🌍 The FX market last week was primarily impacted by US-Iran tensions and significant fluctuations in oil prices, rather than by central banks or major macroeconomic announcements. Early in the week, rising geopolitical risks pushed oil prices above $100 per barrel and brought capital back to the US dollar as a short-term safe haven.
📉 Later, that move reversed as hopes for diplomacy returned and the Hormuz story shifted from blockade risk to the possibility of reopening. Oil prices cooled, risk appetite improved, stocks recovered, and the dollar shifted from strong at the beginning of the week to clearly weaker by the end.
💵 Therefore, the DXY experienced a volatile week but still ended with a slight bearish bias. The dollar surged in the initial phase as risk decreased, temporarily hitting a weekly high near 99.18, before gradually losing momentum as tensions eased and US data wasn’t strong enough to push it further.
💶 European currencies benefited the most from the weaker dollar backdrop. EUR/USD dropped sharply at the start of the week before recovering, while GBP/USD also regained upward momentum and maintained an optimistic sentiment by the weekend. The market clearly favored the easing narrative over a fresh USD buy.
💴 In other news, USD/JPY is still holding up high and trading in a wide range, showing that the yen isn't acting as a pure safe haven anymore. AUD/USD is bouncing back nicely as risk appetite returns, while the Canadian dollar and some EM currencies are also finding support as the panic from earlier in the week eases off.
🔎 Overall, this week marks a clear shift in FX from risk-off to risk-on in just a few sessions. The key issue for the upcoming week is whether the easing narrative around Hormuz gets further confirmation, as that could decide if the pressure on the dollar continues.