The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1101 GMT - Morgan Stanley strategists expect the Bank of England to keep interest rates unchanged at 3.75% in the coming months, they say in a note. The outlook for BOE interest rates is "highly uncertain," however, as the Middle East war rages on, they say. Investors fully price in three quarter-point BOE interest-rate rises by September, LSEG data show. (miriam.mukuru@wsj.com)
1059 GMT - The cost of insuring against potential price swings in the euro versus the dollar, or implied volatility, is surprisingly low given the intensifying Middle East conflict, Commerzbank's Thu Lan Nguyen says in a note. Options-market pricing shows three-month implied volatility for the exchange rate is 7.8%, LSEG data show. This compares to last year's high of 11.1% when U.S. tariffs were imposed, the 2022 high of 12.9% when Russia invaded Ukraine, and the 2020 pandemic high of 12.1%. That's possibly because the market expects the European Central Bank to respond more quickly to an inflation shock this time and the Federal Reserve to be more cautious given a weak labor market and political pressure to cut rates, Nguyen says. (renae.dyer@wsj.com)
1051 GMT - Eurozone wage pressures are expected to continue to ease, the European Central Bank says. The ECB's tracker says wages are expected to rise by 2.6% in 2026, after 3.9% in 2025 and a 4.2% increase in 2024. On a quarterly basis, wages rises are expected to average 1.9% in the first, 2.1% in the second, 2.5% in the third and 2.6% in the fourth quarter, the ECB says. The increase over the course of the year mainly reflects statistical effects related to the treatment of earlier one-off payments rather than new wage pressures, it says. The ECB closely tracks wages particularly due to their impact on inflation in the services sector. (edward.frankl@wsj.com)
1043 GMT - The dollar is likely to strengthen further if the energy price shock stemming from the Middle East conflict intensifies, MUFG Bank's Lee Hardman says in a note. Economies in Asia and Europe will be hit harder compared to the U.S. as the risk of weak growth combined with high inflation, or stagflation, builds, he says. The conflict should continue to dominate currency moves rather than yield spreads, which have moved against the dollar, he says. The market is pricing 17 basis points of Federal Reserve rate rises by year-end, compared to 80bps for the European Central Bank and 90bp for the Bank of England, LSEG data show. However, the DXY dollar index is up 0.5% at 100.109. (renae.dyer@wsj.com)
1021 GMT - Money markets sharply raise expectations of the Bank of England increasing interest rates in the coming months due to inflation concerns. Investors fully price three quarter-point BOE rate increases by September, with a high risk of a fourth by the end of the year, LSEG data show. This contrasts hugely with two rate cuts priced in prior to the Middle East war. "The outlook for UK interest rates has radically changed," AJ Bell's Russ Mould says in a note. "That has significant consequences for consumer and business spending, for the U.K. economy, and for public finances as the government's cost of servicing debt would go up," Ten-year gilt yields surge to 5.105%, their highest 2008, LSEG data show. (miriam.mukuru@wsj.com)
0906 GMT - Market pricing for Bank of England interest-rate rises looks overdone and this poses a risk to sterling, Monex Europe analysts say in a note. The market is pricing in nearly four rate rises by year-end, LSEG data show. Such an aggressive path of rate rises is unlikely given the weak domestic growth outlook and building labor market slack, the analysts say. For now, sterling's direction will be directed by risk sentiment and oil prices in the absence of U.K. data and BOE speeches Monday, they say. Sterling falls 0.2% to $1.3313 against a stronger dollar but the euro drops 0.1% to 0.8660 pounds. (renae.dyer@wsj.com)
0857 GMT - There are clearer signals that the Monetary Authority of Singapore will begin tightening its monetary policy in April, BofA Securities economists write in a note. Singapore could raise its 2026 core inflation forecast, given that the current forecast is for inflation to average 1.0%-2.0% this year, they say. That is especially as imported cost pressures are expected to pick up in the near term, the economists add. "Besides [the] latest guidance, clearer signs of more generalized price pressures are emerging, which at the margin could lead to sharpened policy focus on anchoring inflation expectations." (amanda.lee@wsj.com)
0856 GMT - A striking part of the market response to the Middle East crisis has been the poor performance of some safe havens, says Thomas Mathews at Capital Economics. It might not be surprising that government bonds sold off in the face of an inflationary shock, but gold's struggles are arguably more surprising due to its usual role as a hedge in such situations. Gold slid during the Asia session, wiping year-to-date gains. The weakness could be partly due to the bond market's own troubles, Mathews says. "But its woes may also reflect that it had begun to fare, in some respects, more like a 'risky' asset, and the war may have taken some of the froth out of it." If that's the case, a full rebound isn't guaranteed even if the mood improves. (fabiana.negrinochoa@wsj.com)
0845 GMT - The euro is at risk of falling further despite speculation that the European Central Bank could raise interest rates in April, ING's Francesco Pesole says in a note. With oil prices elevated on the Middle East conflict, risk sentiment unstable and markets already pricing in three ECB rate rises by year-end, the risks for the euro look "skewed to the downside," he says. If the euro falls back to $1.1450, it would confirm the single currency is not finding much support from tighter U.S.-eurozone rate differentials, he says. Higher energy prices could prove detrimental to the eurozone economy as an energy importer. The euro falls 0.3% to $1.1529. (renae.dyer@wsj.com)
0828 GMT - Yields on U.K. government bonds rise further, with 10-year yields again hitting their highest since 2008, as high energy prices raise concerns about a possible resurgence in the U.K. inflation. The sharp rise in gilt yields relative to the U.S. and eurozone peers "emphasizes the U.K.'s vulnerable position as a high inflation economy with weak public finances", XTB's Kathleen Brooks says in a note. Ten-year gilt yields jump 7 basis points to 5.065%, a near 18-year high, shortly after the market open, LSEG data show. (miriam.mukuru@wsj.com)
0823 GMT - The Monetary Authority of Singapore is likely stay on hold in April, despite core inflation rising in February, Barclays economist Brian Tan writes in a note. Core inflation--which is closely watched by the MAS--accelerated in February, mainly due to base effects for uncooked food prices and volatile travel costs. "Our estimates indicate demand-pull pressures remain broadly stable at relatively benign levels," Tan says. The monetary policy statement and other comments from officials next month are likely to sound relatively hawkish, but this may be mainly intended to keep inflation expectations under control, and not to signal monetary policy tightening. (amanda.lee@wsj.com)
0815 GMT - Bitcoin stays weak after hitting a two-week low overnight as the widening Middle East conflict dampens risk appetite. President Trump at the weekend threatened to attack Iranian power plants if the Strait of Hormuz isn't opened within 48 hours and Iran warned it would retaliate. "The escalation puts investors in a difficult spot," Danske Bank analysts say in a note. The energy price shock could become permanent if oil infrastructure is hit, they say. However, if the U.S. can take control of the Strait, it would be positive for risk sentiment, they say. Bitcoin rises 0.3% to $68,350 after hitting a low of $67,383, LSEG data show. (renae.dyer@wsj.com)
(END) Dow Jones Newswires
March 23, 2026 07:01 ET (11:01 GMT)
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