US FX WRAP: Dollar gains on hawkish Powell, Middle-East tensions and hot PPI

Analysis details (19:55)

The Dollar traded firmer on Wednesday, supported by Fed Chair Powell leaning hawkish, further energy disruption in the Middle East and a hot US PPI report. Starting off, Israel's attacks on Iran's South Pars gas field and Asaluyeh oil facility left crude prices rallying, with Brent nearing USD 110/bbl. Meanwhile, PPI was hot on all measures, adding to already existing inflationary concerns, given the report was before the surge in oil prices in March and components which feed into PCE leaned slightly hot. In the afternoon, the Fed held rates as expected, with only Governor Miran dissenting for a rate cut. The statement pointed out uncertainty surrounding the economic impacts from the Middle East situation, with dollar strength picking up in the press conference. Specifically, Powell said he won't approach the question of looking through oil prices lightly and pointed out the vast majority of participants do not see a hike as the next base case (1 does). Meanwhile, the main changes in the SEPs saw 2026, 27, and 28 GDP revised up, as well as core and headline PCE for 2026. DXY climbed back above 100 to around 100.14 from earlier 99.465 lows.

USD/CAD showed little reaction towards the BoC's decision to hold rates as forecasted. Moves in the currency pair were more of a function of US and geopolitical dynamics. The BoC removed the line that the current policy rate is about the right level to keep inflation close to 2% if the economy evolves as expected. This is likely due to the increased downside risks to growth and upside risks to inflation, the central bank pointed out, clouding the policy outlook in the year ahead.

Thursday is a big day for G10 central banks, with the ECB, SNB, BoE, and Riksbank widely expected to hold. Policymakers are expected to stress data dependence and a wait-and-see stance as elevated energy prices persist into the third week of the conflict at their respective rate announcements. Early Friday, the BoJ are expected to hold amid a troubling situation with USD/JPY nearing 160 with no near-term solution in sight to combat higher energy prices.

Click below for G10 central bank Newsquawk previews.

• BoJ


• ECB


• BoE


• SNB


• Riksbank

18 Mar 2026 - 19:55- Fixed IncomeData- Source: Newsquawk