The GBP/USD pair surged to a daily high near 1.3600, trading at 1.3567 and up 0.36% on the day [1]. Similarly, AUD/USD rallied toward 0.7200, trading at 0.7194, as risk sentiment improved and demand for the USD waned [3]. USD/CAD declined to around 1.3670, down 0.26%, despite a steep drop in oil prices, with West Texas Intermediate (WTI) falling to $80 per barrel, marking one of its steepest daily declines in recent weeks [2].
Market participants are now reassessing monetary policy expectations. Investors are pricing in nearly 16 basis points of Federal Reserve easing by the end of the year, with the CME FedWatch tool indicating a 38.2% chance of a 25-basis-point rate cut, up from 25.9% the previous day [1][2]. San Francisco Fed's Mary Daly commented that policy remains 'slightly restrictive' and supported one or two cuts in 2026 before the oil price shock, but noted that a quick end to the conflict could put rate cuts back on the table [1]. In the UK, markets expect 24 basis points of tightening by the Bank of England, with Chief Economist Huw Pill emphasizing inflation as the top priority [1]. In Canada, attention is turning to upcoming CPI data, with Bank of Canada Governor Tiff Macklem warning of 'higher price levels' due to the recent energy shock [2].
Technical analysis across the pairs reflects the bullish momentum. GBP/USD remains above key moving averages, reinforcing its uptrend, while AUD/USD holds above both the 20-period and 100-period SMAs, with the Relative Strength Index suggesting continued upside momentum [1][3]. USD/CAD's decline is notable given the usual correlation between the Canadian Dollar and oil prices, indicating that broader USD weakness is the dominant market driver [2].
Overall, the reopening of the Strait of Hormuz has eased fears of prolonged energy supply disruptions, improved risk sentiment, and led to a broad-based selloff in the US Dollar, with major currencies like the GBP, CAD, and AUD benefiting from the shift [1][2][3].
CONCLUSION
The reopening of the Strait of Hormuz has triggered a rally in major currencies against the US Dollar, as markets anticipate reduced geopolitical risk and reassess central bank policy outlooks. The move has also led to a sharp drop in oil prices and improved risk sentiment. Investors are now closely watching upcoming economic data and central bank commentary for further direction.