This week, it is quite likely that policymakers in the US and the G7 countries will keep interest rates unchanged while watching for signs of how higher energy prices may feed through to inflation. This cautious approach reflects a delicate balance between the need to contain price pressures and the desire not to strangle economic growth.

The Bank of Japan, the Bank of Canada, and the Federal Reserve are all expected to hold policy rates steady. Similarly, the Bank of England and the European Central Bank are unlikely to move this week. Decisions by these leading financial institutions will materially influence the currency market's outlook.

Central banks are closely monitoring the effects of the escalation in the Middle East because events in the Strait of Hormuz could determine the path of monetary policy in the near term. Geopolitical tension, particularly regarding a key global oil route, has already triggered significant energy market volatility, directly affecting inflation expectations and, consequently, rate decisions. Investors and analysts are attentive to every central bank statement, trying to understand how the evolving geopolitical picture will be incorporated into economic forecasts.

Energy-importing countries face a double hit: a higher cost of living for households and a potential slowdown in industrial production. This will put pressure on governments to find ways to stabilize their economies. However, aggressive policy easing through rate cuts could distort markets and further increase price pressures and budget deficits, which would, in turn, create long-term risks.

Against the backdrop of rising inflation — which, incidentally, has not been as severe as many economists initially feared — capital is likely to flow from riskier assets into traditional safe havens. Continued volatility in energy markets, inflationary pressure, and slowing growth will be the defining trends, requiring measured and timely responses from all market participants. Ultimately, the direction of policy will depend on the resolution of the US–Iran conflict, which is currently in a temporary pause.

Technical picture for EUR/USD

Regarding the current technical picture for EUR/USD, buyers should now think about how to take the 1.1740 level. Only this will allow a test of 1.1762. From there, a move to 1.1791 would be possible, but achieving that without support from major players will be difficult. The most distant target is the high at 1.1822. In case the instrument falls only to around 1.1715, I expect serious action from large buyers. If there is no one there, it would be prudent to wait for a refresh of the low at 1.1695 or to open long positions from 1.1670.

Technical picture for GBP/USD

As for the current technical picture for GBP/USD, pound buyers need to take the nearest resistance at 1.3555. Only this will allow targeting 1.3585, above which a break will be rather difficult. The most distant target is the 1.3915 area. In the event of a decline, bears will try to seize control at 1.3515. If they succeed, a breakout of the range will deal a serious blow to bulls' positions and push GBP/USD toward the low at 1.3480, with the prospect of reaching 1.3445.