Oil Shock Sends Currency Markets into Caution Mode

Currency markets have been subdued in cautious trading as investors weigh the impact of rising oil prices and global bond yields. The surge in Brent crude futures above $100 a barrel has put pressure on energy supplies from the Middle East, leading to higher inflation expectations.

The greenback found some relief, leaving the euro and sterling slightly weaker at $1.1633 and 1.3547, respectively. The yen's powerful rally also paused ahead of US PPI and inflation readings.

Market attention is now focused on macros to round out the week, with key data releases from the US expected to influence the Federal Reserve's next policy move. Sally Auld, chief economist at National Australia Bank, noted that the market feels 'put on notice' around these numbers.