USD Under Pressure as BOJ, Fed, BOE, ECB Hold Rates Amid Middle East Crisis

A pivotal week for forex markets is underway as five major central banks — the BOJ, BOC, Fed, BOE, and ECB — are all expected to hold interest rates unchanged, creating a complex backdrop for USD/JPY, USD/CAD, GBP/USD, and EUR/USD. The dominant macro theme remains the Middle East conflict, now in its ninth week, which has kept the Strait of Hormuz closed and physical oil prices elevated at lofty levels. Rising energy costs are complicating the inflation outlook for all major economies, making forward guidance from each central bank the key variable for traders this week. The persistence of elevated oil prices introduces stagflationary risks, particularly for energy-importing economies like Japan and the Eurozone, while commodity-linked currencies such as the Canadian dollar may find underlying support. Traders should watch for any hawkish or dovish shifts in central bank language regarding inflation persistence tied to geopolitical supply disruptions. Near-term volatility is expected to spike around each rate decision, with risk sentiment remaining fragile amid unresolved geopolitical tensions.