Weekly FX Outlook: Volatility, Opportunity and a Market That Can Move Both Ways
Billy Martin Lamera Capital
2026-03-24
The new week begins with markets at an important turning point.
Over the past fortnight, currency markets have shifted from reacting to headlines to pricing something much deeper. What started as a geopolitical story has evolved into a broader macro move, driven by energy prices, inflation expectations and rising bond yields.
That shift remains in place.
However, there is now a new layer to consider.
Markets are no longer moving in one direction. Instead, they are beginning to price two possible paths at the same time. One where tensions continue to escalate, and another where de-escalation begins to take hold.
This is what is creating the sharp moves we are seeing across FX.
The Bigger Picture: Energy Still Drives Everything
At the centre of it all is energy. Disruption around the Strait of Hormuz continues to present a real risk to global supply, with around 20% of the world’s oil and gas passing through this route. Even the threat of disruption has been enough to push prices higher and reintroduce inflation concerns across major economies. This matters because it feeds directly into central bank thinking. Higher energy prices increase inflation risk, while at the same time weighing on growth. That creates a difficult balance and is now being reflected in interest rate expectations globally.
The Dollar: Strong, But Not Untouchable
The US dollar continues to lead. It is benefiting from safe-haven demand, strong liquidity and the fact that the US is less exposed to rising energy prices than many of its peers. That combination has kept the dollar well supported. That said, the move is no longer one-directional. There are early signs that markets are beginning to question how far this can extend, particularly if tensions ease. The dollar remains strong, but it is now more sensitive to changes in the geopolitical backdrop than it was earlier in the move.
Sterling: From Support to Pressure
Sterling is becoming a more delicate story. Earlier this month, the pound found support from rising UK bond yields, as markets adjusted expectations around Bank of England policy. That gave the impression of strength, particularly against the euro. That support is now starting to fade. Yields are still rising, but the reason behind the move has changed. Instead of reflecting stronger growth, they are increasingly pointing toward inflation concerns and pressure on public finances. UK borrowing costs have moved back toward levels last seen during the financial crisis. When that happens, higher yields stop supporting the currency and begin to weigh on it. That shift is now showing up in sterling, particularly against the dollar.
The Euro: Weak, But Not Without Opportunity
The euro remains structurally under pressure. The Eurozone is heavily reliant on imported energy, which leaves it exposed when oil and gas prices rise. That creates a difficult mix of higher inflation and weaker growth. However, there is another side to this. Markets are starting to price a more active response from the European Central Bank. If inflation continues to rise, the ECB may be forced to act more aggressively than previously expected. In a scenario where tensions ease, that could give the euro room to recover.
What This Means for GBP/USD and EUR/USD
Both GBP/USD and EUR/USD are now being driven by the same core factor: the direction of geopolitical risk.
If tensions continue to escalate:
Over the past fortnight, currency markets have shifted from reacting to headlines to pricing something much deeper. What started as a geopolitical story has evolved into a broader macro move, driven by energy prices, inflation expectations and rising bond yields.
That shift remains in place.
However, there is now a new layer to consider.
Markets are no longer moving in one direction. Instead, they are beginning to price two possible paths at the same time. One where tensions continue to escalate, and another where de-escalation begins to take hold.
This is what is creating the sharp moves we are seeing across FX.
The Bigger Picture: Energy Still Drives Everything
At the centre of it all is energy. Disruption around the Strait of Hormuz continues to present a real risk to global supply, with around 20% of the world’s oil and gas passing through this route. Even the threat of disruption has been enough to push prices higher and reintroduce inflation concerns across major economies. This matters because it feeds directly into central bank thinking. Higher energy prices increase inflation risk, while at the same time weighing on growth. That creates a difficult balance and is now being reflected in interest rate expectations globally.
