Hormuz, Hawks and Holds: BOJ's Three Dissenters Set the Tone

The Strait of Hormuz stays shut and oil holds at $109 - the backdrop to a week of central banks decisions. The BOJ opened with a 6-3 split that signals more than a hold. The BoE risks a hawkish surprise Thursday. The Fed begins its handover to Warsh. Sterling leans on inflation, the euro steadies, the yen stirs on hawkish signals as the dollar awaits the FOMC decision tomorrow.

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GBP: Sterling Hawks Watch Ahead of Thursday's MPC

GBPUSD 1.3528 | EURGBP 0.8657 | GBPJPY 215.21

Cable trades near 1.3528 in the early Asian session, softer as traders sit on the sidelines ahead of two back-to-back central bank decisions; the Fed on Wednesday, the Bank of England (BoE) on Thursday. The pair has had little reason to move with conviction, and right now, hesitation is the trade.

Key Technical levels for the GBP/USD pair: Resistance sits at 1.3600 and Support sits at 1.3450

The BoE is widely expected to hold the Bank Rate at 3.75% on Thursday, but markets price in the possibility that the vote may not be a clean 9-0 hold. One or more Monetary Policy Committee (MPC) members could vote for an outright hike, a hawkish dissent that would run ahead of current pricing. A recent poll of economists suggests markets expect an unchanged decision on bank rates, but the outlook for the future seems to be shifting fast.

The data behind that hawkish risk is hard to ignore. UK CPI hit 3.3% YoY in March, up from 3.0% in February, driven by a 4.7% surge in transport costs (the fastest since December 2022), largely reflecting the Iran war’s grip on fuel prices. The BoE’s own preliminary estimates from March put CPI comfortably between 3% and 3.5% through the second and third quarters of 2026. This data forced a swift repricing in the swap markets; where participants once saw a single hike, they now anticipate at least two, with a third becoming a distinct possibility.

Political friction adds a layer of domestic uncertainty. Prime Minister Keir Starmer faces a parliamentary vote today on whether to refer him to the privileges' committee over his appointment of Peter Mandelson as US Ambassador. It is unlikely to move the pound materially. However, it narrows the government’s bandwidth at a moment when fiscal credibility and central bank independence are already under the microscope.

The EUR/GBP pair has held a mild downside bias since the start of the month. The BoE’s inflation data tilts more hawkishly than the ECB’s, and the UK’s stronger growth momentum at the start of the year gave sterling a relative edge. That divergence has been the engine behind GBP outperformance against the euro in recent weeks.

Key Technical levels for the EUR/GBP pair: Resistance sits at 0.8720 and Support sits at 0.8600

The GBP/JPY pair retreated further from its multi-year high after the Bank of Japan’s split 6-3 vote this morning. Three dissenting members: Nakagawa, Takata, and Tamura, all proposed raising the policy rate to 1.0%, a minority large enough to sharpen expectations for a June hike. The BOJ cut its FY2026 growth forecast to 0.5% from 1% and raised its core inflation outlook to 2.8% from 1.9%, with the Iran war and elevated crude oil identified as the primary drivers. The yen firmed modestly to 159.02 per dollar on the news, but the currency stays perilously close to 160, the level that has previously prompted Tokyo to intervene. Japan’s Finance Minister Satsuki Katayama said this morning that authorities are standing by round the clock for decisive action on excessive volatility.

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EUR: Holding Ground While Pressure Builds

EURUSD 1.1712 | EURJPY 186.25

EUR/USD trades at 1.1712, holding above 1.1700 but with the dollar side of the pair dictating direction this week. The dollar bulls appear hesitant and unwilling to commit ahead of Wednesday's Fed decision, keeping the euro afloat rather than euro-specific strength.

Key Technical levels for the EUR/USD pair: Resistance sits at 1.1800 and Support sits at 1.1650

The European Central Bank (ECB) is expected to hold rates at 2.00% for a seventh straight meeting on Thursday. Like every other central bank convening this week, the fog of the Iran war gives policymakers room to breathe and keep policy rates unchanged. The key question is not what the ECB does on Thursday but what it signals about July, and specifically whether the hawks on the governing council are gaining enough ground to shift the guidance forward.

