The war rages on in the Middle East, despite rhetoric of an early end to the crises and markets respond negatively. Oil prices surged back towards US$90pb, even considering that the IEA announced the largest ever release from their emergency reserves, 400 million barrels. The spike in oil prices translated directly into equity and bond markets. Bond yields jumped higher, equities tumbled and the US Dollar attracted more safety flows. The EUR crashed to 1.1550, while the GBP fell below 1.3400, once again. US inflation was steady at 2.4%pa, in the latest CPI reading, the last reading before the Middle East crises kicked off. Expect inflation to heat up as energy prices feed through.The rise in the reserve hit the NZD, which fell back towards 0.5900, while the AUD held onto the elevated levels around 0.7150. The AUD has been remarkably resilient to the rising reserve, due to speculation the RBA may be about raise interest rates, as inflation becomes even more resurgent.
