Five central banks. One week. Stagflation leads.

Five major central banks meet between Tuesday and Thursday. That alone would command attention. But the macro backdrop makes this week genuinely complex. Stagflation is no longer a risk scenario across the US, UK and eurozone - it is the working assumption. The dollar index broke above 100 for the first time since May. Markets have moved from pricing three Fed cuts in 2026 to one. The FOMC dot plot on Wednesday determines whether that repricing continues or corrects.

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US Dollar

DXY 100.35 ▲ +0.55 vs. Thursday

S1 99.40 | S2 98.90 | R1 100.50 | R2 101.00

The DXY is trading near 100.35 in early European hours, its highest level since May 2025.

Two forces could be driving it: safe-haven demand from the Iran conflict, now in its third week, and a rapid collapse in Fed rate cut expectations. Markets price just one cut in 2026, pushed out to December. Before the conflict, three were priced.

Friday's revised Q4 2025 GDP came in at 0.7% annualised, nearly less than half the advance estimate. University of Michigan inflation expectations held at 3.4%. Weakening growth and sticky inflation is the combination that could act as constraints for Fed from any dovish pivot.

Wednesday's FOMC is priced as a hold. The dot plot is what matters. If the median for 2026 drops to one cut or fewer, the dollar's position above 100 looks durable.

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EUR

EUR/USD 1.1425 ▼ -0.0080 vs. Thursday

S1 1.1400 | S2 1.1350 | R1 1.1500 | R2 1.1550

EURUSD opened Monday near 1.1423, extending last week's selloff to fresh 2026 lows.

January eurozone industrial production fell 1.5% month-on-month against a consensus of +0.6%. Germany's contribution was a 1.3% decline. That print ended any remaining optimism about a manufacturing recovery.

The ECB's policy outlook has inverted. Six weeks ago, rate cut expectations dominated. Markets now price a 60% probability of a June hike. European TTF gas is up approximately 61% since Iran attacks began.

Thursday's ECB meeting is a hold at 2.00%. Lagarde's tone on inflation persistence is the actual event. Businesses with EUR payables should watch 1.1400 closely. A clean break opens 1.1350.

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Sterling

GBP/USD 1.3220 ▼ -0.0116 vs. Thursday

S1 1.3125 | S2 1.3000 | R1 1.3250 | R2 1.3400

Sterling gapped lower on Monday's open to 1.3220. It has now fallen roughly 250 pips from pre-conflict levels.

The UK's macro position is uncomfortable. GDP growth was flat in January. CPI is running at 3.0%, well above target. Gilt yields have surged approximately 50 basis points since the conflict began.

The shift in BoE expectations has been dramatic. In February, 65% of economists expected a March cut. Today, 86% expect a hold. The MPC's February vote was 5-4. Any shift in that balance on Thursday - or a change in forward guidance language - will move sterling.

UK businesses with dollar-denominated costs face a tighter margin environment than they did a month ago.

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Japanese Yen

USD/JPY 159.65 ▲ +0.30 vs. Thursday

S1 158.90 | S2 158.50 | R1 160.00 | R2 161.95

USD/JPY traded at 159.69 on Friday and opened Monday near 159.65. The 160 level is in range.

Japan's Finance Minister has moved from expressing concern to stating readiness to take "all necessary steps in currency markets." Reports that the New York Fed has been checking dealer positioning in USD/JPY are significant. That is preparation, not routine monitoring.

Japan relies on the Middle East for approximately 95% of its oil imports. The yen's structural vulnerability is acute.

The risk near 160 is asymmetric. A sudden reversal of 200 pips or more is a realistic near-term scenario if authorities act. Businesses with active JPY exposure should be aware of this.

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Australian Dollar

AUD/USD 0.6983 ▼ -0.0083 vs. Thursday

S1 0.6930 | S2 0.6900 | R1 0.7030 | R2 0.7090

The Australian dollar pulled back sharply from a 21-month high of 0.7168, hit on 11 March, to below 0.70 at Monday's open. Global risk aversion has overridden the energy-exporter narrative, at least for now.

The RBA meets Tuesday at 2:30pm AEDT. All four major Australian banks expect a 25bp hike to 4.10%. Market pricing sits near 75% probability.

The hike is largely in the price. Speculative long exposure in AUD futures is at its most stretched since 2017. A hike without a clear signal of further tightening could see AUD sell off on the day.

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WHAT TO WATCH

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FX PLAYBOOK

• USD payables carry meaningful event risk in both directions this week. The FOMC dot plot on Wednesday is the single biggest near-term driver. Reviewing forward cover on USD exposure before Wednesday afternoon - rather than after - may be worth considering.

• EURUSD near 1.1425 is at 2026 lows. A corrective bounce toward 1.1500 is plausible if Thursday's ECB tone surprises dovish, but the downtrend remains intact. Businesses with upcoming EUR payables may find the current zone worth a closer look ahead of the meeting.

• Sterling at 1.3220 appears fragile ahead of Thursday's BoE. The 1.3125 support level is the next meaningful floor. Businesses with GBP receivables and USD costs may wish to consider whether the current spot represents a useful window before the MPC decision.

• USD/JPY near 160 carries asymmetric intervention risk. The conditions for coordinated US-Japan action are aligning. Businesses with active JPY exposure should treat a sudden, sharp yen appreciation as a realistic near-term scenario - not a tail risk.

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KEY LEVELS MATRIX

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