Forex Forecast, April 2026
The foreign exchange market, or forex, is the largest and most liquid financial marketplace in the world. According to the Bank for International Settlements, or BIS, about $9.6 trillion worth of currencies changed hands every day as of April 2025. Although most people never trade a currency directly, they certainly feel the effects. For instance, how currencies move against each other affects the price you pay when importing electronics, how much you are charged for a holiday abroad, and even what a business pays for raw materials from overseas.
So far in 2026, this market has been moving more than usual. For example, the CBOE Volatility Index, or VIX, an index that gauges expected volatility in the market, has touched the under 15-point level just once this year. In fact, as of this writing, the index was up 49.63% year to date, at 22.38 points. Analysts call the 15-point mark a “high-floor” volatility environment.
Source: https://fred.stlouisfed.org/
And after the Bloomberg Dollar Spot Index shed around 8% of its value in 2025, the hotter volatility we have seen so far in 2026 means the market hasn’t seen the bigger declines yet. But what is likely to happen, in say, a month’s time from today? This article tries to paint a picture of what April 2026 might look like in the forex market. It will argue that three forces will drive currency markets, and will also highlight some of the key events that could move the needle significantly.
The Forces That Will Drive Forex Markets in April 2026
1. Central Banks and Interest Rates
For a long time, interest rates and central bank actions have been the engine of currency moves. This won’t change any time soon.
An interest rate is the cost of borrowing money. You can also think of it as the reward for saving the money, and it is always expressed as a percentage of the principal amount. Interest rates apply in two directions: first, borrowers pay interest as a fee for using someone else’s money, and second, savers earn interest as a return for depositing money in a financial institution, mostly banks.
Central banks, such as the US Federal Reserve, or the Fed, control the level of interest rates in the economy. They do this by setting benchmark rates. When they determine that inflation is high, the central banks raise rates to discourage borrowing and slow spending. And when the economy is sluggish, they lower rates to stimulate growth.
One can say that interest rates are the main engine of currency movements. This is because when a central bank raises the benchmark rate, its currency often strengthens because investors move money there to capture better returns. Contrarily, when rates fall, the currency often weakens as capital seeks higher yields elsewhere.
In the US, the current benchmark rate ranges from 3.50% to 3.75%, and the effective federal funds rate stood at 3.64% as of early February this year. And according to analysts at MUFG, the Fed is expected to cut rates up to three times during 2026. If this happens, the US dollar will experience downward pressure over the medium term.
Meanwhile, the Bank of Japan (BOJ) is moving in the opposite direction. On March 2, Reuters quoted BOJ’s Deputy Governor Ryozo Himino saying that the bank “is expected to keep raising interest rates” this year. “Himino said the growing market volatility would not prevent the BOJ from raising rates,” Reuters reported.
The European Central Bank (ECB), which held its main refinancing rate at 2% in February 2026, will next meet on March 19. And if sentiment on Polymarket about ECB rates is anything to go by, analysts do not expect the bank to raise rates anytime soon in 2026. Most analysts anticipate rates to stay flat at 2% through the end of the year.
2. Trade Tariffs
Tariffs create uncertainty that rattles currency markets. If a country such as the US threatens or implements tariffs, this creates friction that oftentimes impacts economic growth. The result is a weaker dollar.
US president Donald Trump’s tariff agenda has been one of the most turbulent policy stories of his second term. It culminated in a massive defeat at the Supreme Court last month, though Trump responded swiftly by pivoting to a new 10% blanket tariff on virtually all imports.
As of this writing, on March 5, Treasury Secretary Scott Bessent indicated that a 15% tariff could kick in “sometime this week”. This new rate circumvents the Supreme Court’s strike down and instead invokes Section 122 of the Trade Act of 1974, which allows tariffs of up to 15% for a period of 150 days only.
For ING’s Chris Turner, US economic activity has been soft enough to prevent the dollar from fully benefiting from tariff announcements. This is a counterintuitive result that has perplexed some traders, he noted.
3. Geopolitics
Geopolitical events often push investors toward safe-haven currencies. These are the currencies the market views as capable of maintaining their value in the face of global crises. Great examples are the Japanese yen and Swiss franc, but the US dollar is also a popular choice.
