US indices came under moderate pressure last week, with geopolitics being the main negative factor. The US and Israel launched a military operation against Iran, creating a conflict in the Middle East that threatens to significantly disrupt energy supply chains. That, in turn, is impacting all sectors. Increased geopolitical tensions have restored demand for the dollar, which has helped the US currency strengthen against most currencies. With rising energy prices, the US Federal Reserve will base its monetary policy decisions on the anticipation of higher inflation. This will prevent the regulator from easing its monetary policy further. Brent crude oil prices have jumped to their highest levels since July 2024. They briefly reached $87.63 and tried once again to consolidate above this level. The energy resource's price has been buoyed by the escalation of conflict in the Middle East. The closure of the Strait of Hormuz, through which approximately 20-25% of oil passes, is negatively impacting energy shipments to the global market and limiting supply.
The US. Inflation rate
US inflation is gradually easing. The US Federal Reserve previously indicated that this could happen. Global analysts expect the inflation rate to remain unchanged during the reporting period, staying slightly above the Fed's target. This trend will signal to the US regulator that it can refrain from changing its key interest rate for now. Maintaining a moderately tight monetary policy is favourable for the dollar.
However, it's bad news for dollar-denominated assets such as gold. In this context, XAU/USD could decline to 5000.00.
The UK. GDP growth rate
The UK economy isn't putting up impressive results. GDP growth rates remain fairly low, and inflation is gradually declining. Low economic growth, easing inflation, and geopolitical risks are factors that could push the Bank of England to consider another round of rate cuts. That would not be good for the pound. Against this backdrop, GBP/USD could continue to drop to 1.3240.
The US. GDP growth rate
The US economy has been stable for a while, but a deteriorating labour market situation and a slower decline in inflation are leading to a gradual slowdown in its growth rate. Global analysts expect this indicator to decline in the reporting period versus Q1 2026. This is bad news for the dollar since a decline in key macroeconomic indicators could push the Federal Reserve to ease its monetary policy. In this scenario, USD/JPY could decline towards 156.40.