The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
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)
0851 GMT - Central banks across Asia have struck a cautious tone around tensions in the Middle East, says OCBC's Lavanya Venkateswaran. The pain from higher energy prices and reduced oil and natural gas imports is akin to a gut punch for economies like India, the Philippines, Thailand and Vietnam, she says. These economies are net energy importers and, absent subsidies, will see building inflationary pressures. Authorities in India, Thailand and Vietnam can shift some of the subsidy burden off-budget, but that kicks the can down the road, the senior economist says. Indonesia and Malaysia can buffer the impact with fiscal cushions, but the duration and persistence of higher oil prices will significantly affect their ability to keep fiscal backstops in place. (fabiana.negrinochoa@wsj.com)
0844 GMT - Airline stocks rise after oil prices fell on reports that the U.S. sent Iran a 15-point plan to end the Middle East conflict and that Iran would allow "non-hostile vessels" through the Strait of Hormuz. Air France and Wizz Air were the biggest gainers--rising 3.9% and 3.1%,respectively. Closely behind are British Airways owner International Consolidated Airlines Group, easyJet and Lufthansa--rising 2.5%, 2.6% and 2.3%, respectively. Brent crude is down 4.5% at $95.72 a barrel, while WTI falls 3.9% to $86.28 a barrel. (ian.walker@wsj.com)
0845 GMT - The Middle East crisis is shifting some rate trajectories in Asia, OCBC economists say. Some central banks previously biased to further--albeit marginal--easing such as BOT, BSP and the RBI will close the door on rate cuts, says Lavanya Venkateswaran. OCBC has ditched its 50bp rate-cut call for Indonesia, expecting it to remain on hold in 2026. The odds of rate hikes are increasing in some places, but much depends on the duration and persistence of higher energy prices. Since policy rates are already at or close to neutral for most of the region, Venkateswaran thinks policymakers can afford to wait. This allows them to hedge against stagflation risks, which are more pronounced than during the 2022 shock as inflation is higher and policy rates aren't at record lows. (fabiana.negrinochoa@wsj.com)
0837 GMT - Eurozone government bond yields fall, tracking moves in U.S. Treasury yields, amid tentative optimism about a potential resolution to the Middle East conflict. The German 10-year Bund yield drops 5 basis points to 2.967%, while yields on other bonds fall by more than that, according to Tradeweb. Yield spreads narrow as a result. The 10-year Italian BTP-German Bund yield spread narrows 4 basis points to 88 basis points. (emese.bartha@wsj.com)
0831 GMT - Yields on U.K. government bonds fall, along with U.S. and eurozone bond yields, following media reports that the U.S. has proposed a cease-fire in the Middle East. The U.S. has sent Iran a 15-point plan to end the war, The Wall Street Journal reports, citing officials. Market sentiment has improved as a result and eased concerns about prolonged tensions in the Gulf region. U.K. inflation data for February showed annual headline inflation at 3.0% and annual core inflation at 3.2%, in line with the consensus forecast by economists in a WSJ poll. Ten-year gilt yields fall 8 basis points to 4.855%, Tradeweb data show. (miriam.mukuru@wsj.com)
(END) Dow Jones Newswires
March 25, 2026 05:50 ET (09:50 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments