Middle East tensions remain very high, as does the price of oil, which continues to trade above US$100/barrel. The war in the Middle East appears to be spreading, engulfing Saudi Arabia and Yemen. This does nothing to ease the energy crisis and fears over the impact on global inflation. Safety of the US Dollar has been sought, with the EUR tumbling to 1.1550, while the GBP crashed to 1.3500. Bond yields operate at dangerous levels, ahead of the Fed’s latest interest rate decision. The heat is on for the Fed to raise rates 25 basis points, with 90% of market pundits predicting, just that. Chairman Warsh is a ‘Dove’, so we shall see the colour of his metal.The surge in the safety of the reserve was enough to punish commodity currencies, as the NZD surrendered 0.5800, while the AUD slipped below 0.7150. Markets are closely focused on Middle Eastern developments, inflation and Central Banks.
