Reserve Bank of Australia raises rates

The Reserve Bank of Australia raised its cash rate target by 25bps this morning, taking the benchmark rate to 4.10%. The move was in line expectations, with inflation in Australia already picking up through the second half of 2025, rising from 1.9% y/y in June to 3.8% on the January print. In addition, Australia is now facing ‘sharply higher fuel prices’ from the conflict in Iran which ‘if sustained, will add to inflation.’ The conflict in Iran is likely to play a material part in the major central bank decisions and commentary this week, with the US Federal Reserve and Bank of England announcing on Wednesday and Thursday.

As noted by the RBA, the ongoing closure of the Strait of Hormuz is already feeding through to higher prices for businesses and consumers around the world. As a result, with Brent crude still sitting comfortably above USD 100/b, February data is somewhat out of data for policy makers. Nevertheless, we did see some price data released yesterday. Wholesale prices in India rose 2.1% y/y in February, up from 1.8% the previous month but in line with the consensus estimate. In Canada, CPI inflation slowed to 1.8% y/y, from 2.3% in January, coming in below the predicted 1.9%. Prices were up 0.5% on the previous month.

US President Donald Trump has requested that his scheduled summit with Chinese President Xi Jinping be delayed by a month as he wants to be at home to deal with the Iran war. Trump has repeated his calls for partners to help reopen the Strait of Hormuz.

Iranian attacks on the UAE caused Dubai International Airport to briefly suspend operations early Tuesday morning, while in Abu Dhabi a fire at Shah oil and gas field has reportedly been brought under control.

Today’s Economic Data and Events

14:00 Germany ZEW survey expectations, March. Forecast: 39.2

14:00 Germany ZEW survey current situation, March. Forecast: -68.0

Fixed Income

• USTs rallied on Monday as there was some optimism in markets around modestly lower oil prices. Yields on the 2yr fell 5bps to 3.6711%, while the 10yr closed 6bps lower at 4.2160%.
• Regional credit markets were still in the red with a 0.5% drop in a GCC-wide USD-denominated index. All geographies recorded losses while CDS spreads all widened.

Currencies

• The dollar index lost some ground yesterday amid a dose of global market optimism which reduced the demand for the haven currency that had fuelled its gains in recent weeks. It closed down 0.7% on the day against its basket of peer currencies, the biggest one-day fall since 9 February.
• GBP gained 0.7% to close at 1.3320, while EUR climbed 0.8% to 1.1505. JPY closed at 159.07, 0.4% stronger.

• There was modest relief for regional energy importing currencies also. EGP closed 0.3% stronger at 52.3700, while INR closed marginally stronger at 92.4263, capping three straight days of losses.

Equities

• Modest risk-on sentiment boosted global equities at the start of the week, with notable gains in Europe and the US where the Dow Jones, the S&P 500, and the NASDAQ added 0.8%, 1.0%, and 1.2% respectively.
• Locally, the ADX closed down 0.2% while the DFM ended the day 2.5% lower. Saudi Arabia’s Tadawul added 0.6% on the day.

Commodities

• After initially starting the day higher, expectations for a further release of IEA stockpiles led to lower oil prices at the close yesterday, with Brent futures closing down 2.8% on the day, while WTI fell 5.6%. However, this still left WTI at USD 93.5/b and Brent at USD 100.2/b, and Brent is heading higher again in early trading this morning.