FX Daily: Hawkish hangover in Daily Currencies Ratings 20/03/2026 USD: Fed sounds dovish relative to ECB and BoE Oil had another wild ride yesterday, with Brent touching 119$/b before easing back closer to 107$/b. The correction was likely a function of Israel claiming that it is helping the US re-open the Straight of Hormuz, with Prime Minister Benjamin Netanyahu saying he sees “the war ending a lot faster than people think”. That follows US discontent over Israeli strikes on Iranian gas fields earlier this week. While oil prices remain elevated, the size of the dollar decline in the past 24 hours seems to embed some optimism about the war. What also contributed to USD losses were the hawkish surprises by the European Central Bank and Bank of England (discussed in the sections below), which seemed to dwarf the hawkish vibes from US Federal Reserve Chair Jerome Powell’s press conference on Wednesday. That said, our takeaway from this week of central bank decisions hasn’t changed: not enough guidance has been offered to dent oil’s role as a major market driver. Rate expectations should remain fluid and commodity price dependent, and continue to play a secondary role for FX. The next few days will tell us whether this wave of cautious optimism has legs. The dollar can fall more on military de-escalation news, but clarity on the Straight of Hormuz reopening is necessary to prevent USD rebounds at a second stage. Francesco Pesole EUR: April on the table The ECB opted for a cautious tone in light of energy price volatility yesterday, but President Christine Lagarde’s press conference had a hawkish undertone as she conveyed a sense of heightened concern for upside risks to inflation. But even more importantly, Bloomberg later reported that ECB officials are already considering a rate hike in April should inflation rise too far above target. That can be a game-changer. Despite the recent hawkish repricing, markets were pricing in a hike only from June before yesterday. The reasoning was that the ECB would have needed a couple of months of data to assess second round effects. Putting April on the table (now 15bp priced in) means that the ECB may be ready to act aggressively and pre-emptively, intuitively raising the chances of back-to-back increases. Our economists aren’t ready to pencil in a rate hike yet as a positive turn in the war and energy prices can still discourage the hawks. But the chances of a hike have undoubtedly increased, which raises the upside potential for the euro beyond the near-term impact of energy prices. Speaking of which, gas prices have eased back after yesterday’s spike, but Iran’s attacks on Qatar’s LNG facilities are now estimated to cause a loss of 12.8m tons per year (roughly 3% of global production) for three to five years. Further EUR gains from here depend on no additional major shocks to gas supply. We think caution is very much warranted in EUR/USD at this moment, as the pair seems to be trading a bit too strong considering where oil and gas prices are. But should we see some de-escalation over the weekend, EUR/USD could be eyeing 1.170 soon, backed by a hawkish ECB message. Francesco Pesole GBP: Hawkish BoE surprise The Bank of England surprised on the hawkish side with a 9-0 vote in favour of a hold, as consensus was that two members would still vote for a cut. Incidentally, the MPC’s most dovish member, Swati Dhingra, openly discussed a rate hike to “stabilise rate setting dynamics” in case of a sharp ris