On March 2, the Iranian revolutionary guards blockaded the Strait of Hormuz. The result is that traffic through the waterway is now about 81% lower than last week, and as of this writing, at least five oil tankers have sustained damage, and around 150 vessels are stranded in the region.
This Strait handles close to 20% of the world’s oil and liquefied natural gas daily. So, a prolonged blockade removes that volume from global markets in one stroke. Oil prices have already hit a seven-month high, and CNBC’s energy desk reported that a prolonged closure could push crude into triple digits.
This crisis is now a massive source of volatility in global forex markets. Back in February, JPMorgan published a survey that found that 41% of traders saw geopolitical tensions as the biggest market driver in 2026. The current reality shows that not enough traders were worried.
The US Dollar Is Still King, But Struggling
At writing, the US Dollar Index (DXY) was trading at 99.13, up 1.27% year to date. The greenback appears to have recovered from the late January and February dip due to what some describe as safe-haven demand.
U.S. Dollar Index, Weekly Chart
Source: Sigmanomics.com
However, MUFG Bank’s Lee Hardman believes the dollar’s recent recovery could be short-lived. If the US-Iran conflict lasts weeks rather than months, Hardman noted that the “dollar strength is likely to peak in the near term before reversing from the second quarter onwards.”
According to the analyst, the conflict has boosted oil prices and the dollar due to America’s energy independence and the reduced prospect of further interest-rate cuts by the Fed. Hardman added that provided energy prices ease, the Fed has scope to cut rates in the second half of 2026.
And the greenback’s weakness will boost the euro and the British pound, according to Morgan Stanley. The bank’s analysts forecast the EUR/USD pair to reach 1.23 by spring 2026, and the key driver will be US dollar weakness. Dutch bank ABN AMRO expects the pair to climb to $1.25 by year-end, also citing dollar weakness, as well as German fiscal support.
For the cable, a nickname for the British pound among forex traders, analysts at MUFG forecast a near-term dip to 1.307 by the end of the first quarter before a gradual recovery to 1.367 by year-end. Aura Group noted this week that the GBP/USD pair may test the 1.3200-1.3400 support zone in the near term due to unresolved UK domestic issues.
What to Watch in April
Several scheduled events in April could materially shift currency markets. The table below summarizes the most important ones:
|
Event |
What to Watch |
Potential Impact |
|
BOJ Policy Meeting (April 28) |
Whether the BOJ raises rates by 25 basis points |
A hike would likely strengthen the yen sharply; no hike could trigger a yen selloff |
|
US Federal Reserve Signals |
Fed tone on timing of rate cuts; US jobs and inflation data |
Weaker data accelerates dollar selling; stronger data provides temporary dollar relief |
|
US Tariff Developments |
Any expansion of blanket tariffs by the Trump administration |
Broader tariffs would increase market-wide volatility across all major pairs |
|
Middle East/Iran Conflict |
Whether tensions escalate or show signs of de-escalation |
Escalation boosts yen and Swiss franc; stabilization may ease safe-haven demand |
|
Bank of England Rate Decision |
Whether the BoE delays an expected rate cut to April |
A delay would support GBP; a cut would likely weaken the pound in the near term |
Conclusion
This April will likely see the Bank of Japan exit from ultra-low rates, further policy uncertainty from Trump’s White House, and a deepening crisis in the Middle East. These factors may conspire to keep the US dollar on a weaker trajectory at the benefit of safe-haven currencies.
Although the euro and the pound appear to have the upper hand against the greenback, a prolonged rise in energy prices will weaken them, particularly the euro. But the Japanese yen could become the month’s most watched currency, which will happen because of a potential BOJ rate hike and growing safe-haven demand.
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Neha Gupta
Neha Gupta is a Chartered Financial Analyst with over 18 years of experience in finance and more than 11 years as a financial writer. She’s authored for clients worldwide, including platforms like MarketWatch, TipRanks, InsiderMonkey, and Seeking Alpha. Her work is known for its technical rigor, clear communication, and compliance-awareness—evident in her success enhancing market updates.
