While the single European currency is rapidly losing momentum against the US dollar, economists estimate that the euro area will see its largest inflation jump this month since Russia's military operation in Ukraine began in 2022.

Today, Germany's crucial economic data are due tomorrow. Inflation in March could spike by as much as 1.1 percentage points. According to initial official estimates, consumer prices for the whole of March after the US strike on Iran are expected to increase by 0.7 percentage points, implying an annual CPI of about 2.6%. The core CPI excluding energy and other volatile items is expected to remain at 2.4%. The figures will be published on Tuesday following reports from the region's largest economies.

The last time the region saw a larger inflation jump was four years ago in the same month, when gas markets were paralyzed; that CPI rise was significantly sharper at about 1.5 percentage points.

Memories of that crisis, when the European Central Bank reacted slowly, have prompted policymakers to act faster this time if needed, possibly by raising interest rates next month. Several ECB officials flagged that possibility last week. ECB President Christine Lagarde warned that repairing damage to oil and gas infrastructure in the region will take many months, and even if the war ended tomorrow, oil prices would not return to prior levels as quickly as many expect.

A full-blown cost-of-living crisis now looks unlikely. However, a pessimistic scenario — a prolonged conflict and sustained higher energy prices — could trigger at least three ECB rate hikes and push the region into a technical recession.

Despite White House calls for talks, fighting continues: Iran and Israel exchange missile strikes and attacks on Gulf states have increased.

Inflation forecasts for the euro area vary across surveys from about 2% — the ECB's target — to 3.1%. Tuesday's releases should open many eyes.

Technical outlook for EUR/USD

Buyers now need to reclaim 1.1520. Only that will allow a test of 1.1555. From there, the currency pair could climb to 1.1585, but doing so without support from major players will be difficult. The more distant upside target is 1.1630. On the downside, I expect significant buyer interest only around 1.1485. If there is no buying there, it would be prudent to wait for a new low at 1.1445 or to open long positions from 1.1410.

Technical outlook for GBP/USD

Pound buyers should take the nearest resistance at 1.3285. Only that would allow targeting 1.3310, above which a further breakout will be difficult. The more distant upside target is around 1.3340. On the downside, bears will try to seize control at 1.3255. If they succeed, a break of that range would deal a heavy blow to bulls and could push GBP/USD down to 1.3230, with a potential extension to 1.3200.