The Eurozone is at the center of market attention as investors await the release of preliminary Harmonized Index of Consumer Prices (HICP) data for March, scheduled for 09:00 GMT on Tuesday [2][4]. According to estimates, headline HICP is expected to rise to 2.7% year-on-year, up from 1.9% in February, while core HICP is projected to remain steady at 2.4% year-on-year [2]. This uptick in inflation expectations is attributed to surging oil prices, driven by the ongoing conflict in the Middle East, although oil prices have recently eased as speculation grows that US President Donald Trump could end the Iran conflict, potentially alleviating fears of prolonged supply disruptions [1][2][4].
West Texas Intermediate (WTI) oil prices fell to around $99.60 per barrel after four consecutive days of gains, following reports from the Wall Street Journal that President Trump signaled a willingness to halt the campaign against Iran even if the Strait of Hormuz remains largely closed [1][2][4]. However, Iran's foreign ministry spokesperson stated that no direct talks with the US have taken place, and described US proposals as 'unrealistic, unreasonable and excessive' [4]. Analysts view the oil price drop as a short-term reaction, with a lasting decline dependent on the full restoration of flows through the Strait of Hormuz [1].
In currency markets, the EUR/CAD pair recovered recent losses and hovered near 1.5990 during European trading hours, supported by the weaker Canadian Dollar amid softer oil prices [1]. The EUR/USD traded slightly higher at around 1.1468, but the near-term bias remains bearish as the pair continues to print lower highs and lower lows beneath the descending 20-day Exponential Moving Average [2]. The EUR/GBP pair pulled back after a recent rally, finding resistance at 0.8700 but maintaining a mildly bullish near-term bias above 0.8680 [3].
On the data front, German Retail Sales contracted by 0.6% month-on-month in February, missing expectations for a 0.2% increase, and the previous month's figure was revised lower to -1.1% [1]. Annual retail sales grew by 0.7%, below the 1% estimate [1]. Bank of France Governor François Villeroy de Galhau commented that policymakers are ready to act if energy-driven inflation broadens, and noted that the Iran war-related energy shock is likely to be inflationary in the near term [1]. ECB President Christine Lagarde stated that the case for action becomes stronger when deviations from the inflation target grow larger and more persistent, and that some measured adjustment of policy could be warranted if the inflation overshoot is significant but not persistent [2].
Market sentiment has shifted positively early Tuesday as investors digest the latest headlines on the Middle East crisis and await key economic data releases, including the Eurozone HICP and US economic indicators later in the day [4]. Wall Street's main indexes closed in negative territory on Monday, and the US Dollar showed strength against most major currencies this week [4].
CONCLUSION
The Eurozone's inflation outlook and the evolving situation in the Middle East are driving market sentiment, with oil price movements and central bank commentary in focus. While the Euro has shown resilience against some peers, technical signals suggest caution remains. Investors are closely watching upcoming inflation data and geopolitical developments for further direction.