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Market Insight 18-03-2026

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  • Market Insight 18-03-2026

Market Update: Wednesday, 18 March 2026

Market focus is shifting midweek from the geopolitical crisis to central bank policy, with a positive shift in mood supported by a retreat in crude oil prices. Investors are now awaiting a heavy schedule of monetary policy decisions, most notably from the Federal Reserve and the Bank of Canada.

Geopolitical Crisis and Energy Markets

While military activity remains intense, news of a potential supply resumption from Iraq has provided some relief to energy markets.

  • Oil Prices: West Texas Intermediate (WTI) is trading lower at around $93, down approximately 2.5% on the day. This follows reports that Baghdad and the Kurdistan Regional Government (KRG) have reached an agreement to resume crude exports from Iraq’s Kirkuk fields to Turkey’s Ceyhan port.
  • Military Escalation: Despite the dip in oil prices, the conflict remains volatile. Israel confirmed the killing of Ali Larijani, a senior Iranian security official, while the US military launched “deep penetrator” bombs targeting missile sites along the Strait of Hormuz.
  • Regional Strikes: Israel has initiated a new wave of strikes on Beirut, ordering evacuations as it continues its campaign against Iranian-backed assets. The US also conducted strikes on Iranian coastal sites citing threats to global shipping from anti-ship missiles.
  • Economic Risk: Despite the midweek dip, surging energy prices linked to the conflict continue to pose a long-term risk to the global economy by fuelling inflation and increasing the likelihood of interest rates remaining higher for longer.

Currency Market Overview

The US Dollar (USD) Index is holding steady above 99.50, having reversed its direction late on Tuesday as the improving risk mood pressured the Greenback.

  • GBP/EUR: The cross remains in a consolidative phase near 1.1580. Traders are balancing the UK’s sticky inflation profile against the Eurozone’s industrial weakness, with both currencies sensitive to the outcome of today’s Fed meeting.
  • GBP/USD: Sterling is trading with a modest bid near 1.3360. The pair is benefiting from the slight softening of the US Dollar, though gains are capped by ongoing concerns regarding the impact of high energy costs on UK growth.
  • EUR/USD: The pair has edged higher toward 1.1540. While the Euro is seeing some relief from lower oil prices, gains remain limited ahead of the Fed’s interest rate decision and revised economic projections.
  • AUD/USD: The Australian Dollar is trading near 0.7110. The currency is finding support from the improved market sentiment and the steadying of global equity markets midweek.
  • USD/CAD: The pair is trading around 1.3690. Volatility is expected for the Loonie today as the Bank of Canada (BoC) prepares to announce its latest interest rate decision amid the fluctuating oil market.
  • USD/CHF: The pair is under slight pressure near 0.7860. The Swiss Franc has gained on safe-haven demand, though its upside remains limited by the Swiss National Bank’s (SNB) stated willingness to intervene to prevent excessive currency strength.

Central Banks and Economic Outlook

  • Bank of England (BoE): Policymakers remain in focus as markets continue to price out near-term rate cuts. The persistent threat of energy-driven inflation is keeping the BoE on a cautious path.
  • European Central Bank (ECB): The central bank continues to navigate a difficult period of economic uncertainty. While inflation remains a concern, the primary focus for Euro-watchers is whether the growth outlook will deteriorate further.
  • Bank of Canada (BoC): The BoC is set to announce its policy decision later today. Analysts are watching closely to see how the bank balances domestic economic data against the recent extreme volatility in crude oil.
  • US Federal Reserve: The Fed is widely expected to keep its benchmark interest rate unchanged at 3.50%–3.75% today. This would mark a second consecutive pause. Traders are awaiting Chair Jerome Powell’s remarks and the Summary of Economic Projections (SEP) for clues on the future rate path.

Final Summary

The market mood has seen a welcome, albeit cautious, improvement as the resumption of Iraqi oil exports offers a reprieve from the relentless surge in energy prices. This shift has allowed risk-sensitive currencies to claw back some ground against the US Dollar. However, the underlying geopolitical tension remains acute, with high-profile military strikes keeping safe-haven demand present in the background. Today’s triple-header of US PPI data, the Bank of Canada decision, and the Federal Reserve meeting will provide the true test for market sentiment. Investors will be looking to see if central banks maintain their hawkish stance in the face of war-driven inflation, or if the focus starts to shift toward protecting global growth.