Daily Market Update
March 03, 2026EUR/USD ranged from the low to high 1.16’s overnight. The EUR/USD pair pierced the 1.1600 mark on Tuesday, as risk aversion keeps fueling demand for the US Dollar (USD).
The escalation of the Middle East crisis has finally interrupted traffic through the Strait of Hormuz, with the immediate consequence of soaring Oil prices. The barrel of West Texas Intermediate (WTI) crude traded as high as $77 per barrel, levels not seen since last December.
The Iran war, spread throughout the Persian Gulf, is becoming a global disruptive event. Indeed, the immediate reaction could be higher oil prices and demand for the safe-haven USD, but that’s just the tip of the iceberg.
Inflation is likely to become a concern in the upcoming weeks, although the market won’t know the extent of the impact until April, when March figures are expected to be reported.
Central banks from around the world are taking different monetary policy approaches, albeit most of them are still in a paused, loosening cycle.
Mounting inflationary pressures could force a sudden course change, with the odds of rate hikes rising as the chaos spreads.
The GBP/USD pair drifts lower for the second straight day on Tuesday and drops to over a one-week low, around mid-1.3500s, during the early European session following the release of the UK jobs report.
The Office for National Statistics (ONS) reported that the ILO UK Unemployment Rate climbed to 5.2% in the three months to December, from 5.1% the prior month, marking the highest level since early 2021.
Additional details showed that the number of people claiming jobless benefits rose to 28.8K in January, pointing to continued softening in the UK labour market at the start of 2026.
Furthermore, the rate of annual wage growth also moderated during the reported period, dropping to its lowest level in almost four years.
In fact, Average Earnings Excluding Bonus increased 4.2% in the three months ended December, down from 4.6% in the previous quarter, while the gauge including bonuses slowed to 4.2% from the former reading of 4.6%.
Barring any surprises from the UK consumer inflation figures, due for release on Wednesday, the latest employment details reaffirm bets for a March interest rate cut by the Bank of England (BoE) and weigh on the British Pound (GBP).
The US Dollar (USD), on the other hand, climbs to over a one-week high and turns out to be another factor exerting downward pressure on the GBP/USD pair.
The USD, however, lacks bullish conviction amid dovish Federal Reserve (Fed) expectations. In fact, traders ramped up their bets that the US central bank will lower borrowing costs in June following the release of softer US consumer inflation figures last Friday.
Moreover, the current market pricing indicates a higher possibility of at least two rate cuts in 2026, which, along with threats to the Fed’s independence, caps the upside for the USD.
Following a modest intraday downtick, the US Dollar (USD) attracts fresh buyers for the second straight day and climbs to its highest level since January 20.
Against the backdrop of reduced bets for more aggressive easing by the US Federal Reserve (Fed), a further escalation of geopolitical tensions in the Middle East continues to benefit the Greenback’s status as the global reserve currency. This turns out to be a key factor acting as a tailwind for the USD/JPY pair.
Meanwhile, Reuters reported that sources familiar with the central bank’s thinking stated that fresh market volatility triggered by the Middle East conflict has heightened the chance the Bank of Japan (BoJ) will hold off on raising rates in March.
This comes on top of Japanese Prime Minister Sanae Takaichi’s reservations about additional monetary tightening by the BoJ, which keeps the Japanese Yen (JPY) bulls on the defensive and further supports the USD/JPY pair.
Investors, however, still seem convinced that the BoJ will stick to its policy normalization path.
This, along with speculations that authorities would step in to stem further JPY weakness, caps the upside for the USD/JPY pair.
Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains to the upside, and any corrective pullback could be seen as a buying opportunity amid persistent geopolitical uncertainties.
Source FX Street
