Last week, US indices began to rise again. In addition, the S&P 500 and Nasdaq have set all-time highs. Optimism about the conflict in the Middle East grew after US President Donald Trump announced that Israel and Lebanon had reached a 10-day ceasefire agreement. Markets are also waiting for a new round of talks between the US and Iran. This has become a primary growth driver. In the forex market, the dollar mostly remained under pressure. The closure of the Strait of Hormuz has significantly reduced oil flows to the global market. When considering that most oil trades are conducted in dollars, it reduces demand for the US currency. By the end of the week, Brent crude oil prices had fallen to around $89.00 a barrel. During the ceasefire between Israel and Lebanon, Iran has opened the Strait of Hormuz for commercial shipping. and negatively affected oil prices.
Germany's ZEW Indicator of Economic Sentiment
The German economy remains weak. Moreover, high energy prices are driving up inflation, which is putting additional pressure on it. Some large companies have carried out big layoffs. In these circumstances, global analysts expect economic sentiment to decline. The decline in macroeconomic indicators is a worrying sign, especially since higher inflation will not allow the ECB to cut rates to stimulate GDP growth. That's bad news for the euro. EUR/USD could briefly drop to 1.1700.
The US. Retail sales
Despite the tense geopolitical situation, the US economy is currently performing relatively well. Although rising energy prices have certainly led to higher fuel prices at gas stations, this could increase inflationary pressure, which would reduce consumer spending. Global analysts expect US retail sales to slow down. Meanwhile, despite key indicators somewhat cooling, rising inflation will keep the Fed from moving to lower its key interest rate. That means the regulator will continue to pause its monetary policy easing cycle. However, in the current conditions of the conflict in the Middle East, expectations for the Fed's decisions will remain secondary to signs of a US economic slowdown. This is a negative sign for the dollar. In this context, gold (XAU/USD) could rise to 4840.00.
The UK. Inflation rate
The conflict in the Middle East isn't slowing down. The Strait of Hormuz remains closed to most vessels, which is negatively impacting oil and liquefied natural gas supplies in the global market. As a result, energy prices are rising, which are also factored into the prices of other goods and services. In this context, global analysts expect the UK to see a significant increase in inflation. Rising inflation will prevent the Bank of England from cutting its key interest rate to stimulate economic growth. The regulator's continued tight monetary policy is good news for the pound. In this context, GBP/USD could rise to 1.3650.