The EUR/JPY pair hit its strongest level against the yen in a fortnight this morning, before the BOJ's decision pulled it lower. The 6-3 vote split was striking in its scale, signalling a hawkish minority growing more vocal despite the backdrop of war-driven uncertainty. This signals that a June rate hike is now more credible, and with that, the time of the cheap yen may be coming to an end.

The EUR/GBP pair's downside bias this month reflects a straightforward divergence story: UK inflation data tilts the BoE more hawkishly than the ECB. Until the ECB gives a clearer signal that its own tightening cycle has further to run, sterling should continue to hold the relative edge.

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USD: The Dollar Waits for Its Last Powell Press Conference

DXY 98.52 | USDJPY 159.08

The dollar index (DXY) holds at 98.52. The safe-haven bid that lifted it in March, when the Middle East conflict first erupted, has nearly evaporated. US-Iran talks stalled after President Trump said he was unhappy with Tehran's latest proposal for not addressing Iran's nuclear programme, which has steadied the dollar but not rekindled the fear premium it briefly commanded.

Wednesday's FOMC decision is widely expected to be a hold, and in isolation it almost certainly would be a non-event, but Wednesday is not just another FOMC meeting. It is likely to be Jerome Powell's final press conference as Fed chair. The Senate Banking Committee votes at 10am EDT (1400 GMT) on Wednesday to advance Kevin Warsh's nomination to the full Senate, a timing that increases the odds of his confirmation before Powell's term expires on 15 May, positioning him to chair the June FOMC meeting.

Senator Thom Tillis lifted his blockade of Warsh's nomination on Sunday after the Department of Justice (DOJ) concluded its criminal investigation into Powell. With Tillis's support, Republicans hold a 13-11 majority on the Banking Committee, and Warsh's path to confirmation is now clear.

Warsh has signalled he wants what he described at his confirmation hearing as "regime change" at the Fed. He is expected to push for rate cuts and has indicated he would change how the central bank measures inflation and communicates. Analysts warn that the market may be getting ahead of itself on the cutting cycle implied by a Warsh Fed. With Brent Crude at $109 a barrel and CPI improving only incrementally, the FOMC's other members are unlikely to be swift followers. The US 2-year yield moved sharply before the weekend on the Warsh narrative, but that move may be outpacing the fundamentals.

The USD/JPY pair holds at 159.08. The yen has been anchored around 159 since mid-March. The BOJ's hawkish hold this morning provided a modest lift, but the carry differential against the dollar still keeps yen bulls cautious. Investors now focus on Governor Kazuo Ueda's press conference this afternoon for any shift in tone on the pace of normalisation.

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On the Periphery: Aussie, Kiwi

AUDUSD 0.7179 | NZDUSD 0.5897

The Aussie dollar trades near $0.7179, largely flat. Australian Q1 CPI data is due this week and is expected to show strong YoY growth of 4.1%, which would keep the RBA firmly in a holding pattern. The Fed's Wednesday decision lands first and could be a dominant factor in the near-term direction of commodity currencies.

The Kiwi dollar softens near $0.5897. Both antipodean currencies are being driven by the same global forces: the energy shock, dollar direction, and the unsettled risk appetite posed by a prolonged Middle East conflict.

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Current Rate Table:

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Market Lookahead

Tue, 28 April

• US Consumer Confidence (Apr)
• ECB President Lagarde Speech

Wed, 29 April

• Australia CPI (Mar)
• Eurozone Consumer Confidence (Apr)
• BoC Interest Rate Decision
• Fed Interest Rate Decision

Thu, 30 April

• Eurozone HICP and Core HICP (Apr) and Q1 GDP
• BoE Bank Rate decision
• ECB Rate on deposit facility
• US CPI and Q1 GDP

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