The kinetic war reignited in the Middle East, with exchanges between Iran and the USA, resulting in negative reactions in the markets. Global bond yields spiked to multi-year record levels, oil prices surged to US$90, while equities tumbled. Inflation fears are being recognised across the West, as EU CPI jumped to 3.3%, following a confirmed rise in German inflation. The energy crisis will fuel the inflation crisis, which in turn, has created bond crisis. This is reflected in economic data, especially trade balances and GDP growth. The US Dollar rebounded, with the EUR slipping back below 1.1600, while the GBP held 1.3500.Commodity currencies were not immune to the stronger reserve, with the AUD falling back below 0.7150, while the NZD surrendered 0.5900. Expect action on local markets today, with the RBNZ’s latest interest rate decision and the release of Australian GDP growth data. The RBNZ is expected to raise rates 25 basis points in response to surging inflation, potentially providing a short-term boost to the Kiwi. Australian GDP growth is expected to show a big fall.
