FX Daily: Just another ‘anti-decay’ Friday in Daily Currencies Ratings 27/03/2026 USD: It’s in Iran’s interest to keep oil sky-high ‘Theta’, or the time decay component in the value of an FX option, normally accelerates into weekends on the view that nothing happens over the two days the market is closed. This March, however, we have been seeing FX options staying bid into weekends on the view that there will be major event risk out of the Middle East. Some of the thinking here is that the White House can make some of its most belligerent comments while financial markets are closed and give investors the chance to re-appraise events by the time markets open on Monday. In FX markets, US President Donald Trump’s delay of a plan to bomb Iranian energy infrastructure by 10 days has brought little relief. The dollar remains well bid and the relief rallies in Asian equities have been very modest indeed. Presumably, investors are well aware of the Iranian position that it has been attacked before in the middle of negotiations, and in turn, the 10-day delay is providing little solace. Additionally, Iran will be aware that its stranglehold on the Strait of Hormuz is starting to bite real world activity. Fuel rationing is starting to be enacted in some countries and with reports of 60 days worth of fuel stocks left in the likes of India and Korea, Iran will feel that it has time on its side. Barring some conciliatory words from Iran today – which seems highly unlikely – we expect the dollar to stay bid and risk assets to remain vulnerable. Most are amazed at how well equity markets are performing given the threat to global activity and now the rising cost of borrowing/financing. European Central Bank President, Christine Lagarde, was the latest official to echo such comments in an interview with The Economist yesterday. US data will again take a back seat to Middle East headlines today. However, there might be some interest in the inflation expectations component of the final University of Michigan consumer sentiment data at 4:00pm CET today. The preliminary readings had shown the 1 year and 5-10 year readings rising to 3.6% (3.4%) and 3.5% (3.2%) respectively. Any big rise in these might be a slight dollar positive in that they could drag the Federal Reserve further into the tightening camp. Currently, 15bp of Fed tightening is priced this year. We know the Fed likes to see medium-term inflation expectations anchored. Inflation expectations for the 5 and 10-year zero-coupon inflation swaps have risen 20bp and 5bp respectively this month. Any large further rises here could see traders more actively engage in the idea of the Fed tightening this year. This would help the dollar and hit risk assets. DXY remains bid towards the top of a 99.00-100.00 trading range. We see scope for another run towards the 100.25/50 area and risk assets and risk currencies staying under pressure. Chris Turner EUR: Little reprieve EUR/USD remains soft as investors seem more minded to brace for escalation than a ceasefire. News of further US troop movements towards the Middle East is seen as worrying. Those investors in February who backed the view that the US military build-up would result in action – and not merely be used for maximum bargaining pressure – were proved correct. Developments in the Middle East are a clear risk negative. One aspect that needs more attention is the role of Middle East investors, largely through Sovereign Wealth Funds, in global capital mar