On April 8, a key European Central Bank official signaled that prolonged energy price shocks stemming from the Middle East could force the ECB to adopt a more restrictive monetary policy stance. Yannis Stournaras, a member of the ECB's Governing Council and Governor of the Bank of Greece, emphasized that if such shocks persist long enough to affect medium-term inflation expectations and wages, the central bank would need to respond. His remarks, made during the Bank of Greece's annual shareholders' meeting, highlight the significant uncertainty surrounding ECB policy in 2026 and underscore the need for flexibility. Stournaras stated that the Governing Council will assess whether rising energy costs translate into broad, persistent inflation risks through expectations, wage adjustments, and pricing mechanisms.
Separately, New York Federal Reserve President John Williams noted on Tuesday that the conflict in the Middle East is expected to elevate overall inflation this year, while reaffirming that current monetary policy is appropriately positioned. Williams indicated in an interview that the impact of the war would directly affect headline inflation, given the significant weight of energy prices. He projected that headline inflation would rise around mid-year, reaching approximately 2.75% for the full year. In the short term, Williams suggested inflation could exceed 3% as the economic effects of military actions involving the U.S. and Israel against Iran permeate the system—a scenario already anticipated by markets. He added that he is closely monitoring core inflation, which may also see a moderate increase due to energy price pressures.
Key economic data releases scheduled for today include Eurozone February retail sales, German industrial orders for February, the UK Halifax House Price Index for March, the French trade balance for February, and Eurozone retail sales figures.
The US dollar index edged lower yesterday, closing slightly down as it hovered near 98.90. The decline was attributed partly to ongoing profit-taking and weaker-than-expected US durable goods orders data. Additionally, an easing of geopolitical tensions reduced safe-haven demand for the dollar, further pressuring the index. Resistance is seen near 99.50, with support around 98.50.
The euro/USD pair advanced modestly, trading around 1.1680. The gain was supported by short covering, technical buying near the 1.1500 level, and broad-based dollar weakness. Comments from ECB officials hinting at potential rate hikes also provided underlying support. Resistance is anticipated near 1.1750, while support lies near 1.1600.
The British pound/USD pair also rose, trading near 1.3410. The move higher was driven by short covering, technical support near 1.3200, and a softer US dollar amid receding risk aversion and disappointing US economic data. Poor UK economic data released during the session had limited impact. Resistance is viewed around 1.3500, with support near 1.3300.