In the face of ongoing hostilities, oil has steadied after a near 30% jump on Monday to about $120 per barrel. The United States began emergency measures to curb the rise in oil futures, and Saudi Arabia reportedly increased pipeline flows, from the previously reported 2 million barrels per day to as much as 5 million. Those steps have weighed on prices, but they are extraordinary and temporary. Without a radical change in the overall situation in the Middle East, they can only marginally address the oil supply problem.

With the market pausing to assess the impact, attention has shifted to key US economic releases due tomorrow, Wednesday. Chief among them is the consumer price report, which was expected to show a month-on-month increase in February of 0.3% versus 0.2% in the prior month and a year-on-year rise from 2.4% to 2.5%.

It is true that the report does not reflect the effect of the war that began at the end of February. Nonetheless, against the backdrop of the conflict appearing to reach a stalemate, it could lead to a local weakening of the dollar — a reaction that currency traders have already begun to price in. Stabilization measures promised by Mr. Trump in the United States may prevent a surge in inflation, which was one of the drivers of the dollar's earlier strength and of markets pushing out expectations for the Fed's first rate cut from June to September. Likewise, if the situation in the Middle East changes, the dollar may stop being bought as a safe-haven currency.

What can be expected in markets today?

I believe the overall market mood may calm somewhat. Mr. Trump's pledges and the increase in Saudi oil supplies are currently putting downward pressure on oil and on the dollar. Tomorrow's US inflation report could even cause some additional dollar weakness.

Forecast for the day:

USD/JPY

The pair is trading above support at 157.30; a break below that level could send it down to 156.00 in reaction to the US inflation report. A tactical sell level could be 157.22.

GBP/USD

The pair is trading above support at 1.3445. Holding above that level could lead to gains toward 1.3570 on US inflation news. A tactical buy level could be 1.3488.