Weekly Market Report
Geopolitical tensions in the Middle East remain a key driver for currency markets, with renewed uncertainty around US-Iran negotiations pushing oil prices higher and generally supporting the US Dollar as a safe-haven currency.
Higher energy prices are also feeding into inflation expectations, leading investors to reassess the future path of interest rates. The overall time has shifted towards central banks remaining cautious for longer as they assess the inflaction impact on the latest energy shock.
Sterling has softened slightly as global risk sentiment and energy-driven inflation concerns continue to influence price action.
What this may mean for businesses
Exchange rates are being driven more by external events such as energy prices and geopolitics rather than by normal domestic economic data making short-term currency movements harder to predict.
The Dollar remains supported in periods of uncertainty, which may increase costs for businesses making USD payments
For EUR exposure, the current backdrop may lead to greater short-term volatility rather than a clear directional trend as markets weigh weaker growth against higher inflation riskTiming may matter more in the current environment, particularly where businesses are relying only on spot contracts.
Forwards and market orders may be used to help reduce risk.