Global Watch April 2026
The conflict in the Middle East has triggered a sharp rise in energy prices. Inflation will be higher and economic growth lower as a result, though to what extent will ultimately depend on how long energy supplies through the Strait of Hormuz remain disrupted. While this leaves central banks facing a difficult balancing act, the path for interest rates will be higher than previously expected. We now see the ECB nudging rates up by 25bps in the next few months and expect the Fed and the Bank of England to keep policy on hold for the remainder of this year. The dollar benefited from a ‘safe haven’ bid in the initial stages of the war but has since given up most of its gains. With EURUSD remaining within our previously projected range of $1.14-$1.21, we are leaving our forecast for the pair unchanged. We are also keeping our forecasts for GBPUSD and EURGBP largely intact at $1.32-$1.38 and £0.84-£0.89 respectively.