8 min readWeekly recap:
US major indices fell for a third straight week, with the S&P 500 declining 1.6% amid geopolitical tensions and elevated oil prices, which continued to weigh on stocks and bonds. Meanwhile, the USD rose 1.4%, marking the second straight week of gains.
The USD has risen to its highest level since May last year, benefiting from safe-haven flows and its status as a net energy exporter, even as data painted a mixed picture for the US economy.
US data showed that the US core PCE, the Fed’s preferred inflation gauge, rose to 3.1% YoY, up from 3%, and CPI remained unchanged at 2.4% as expected. However, this data is already outdated, given that it doesn’t account for the recent rise in oil prices. US GDP was revised lower to 0.7% from 1.4%.
Headlines surrounding the Middle East conflict resulted in elevated volatility in the oil market, which saw its largest weekly range on record. The price rallied to $120, fell to $77, and ended the week at $100 per barrel. Meanwhile, Gold posted a second straight weekly decline.
Iran conflict
Over the weekend, President Trump rebuffed Iranian offers for a ceasefire, signalling that the US would continue its operation “Epic Fury” offensive until Tehran accepts more stringent terms. As the conflict enters its third week, the US is doubling down on its military pressure even as the Strait of Hormuz remains effectively closed, keeping oil prices at $100 per barrel.
Trump is attempting to create a coalition of allies to reopen the Strait, but so far, there is no agreement. The longer the Strait of Hormuz is closed, the potentially higher the oil price could go. However, any signs of de-escalation could help oil prices recover quickly.
Nvidia GTC (Mon – Thu)
NVIDIA GTC 2026 is scheduled for 16-19 March in San Jose, CA. The event will kick off with a keynote from NVIDIA co-founder and CEO Jensen Huang ON Monday. Analysts anticipate that the event will delve deeper into Nvidia’s business strategies, chip and software roadmaps, and preview upcoming products and services. This occasion has become Huang’s primary platform for showcasing the company’s innovations.
This year, the event holds extra significance as investors seek reassurance that Nvidia’s strategy of reinvesting profits into AI is yielding results, particularly amid a flurry of recent deals. Market observers will also be attentive to discussions on how geopolitical tensions, including the recent Middle East conflict, might influence energy costs and demand. Huang’s speech can often impact the broader mood towards AI and tech stocks in general, such as the Nasdaq.
RBA rate decision (Tuesday)
The Reserve Bank of Australia meets this week amid rising expectations that it could hike rates by 25 basis points. Financial markets had previously considered May the most likely date for the next rate hikes, but expectations have shifted. Inflation was already rising ahead of the Middle East war, which is expected to further increase inflationary pressures due to rising oil and energy prices.
The market is pricing in a 70% chance of a rate hike on Tuesday, up from about 30% just a few weeks ago. A rate hike on Monday, hawkish commentary could push AUD/USD higher.
FOMC rate decision (Wednesday)
The Federal Reserve rate decision comes on 18 March, and the central bank is widely expected to leave interest rates unchanged at 3.5% to 3.75%, which is priced in with a 99% probability. However, the market will be more interested in the outlook for rates, which the Fed could signal through updated projections and the dot plot.
Stagflation risks have risen sharply since the FOMC last met in January. Higher inflation, combined with a weaker labour market, is the central worst-case scenario, as it creates tensions between the dual mandate and opposing policy responses. The conflict in Iran keeps the outlook uncertain, with oil prices gyrating as the markets attempt to price in the risks.
Meanwhile, the latest nonfarm payroll report was significantly weaker than expected, falling by 92,000, while unemployment rose to 4.4%. The Fed will most likely highlight additional uncertainty in the outlook due to the Iran conflict, and updated projections will likely shift in a stagflationary direction.
The market is no longer pricing in a rate cut in June, with the next rate cut not expected until December. A hawkish-sounding FOMC could help lift the US dollar higher and pull stocks such as the Dow Jones lower.
BoE rate decision (Thursday)
Just a few weeks ago, the market was fully pricing in a 25 basis-point rate cut; however, since the start of the Middle East crisis and the surge in oil prices, the central bank is expected to leave interest rates unchanged this week at 3.75%, owing to higher inflation expectations. Rising oil prices mean that the previously expected inflation of 2% by April is now looking highly unlikely, with the OBR expecting inflation to stay at 3% this year.
As a result, the BoE may not cut rates until later on in the year, and the timing of which has become very unclear. Should oil and energy prices remain persistently high, the BoE could end up hiking rates. A more cautious-sounding BoE could support GBP and limit the downside in GBP/USD.
BoJ rate decision (Thursday)
The Bank of Japan is expected to leave interest rates unchanged at 0.75%, but it is expected to announce another 25 bps rate hike in the next quarter. Inflation was already proving sticky, and rising inflationary pressures from higher oil prices and a weaker yen could mean the BoJ is more likely to raise rates in the near future.
The Japanese yen has weakened significantly due to concerns about the impact of higher oil prices on the economy. The meeting comes as the BoJ faces pressure from Japanese Prime Minister Sanae Takeichi to keep rates unchanged, but the BoJ may be unable to delay the pace of rate hikes much to avoid further weakening of the yen.
Japanese authorities stand ready to support the currency as the USD/JPY trades close to the 160 threshold for intervention.
ECB rate decision (Thursday)
The ECB is also expected to leave interest rates unchanged on Thursday at 2%, where they’ve been since the last 6 meetings. Markets will look for clues over the central bank’s reaction to rising inflationary pressures and Christine Lagarde’s press conference. Before the Middle East conflict, the ECB was expected to leave rates unchanged this year, but investors are pricing in a rate hike by July.
This creates an interesting scenario in which the Fed is expected to cut this year, while the ECB moves in the opposite direction and hikes. This means that the bar for a rate hike is high. The market will listen closely to clues over the ECB’s outlook.
Recent ECB speakers have suggested that the central bank is ready to stamp out inflation; however, they are also cautious about acting too quickly. EUR/USD has fallen sharply owing to rising energy and oil prices.
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