Market Highlight 18.03.2026

European Central Bank (ECB) and the Bank of England (BoE) are expected to keep policy rates unchanged at meetings later this week as the conflict in Iran upends previously held forecasts. The war in the Middle East has entered its third week and is likely to leave the euro area with weaker growth and higher inflation this year than economists had projected. The magnitude will depend on how long the conflict persists and how long the Strait of Hormuz remains effectively closed to most maritime traffic. ECB policymakers have estimated that oil at USD 130 per barrel, alongside higher natural gas prices, would shave almost 0,25% off euro-area growth while pushing inflation up by close to 1%. Even so, the ECB may seek to reassure European households that it will not allow inflation to spiral out of control, with the 2022 surge in energy and food prices following the outbreak of the war in Ukraine still fresh in public memory. In the U.K, the BoE had previously signalled it could cut rates at its March meeting from 3,75% to 3,5% after the British economy showed signs of stalling in January. However, the recent sharp swings in global energy markets may constrain that option.

The USD marked a second consecutive daily decline (-0,26%) as markets position for policy signals from major Central Banks this week. Markets are currently pricing in only one FED rate cut toward the end of this year, while the ECB is seen as potentially raising rates again by around two moves in the months ahead.
The USD/VND interbank exchange rate continued to trade steadily around the 26.300 area yesterday. The effective ceiling rate was kept unchanged for a second consecutive day at 26.321.

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