The PCE price index will be released today, with markets expecting the core reading to rise 0.4%. Despite the recent softness in Consumer Price Index (CPI) data, economists anticipate that the Personal Consumption Expenditures (PCE) price index the Federal Reserve’s preferred inflation gauge will show stronger price pressures. While core CPI usually runs above PCE, the faster growth in PCE has created an unusual gap between the two measures, with core PCE expected to reach around 3.1%. Meanwhile, rising oil prices amid the Iran war are increasing the risk of higher inflation in the coming months, potentially complicating the Federal Reserve’s path toward interest-rate cuts as higher energy, transportation, and food costs add fresh inflationary pressures.

The Australian dollar has emerged as an unexpected haven amid the Iran crisis, rising to 71.68 US cents, its highest level since June 2022 and a 35-year high against the yen, supported by higher oil and gas prices and expectations of an RBA rate hike. Investors expect rates to rise on March 17, and Australia's position as a major energy exporter supports the currency. Markets forecast a roughly 33% chance of the Australian dollar reaching 75 US cents within three months, and the currency remains relatively resilient to global volatility.

The UK economy nearly stalled at the start of 2026, with GDP showing little meaningful growth in January as the services sector the main engine of the economy weakened. Manufacturing and construction posted only modest gains of 0.1% and 0.2%. This raises doubts about the Bank of England’s forecast of 0.3% growth for the first quarter. Meanwhile, the Iran war and the surge in energy prices, with oil rising above $100, increase the risk of a new inflation shock and could delay interest-rate cuts. A weak labor market, higher mortgage rates, and rising fuel prices are also adding pressure on households and the broader economy

According to a Bloomberg survey, many economists expect the European Central Bank to keep interest rates unchanged at least until 2027, while markets continue to price in the possibility of rate hikes this year. The disagreement largely stems from uncertainty about the duration of the Iran war and its impact on energy prices and inflation. Policymakers led by Christine Lagarde remain alert to the risk of another inflation shock following the surge in energy costs but prefer to wait and assess the real economic impact of the conflict and potential disruptions in the Strait of Hormuz. Most economists still believe that if inflation intensifies again, the ECB’s next move would more likely be a rate hike rather than a cut.