Global FX Market Overview, May 4–9 – USD caught between Hormuz risk and monetary policy divergence

📌 Over the past week, the FX market was driven more by geopolitics than by traditional macro data. Tensions around the Strait of Hormuz pushed WTI oil briefly toward $102.5 per barrel before prices pulled back sharply as de-escalation signals emerged, causing capital flows to swing quickly between risk-off and risk-on.
💡 DXY moved narrowly around the 98 area, showing that the USD still retained its safe-haven role during stress periods but lacked enough strength to form a clear uptrend. Pressure came from expectations that the Fed would remain more cautious than the ECB, BoE, and RBA, while weaker-than-expected US labor data only played a secondary role.
🔎 EUR/USD climbed toward 1.174–1.175, GBP/USD held around 1.353–1.360, while AUD and NZD stood out as risk appetite returned and the RBA raised rates to 4.35%. CAD was also relatively supported by still-elevated oil prices, helping USDCAD remain more stable than many other major pairs.
⚠️ USD/JPY was the most volatile pair, briefly approaching 160 before falling back to the 154–155 area after BoJ intervention, then recovering toward 156–157. This pair is now reflecting safe-haven demand, carry trade flows, and intervention risk at the same time, so the chance of sharp volatility remains high.
⏱️ Emerging-market currencies faced clearer pressure, especially in energy-importing economies such as IDR, KRW, and INR. When oil stays high, import costs and inflation pressure make EM FX vulnerable during risk-off phases, even though some recovery appeared when markets priced in lower geopolitical tension.
✅ Next week, the key levels to watch are WTI oil around $100–105 and the US 10Y yield near 4.45%. If Hormuz tensions keep easing, the USD may remain soft while EUR, GBP, and AUD stay supported; otherwise, a new escalation headline could quickly bring USD, JPY, and CHF back to the center of defensive flows.
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