The Dollar: Strong, But Not Untouchable
The US dollar continues to lead. It is benefiting from safe-haven demand, strong liquidity and the fact that the US is less exposed to rising energy prices than many of its peers. That combination has kept the dollar well supported. That said, the move is no longer one-directional. There are early signs that markets are beginning to question how far this can extend, particularly if tensions ease. The dollar remains strong, but it is now more sensitive to changes in the geopolitical backdrop than it was earlier in the move.
Sterling: From Support to Pressure
Sterling is becoming a more delicate story. Earlier this month, the pound found support from rising UK bond yields, as markets adjusted expectations around Bank of England policy. That gave the impression of strength, particularly against the euro. That support is now starting to fade. Yields are still rising, but the reason behind the move has changed. Instead of reflecting stronger growth, they are increasingly pointing toward inflation concerns and pressure on public finances. UK borrowing costs have moved back toward levels last seen during the financial crisis. When that happens, higher yields stop supporting the currency and begin to weigh on it. That shift is now showing up in sterling, particularly against the dollar.
The Euro: Weak, But Not Without Opportunity
The euro remains structurally under pressure. The Eurozone is heavily reliant on imported energy, which leaves it exposed when oil and gas prices rise. That creates a difficult mix of higher inflation and weaker growth. However, there is another side to this. Markets are starting to price a more active response from the European Central Bank. If inflation continues to rise, the ECB may be forced to act more aggressively than previously expected. In a scenario where tensions ease, that could give the euro room to recover.
What This Means for GBP/USD and EUR/USD
Both GBP/USD and EUR/USD are now being driven by the same core factor: the direction of geopolitical risk.
If tensions continue to escalate:
- The dollar is likely to strengthen further
- GBP/USD remains under pressure
- EUR/USD moves lower
If tensions begin to ease:
- Oil prices are likely to fall
- The dollar weakens
- Both GBP/USD and EUR/USD can move higher quickly
This is why markets are moving sharply in both directions. It is no longer about one trend, but about which scenario plays out.
GBP/EUR: Short Windows, Not Long Trends
The pair continues to highlight this environment clearly. We have seen repeated attempts to move above 1.16, but none have held. Each move higher has been short-lived. The underlying drivers explain why. Sterling is supported by relatively higher yields, but that support is now being offset by concerns around the UK’s fiscal position. At the same time, the euro remains structurally weak due to energy exposure. The result is a range-bound market where opportunities appear, but do not last.
For euro buyers, this is key. These spikes higher are not long-term trends. They are brief windows, and they need to be acted on when they appear.
Key Events This Week: Where Data Meets the Narrative
While geopolitics continues to set the direction, this week’s data will help shape how far moves extend. Early in the week, PMI data across the UK, Eurozone and US will give an indication of how economies are coping with rising energy prices. Midweek, UK inflation will be the main focus. This has the potential to move sterling meaningfully, particularly given how sensitive the market is to inflation expectations right now. Later in the week, US growth and labour market data will be watched for signs of resilience, while Eurozone inflation will be key for the euro. In short, geopolitics sets the tone, but the data will either confirm or challenge it.
Lamera Capital Trade Bias
GBP/USD
The near-term bias remains to the downside while geopolitical risks persist and the dollar stays supported. The pair is holding above recent support for now, but this looks increasingly fragile. A break lower would open further downside, while any sign of de-escalation could trigger a sharp recovery.
GBP/EUR
Neutral to slightly bearish in the short term. The failure to meaningfully hold above 1.16 suggests the market is not ready to push sterling higher on a sustained basis. Rallies continue to present opportunities rather than trends.
EUR/USD
Balanced, but unstable. The dollar remains supported for now, although positioning is becoming stretched. Any easing in tensions could lead to a quick move higher in the euro.
Bottom Line
This is no longer a market moving in a straight line. It is a market pricing multiple outcomes at once. The dollar remains supported, but not untouchable. Sterling is beginning to feel the pressure of rising yields driven by fiscal concerns. The euro remains vulnerable, but capable of sharp rebounds. Most importantly, opportunities are appearing more frequently, but they are not lasting. In this environment, timing matters, and the best outcomes tend to come from acting when the window is open, rather than waiting for certainty.