Investors and forex traders remain focused on recent comments from Federal Reserve Chair Jerome Powell, who said during a speech at Harvard University that inflation expectations in the country remain stable despite rising energy prices. Therefore, the regulator will not respond by adjusting borrowing costs, which, in his view, affect the economy only with a lag. As a result, tightening monetary conditions now would not influence the inflationary consequences of the US-Iran confrontation.

However, analysts believe Powell’s optimism ahead of his resignation in May may be excessive. Consumer prices had already remained above the 2.0% target before the military conflict began (annual inflation reached 2.4% in February, while core inflation stood at 2.5%), and now show signs of rapid acceleration. Over the past month, gasoline prices in the US have risen by 30.0% to $4.0 per gallon, while diesel fuel increased by 40.0% to $5.0 per gallon, levels not seen since the beginning of the Russia-Ukraine conflict in 2022. At the same time, Chinese manufacturers exporting goods to the United States have openly stated that rising energy costs are forcing them to pass expenses on to consumers, in some cases raising prices by up to 20.0%, reinforcing expectations of tighter policy by year-end. New York Federal Reserve President John Williams also noted that the current policy stance remains appropriate for balancing risks while pursuing maximum employment and price stability.

Eurozone

The euro is losing ground against the pound and shows mixed performance against the US dollar and the yen.

February retail sales data in Germany showed a 0.6% monthly decline compared to expectations of a 0.3% increase, while annual growth reached 0.7%, below forecasts of 1.0%. Overall, the national industrial sector remains under pressure from US trade tariffs and rising energy prices, increasing the likelihood of a recession.

According to preliminary March data, annual consumer inflation in the eurozone rose from 1.9% to 2.5%, slightly below expectations of 2.6%. On a monthly basis, inflation increased from 0.6% to 1.2%, while core inflation declined from 2.4% to 2.3% and stabilized around 0.8%. Bank of Greece Governor Yannis Stournaras also warned that if inflation accelerates further, the European Central Bank may be forced to take decisive action to prevent inflation expectations from becoming entrenched.

United Kingdom

The pound is moderately strengthening against major peers — the euro, yen, and US dollar.

UK fourth-quarter GDP data met market expectations, showing growth of 0.1% quarter-over-quarter and 1.0% year-over-year, slightly below the previous 1.2% reading.

However, analysts note that economic growth remained relatively weak at the end of last year, even before the negative effects of the Middle East crisis emerged. The situation may worsen further, potentially reducing the need for a hawkish stance from the Bank of England. Market participants remain divided over future policy moves, with some expecting two or three rate changes, while most economists anticipate a wait-and-see approach.

Japan

The yen is strengthening against the US dollar but weakening against the pound and showing mixed performance against the euro.

Tokyo inflation data for March showed annual CPI declining from 1.5% to 1.4%, while core inflation fell from 1.8% to 1.7%, below the Bank of Japan’s 2.0% target and the lowest level in nearly two years, largely due to government fuel subsidies.

However, inflationary pressures may return amid rising energy prices caused by the Middle East conflict, potentially prompting tighter monetary policy in the medium term. February retail sales fell by 0.2% versus expectations of 0.9% growth, while industrial production declined by 2.1%. Japan’s Finance Minister Satsuki Katayama also warned about increased speculative activity in currency and oil markets and confirmed the government’s readiness to respond, hinting at possible currency intervention.

Australia

The Australian dollar is moderately strengthening against the euro, yen, and US dollar while showing mixed dynamics against the pound.

Investors are focused on the minutes of the latest Reserve Bank of Australia meeting, which highlighted uncertainty over the future policy path due to geopolitical risks from the Middle East conflict.

The continuation of the conflict could significantly impact inflation and economic activity, requiring policymakers to carefully assess future decisions while maintaining price stability and supporting economic growth. On March 17, the RBA raised interest rates by 25 basis points for the second consecutive time, bringing them to a ten-year high of 4.10%.

Oil

Oil prices are attempting moderate declines as markets remain uncertain amid conflicting signals from Washington and Tehran.

According to The Wall Street Journal, US President Donald Trump discussed the possibility of ending the military operation in Iran, as forcing Tehran to unblock the Strait of Hormuz could escalate and prolong the conflict.

However, he previously warned about destroying Iran’s energy infrastructure if tanker traffic is not restored. Analysts note that any escalation could cause significant damage to regional infrastructure and accelerate the rise in oil prices.

At 23:30 (GMT+2), traders will focus on inventory data from the American Petroleum Institute (API), which is expected to show a decline of 1.300 million barrels.