Amid the war in the Middle East, the Strait of Hormuz blockade, and the subsequent energy crisis, "classic" fundamental factors have moved to the background. The tone of trading is set by "frontline reports," rather than macroeconomic data, which has been overshadowed by geopolitics.
However, the upcoming week will differ from the previous two as we will learn the positions of key central banks for the EUR/USD pair—namely, the Fed and the ECB.
On Wednesday, March 18, the U.S. Federal Reserve will conclude its latest meeting. According to preliminary forecasts, the central bank will maintain all monetary policy parameters unchanged. The probability of this scenario is 98%, according to CME FedWatch data. This means that a pause in March is already fully priced in. Therefore, market attention will focus not on the formal outcomes of the meeting but on the tone of the accompanying statement, the dot plot forecasts, and Jerome Powell's rhetoric.
Since the March meeting is quarterly, the Fed will update its macroeconomic forecasts and the "dot plot" (the forecasts of Fed members on the likely path of interest rates). Many analysts believe that the median forecast will shift toward 3.25-3.5%. This would imply that the central bank is leaning towards one or (at most) two rounds of rate cuts by the end of the current year. Such an outcome would be interpreted by the market very unambiguously—in favor of the U.S. currency, as the market previously expected 2-3 cuts in 2026.
As of now, markets are pricing in a 30% probability of a rate cut in June. If the dot plot forecast suggests only one round of cuts by the end of the year, this probability could drop to zero. In that case, market expectations would shift to September or even December.
Inflation forecasts may be revised upward (to 2.2%-2.4%), and GDP growth forecasts could be adjusted to 1.8%.
Fed Chair Jerome Powell will likely attempt to strike a balance in his rhetoric, but it will be difficult for him to avoid a "hawkish tilt." Most likely, he will reiterate his view that the central bank "needs more evidence of sustained inflation decline," given the acceleration of the core PCE index and the stagnation of the CPI (both overall and core). Powell will also likely emphasize the increased geopolitical instability, rising energy prices, and uncertainty regarding U.S. trade tariffs.
All these hawkish signals will be interpreted in favor of the U.S. currency.
The March meeting of the European Central Bank will take place on Thursday, March 19. The formal outcomes of this meeting are also predetermined—it is certain that the central bank will maintain all monetary policy parameters unchanged.
The main intrigue of the March meeting lies in assessing the current situation. The ECB must balance between fragile economic growth and external shocks that could simultaneously drive up inflation and slow GDP growth.
Like the Fed, the ECB will update its macroeconomic forecasts at the March meeting. Recall that in February, the overall CPI in the Eurozone retreated from January's lows (1.7%) and slightly accelerated (to 1.9%) due to rising service prices. In the updated forecasts, the regulator is likely to warn that inflation will continue to show upward momentum amid rising energy prices. A downward revision of economic growth forecasts is also expected—again, due to the energy crisis, weak exports, and uncertainty regarding U.S. trade tariffs.
Nevertheless, despite the ongoing geopolitical events, the ECB is likely to adopt a "neutral" rather than a hawkish stance. While acknowledging inflationary risks, Christine Lagarde will likely say the bank will act cautiously and not react to short-term spikes in oil prices. This means that decisions will be made "from meeting to meeting" based on incoming data.
Such a scenario does not favor the euro. The ECB will only provide support to the European currency if it allows for an increase in interest rates in the foreseeable future (in the summer); however, this scenario is unlikely.
Although macroeconomic reports are currently overshadowed by geopolitical events, some releases still have the potential to influence the EUR/USD pair.
On Tuesday, the ZEW indices will be published. As is well-known, these are among the most influential leading indicators for the German and Eurozone economies. Unlike the IFO index (which surveys business executives), the ZEW reflects the expectations of analysts—specifically, the financial community.
According to preliminary forecasts, the business climate index for Germany is expected to sharply decline in March to 39.5, down from the previous value of 58.3. The current situation index is also expected to decline, from -65.9 to -80. The broader European business sentiment index from the ZEW institute may also disappoint, falling from 39.4 to 24.3.
In other words, the euro may face pressure even if the report is released at the forecast level. If the release falls into the negative zone, EUR/USD sellers will have additional arguments to further pursue the bearish trend.
The following day—on Wednesday—one of the key inflation indicators, the Producer Price Index (PPI), will be published in the U.S. In January, the overall PPI slightly slowed to 2.9% year-on-year; however, in February, experts expect it to accelerate to 3.1%. The core index is also expected to rise to 3.8% year-on-year (the highest value since January 2025) after a rapid increase in the previous month.
Such a result would provide additional support for the U.S. dollar.
Thus, the EUR/USD pair retains the potential for further decline, even without considering geopolitical factors. The technical picture supports this as well. On all higher timeframes (except for the monthly), the pair is at the lower line of the Bollinger Bands indicator. On the four-hour and daily charts, the Ichimoku indicator has formed a bearish "Parade of Lines" signal, indicating a priority for short positions. Corrective pullbacks should be used as opportunities to enter sales, targeting the levels of 1.1410 and 1.1350.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
InstaSpot analytical reviews will make you fully aware of market trends! Being an InstaSpot client, you are provided with a large number of free services for efficient trading.
