A look at the day ahead in European and global markets from

Ankur Banerjee

As the U.S. and Israel's war with Iran intensifies after major

attacks on energy infrastructure, central bank meetings have

become the stage for policymakers to unite in flagging the

prospect of accelerating inflation due to soaring energy prices.

The Bank of Japan joined the U.S. Federal Reserve and Bank

of Canada in keeping interest rates steady but highlighted

mounting price pressure that could accompany a prolonged war

that has upended global markets this month.

With markets expecting the European Central Bank and Bank of

England to likewise hold rates later in the day, the focus will

again be on comments from officials who will likely talk tough

on inflation.

Policymakers are walking a tightrope as they look to rein in

stubborn price pressure without derailing growth, just as they

did in 2022 when Russia's invasion of Ukraine spurred a

commodities-led spike in inflation rates.

That stagflationary dilemma has sapped investor sentiment as

markets come to terms with another conflict that shows no sign

of easing.

And so, traders have put on their risk-off hats, sold

stocks, pushed expectations of U.S. rate cuts further back and

bought U.S. dollars. Oil prices are firmly above $100 a barrel

while natural gas is up more than 6%.

That has left the Japanese yen just below 160 to the dollar

which traders expect could trigger intervention, especially

after strong comments from Japan's finance minister on Thursday.

Yen watchers might feel a sense of deja vu as the prospect

of an intervention raises its head every few months.

The spotlight is firmly on BOJ governor as investors weigh

how he will frame the balance between the need to support a

shock-hit economy and avoid being behind the curve on inflation.

That may dictate where yen ends up.

After that, it's over to the ECB and BoE.

Key developments that could influence markets on Thursday:

* ECB policy meeting

* BoE policy meeting

* UK wage data