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Foreign exchange positions for today's ECB rate hike while eyeing U.S. military launches against "multiple" targets in Iran for the second straight day after Trump says Tehran is dragging out peace talks.
GBP/EUR remains supported just below the 1.16 barrier in early trade and the escalation in Iran. The U.S. is growing frustrated that no deal has been reached, and Iran is looking increasingly aggressive in its actions. A flare-up looks to be in the making. For GBP/EUR, the conflict has proven supportive via the inflation and interest rate channel. With pullbacks being shallow, a break of 1.16 looks to be at hand in short-term. ECB decision later today could pose some limited two-way risks.
GBP/USD holds onto post-inflation gains. Midweek inflation data from the U.S. showed little sign of a significant inflationary shock stemming from the war, with core inflation actually undershooting expectations on the month. That will cool Fed rate hike speculation and deny the dollar support. GBP/USD is expected to respect 1.33020 and 1.3480 tramlines.
EUR/USD is holding just above 1.15 in the wake of U.S. inflation and ahead of the ECB decision. The risk for euro bulls is that the ECB raises interest rates but stresses optionality on future hikes. That's a way of signalling it hasn't made up its mind and will await data for instruction. That would cool interest rate expectations and weigh on the euro. However, a strident communication that signals the ECB is intent on getting ahead of inflation with a brace of hikes will read dovish and offer EUR some near-term support.
GBP/AUD has had a decent run of late as AUD retreats and pares back some of its 2026 gains. A move above 100-day moving average confirmed midweek, which is a constructive technical signal for those wanting a firmer pound. AUD disadvantaged by rising expectations for U.S. Fed hikes during the course of the past month, because that tightens global financial conditions and caps risk-taking amongst investors.
GBP/NZD also on the rise, in tandem with GBP/AUD, for much the same reasons. NZD also particularly vulnerable to Iran war escalation and is lower amidst rising US‑Iran tensions. Brent crude oil up about 3% overnight doesn't help net energy importer NZ. U.S. President Trump pledged to attack Iran "very hard" after accusing the country of dragging out talks on an interim peace deal. If we're in an escalation phase, look for NZD underperformance.
