The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1123 GMT - The cost of insuring euro credit against default declines slightly as market sentiment improves after the U.S. sent a 15-point plan to end the Middle East war. The iTraxx Europe Crossover index of euro high-yield credit default swaps falls 12 basis points to 330bps, after hitting an 11-month high of 365bps on Monday, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
1103 GMT - The sharp worsening in March's Ifo survey reflects German companies' legitimate concerns about the Iran war, Commerzbank's Joerg Kraemer says in a note. The headline business-climate index fell to 86.4 in March, from 88.4 in February, with all major sectors affected. The expectations index, which gauges the outlook for the six months ahead, plummeted to 86.0 from 90.2. "If the war in the Middle East and the closure of the Strait of Hormuz do not end quickly, the economic damage signaled by today's slump in Ifo business expectations will eventually materialize," Kraemer says. In that case, little of the economic upswing economists harbored recently would remain. But if the war ends in a few days, Ifo's index would recover in April, he adds. (edward.frankl@wsj.com)
1031 GMT - Liquidity at the front end of the U.S. Treasury yield curve has deteriorated amid elevated volatility since the onset of the Middle East conflict, Morgan Stanley strategists say in a note. This has led to wider bid-ask spreads and high volumes signaling forced flows, they say. "Elevated volumes alongside wider spreads suggest flows are driven by necessity rather than desire." Two-year bid-ask spreads have widened around 27% versus February, they say. "Large intraday yield swings are increasingly coinciding with thin liquidity conditions in the front end." (emese.bartha@wsj.com)
0955 GMT - The U.K. inflation data due to be released in April will carry more weight than Wednesday's print as it will show the impact of the Middle East conflict, RBC Capital Markets strategists say in a note. Tensions in the Gulf region have led to a sharp rise in energy costs, raising the risk of high inflation around the globe. The latest data shows annual U.K. inflation in February was 3.0%, unchanged from the January inflation and in line with the consensus forecast by economists in a WSJ poll. (miriam.mukuru@wsj.com)
0959 GMT - The euro is likely to struggle to sustain any recovery attempts against the dollar as energy prices remain elevated due to the Iran war, Commerzbank's Thu Lan Nguyen says in a note. Eurozone and U.S. interest rate expectations have risen roughly in tandem, suggesting the euro should trade steady versus the dollar rather than higher, she says. The eurozone is also "far more exposed to the current energy price shock than is the case for the U.S." While European Central Bank policymakers have expressed concerns over inflation risks, doubts over any rate rises could grow if there are more signs of a weakening economy, she says. The euro falls 0.1% to $1.1595. (renae.dyer@wsj.com)
0950 GMT - Falling business sentiment suggests that the energy shock could upend hopes for a recovery in Germany, Franziska Palmas at Capital Economics says in a note. The Ifo business climate index fell to 86.4 in March from 88.4 in February. "The drop was entirely due to the expectations index, presumably reflecting concerns about the rise in energy prices and wider fallout from the war in the Middle East," Palmas says. But Germany looks more resilient compared with the energy shock of 2022. Price rises have so far been smaller, while a lot of energy-intensive production has been lost since then, Palmas says. "Germany also has more scope to loosen fiscal policy than most of its eurozone peers." Still, CapEcon downgrades its GDP forecast for 2026 to 0.5% from 0.8%. (don.forbes@wsj.com)
0949 GMT - Markets lower their expectations of the Bank of England raising interest rates in the coming months on prospects of a possible end to the Middle East conflict. This follows media reports that the U.S. proposed a cease-fire in the Middle East. Investors fully price in two quarter-point BOE rate increases by the end of the year, having fully priced in three increases and a risk of a fourth at the start of this week, LSEG data show. (miriam.mukuru@wsj.com)
0944 GMT - U.K. inflation should return to target in 2027, giving the Bank of England room to cut rates later this year, Andrew Wishart at Berenberg says in a note. The country's annual rate of inflation held steady at 3.0% in January. "In the absence of the conflict we would have taken this as an encouraging sign that inflation would soon return to target," he says. While the energy crisis risks creating a price spiral in other areas, a sluggish economy and weak labor market should limit this, allowing inflation to fall below 2% next year, Wishart says. "Therefore, the BOE would be wise to keep rates on hold while it monitors the passthrough rather than hike. We think it will, before delivering another cut in 4Q." (don.forbes@wsj.com)
0930 GMT - Sterling could rise against the euro if Bank of England official Megan Greene supports the case for an interest-rate rise in April when she speaks at a conference at 1200 GMT, ING's Chris Turner says in a note. At last week's meeting, Greene was concerned about rising energy prices and fertilizer prices affecting food. She seems to agree with BOE chief economist Huw Pill who said Tuesday that uncertainty over the Iran war isn't an excuse for inaction on inflationary pressures, Turner says. The market is pricing a 65% chance of an April rate rise, LSEG data show. A rate rise next month is unlikely but the trend in rate expectations could boost the pound, he says. The euro trades flat at 0.8652 pounds. (renae.dyer@wsj.com)
0927 GMT - U.K. inflation data for February showed the annual headline inflation at 3%, unchanged from January and in line with the consensus forecast by economists in a WSJ poll. The steady inflation data and decelerating wage growth indicate that U.K. interest rates are still relatively restrictive, EFG Asset Management's Joaquin Thul says in a note. The Bank of England is likely to keep interest rates unchanged at 3.75% at the April policy meeting, he says. (miriam.mukuru@wsj.com)
0922 GMT - An extended Bank of England interest-rate pause is more likely than hikes, Capital Economics' Ruth Gregory says in a note. The energy-price shock prompted by the Iran war is likely to extinguish U.K. growth and add to the already-high unemployment rate, she says. While a larger and more persistent inflation shock could force the BOE to hike, any tightening cycle would probably be small and short, she says. After inflation was unchanged at 3.0% in February, the rise in oil prices probably raised inflation by 0.3 percentage points in March. "In our baseline scenario, we now think CPI inflation could rise to a peak of 4.6% in the fourth quarter," Gregory says. (edward.frankl@wsj.com)
0854 GMT - A return to the Bank of England's 2% inflation target now looks like a distant memory given the jump in energy prices, Deutsche Bank's Sanjay Raja says in a note. "The bump back in inflation will put to rest any talk of rate cuts this year. And the risks that the BOE reverses course and hikes the bank rate can no longer be dismissed," Raja says. Pump prices have risen by nearly 7% in March and likely to rise by a similar amount in April, he says. The potential for spillovers into other parts of the consumer-price index basket is rising, with fertilizer prices on the rise, shipping costs surging, and the prospects of second-round effects no longer negligible. Inflation is set to peak near 3.5% later this year, he says. (edward.frankl@wsj.com)
(END) Dow Jones Newswires
March 25, 2026 07:23 ET (11:23 GMT)
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