News & Insights

Markets caught between strength and strain

Markets rebounded, with the S&P 500 rising 3.38% and breaking a five-week losing streak in a holiday-shortened week. U.S. equities closed April 3 for Good Friday. Oil eased slightly to $109 per barrel, while the 10-year Treasury yield declined to 4.35%, signaling modest relief in inflation expectations.

RBI rupee defence is raising the cost of INR hedging

Reserve Bank of India (RBI) measures are supporting the rupee (INR) but reducing offshore liquidity and raising hedging costs. Investors should reassess INR hedging, including onshore access and execution strategies.

Geopolitics, inflation expectations, and the repricing of rate risk

Middle East tensions rippled through rates and FX, with oil-driven inflation concerns reversing the recent disinflation-led rally in swap rates. The shift makes expected central bank easing less straightforward and has strengthened the dollar’s safe-haven appeal.

Iran war pause

Markets fell as geopolitical tensions and oil volatility rose, with S&P 500 down 2.1%. Jobs data remained resilient, but sentiment weakened as focus shifts to payrolls, Fed signals, and inflation risks.

No base case: Central Banks in a world of widening outcomes

Inflation rebuilds and growth slows

Markets are adjusting to a more difficult macro environment. Higher energy prices and early signs of slowing growth are beginning to move together. WTI crude remained near $100 per barrel following its recent surge, keeping inflation risks in focus. Equities declined, with the S&P 500 down roughly 2% on the week. The 10-year Treasury yield rose to 4.38%, and inflation expectations also moved higher. The 5-Year Breakeven Inflation Rate (T5YIE) approached 2.6%, signaling that markets see firmer inflation ahead and a loss of momentum in the disinflation trend.

BoE and ECB keep rates on hold but both warn of inflation risks amid Middle East conflict

The Bank of England’s (BoE) Monetary Policy Committee (MPC) voted unanimously to keep interest rates at 3.75% today, as they warned of a rising risk to the path of inflation and economic outlook from the worsening conflict in the Middle East. While the decision itself was widely expected, the tone was materially more hawkish than markets had been pricing previously, with all four MPC members who voted in favour of a 25 basis point (bp) cut last month, voting to now keep them on hold. The European Central Bank (ECB) also left its three key policy rates unchanged and warned that the war in the Middle East has made the outlook “significantly more uncertain,” creating upside risks to inflation and downside risks to growth. The ECB’s updated staff projections now see headline inflation averaging 2.6% in 2026, up from 2.0% in their December forecasts, with the revision driven largely by higher energy prices. Rates markets have responded accordingly. Sterling swap rates have risen materially, with the 5-year GBP swap rate near 4.25% today versus 3.60% prior to the commencement of US-Israeli strikes, while the 5-year EUR swap rate has risen to 2.70%, from 2.30% over the same period. In FX markets, the GBP saw another volatile day, reversing an earlier decline versus the U.S. dollar to 1.3250, reaching an approximate 1.0% gain to 1.3400. The Euro also finished the day around 1.0% higher versus the dollar at 1.1550.

FOMC holds rates, maintains mildly restrictive stance

On Wednesday, March 18, 2026, the Federal Open Market Committee (FOMC) voted to hold the federal funds rate unchanged at a range of 3.50%–3.75%. All members supported the decision except Governor Miran, who dissented in favor of a 25 basis point (bp) cut. The Committee emphasized increased uncertainty in the economic outlook, citing recent developments in the Middle East and their unclear implications for the U.S. economy. While economic activity continues to expand at a solid pace and unemployment remains stable, the housing sector remains a weak point. The updated Summary of Economic Projections (SEP) showed upward revisions to both real GDP and PCE inflation relative to December. The expected rate path remained largely unchanged, however, with one cut projected in 2026 and another thereafter. Chair Powell reiterated that the Fed remains focused on its dual mandate and is monitoring risks on both sides. He highlighted ongoing concerns around inflation progress, particularly with goods prices. He also emphasized that policy would remain data dependent and that rates are currently near the boundary between restrictive and non-restrictive, with a preference to maintain mildly restrictive conditions until clearer inflation progress is achieved.

The Hormuz oil shock

Oil prices surged after disruption in the Strait of Hormuz, reviving stagflation fears as growth weakens and energy costs rise. February inflation looked contained, but markets now expect renewed pressure, leaving the Fed cautious and investors focused on rates, spending and global central banks.

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Surging oil prices and job losses raise stagflation risk

Markets were choppy as investors rotated out of tech on AI job displacement fears. The S&P 500 fell 2% and the 10-year yield rose to 4.15% as February payrolls dropped 92,000 and unemployment ticked up to 4.4%. Middle East escalation lifted oil and gas, complicating the Fed outlook. CPI and PPI are next.

Jackie Bowie on inflation and global risk in IFR

Jackie Bowie, Managing Director and Head of EMEA at Chatham Financial, was featured in International Financing Review (IFR) discussing how escalating geopolitical tensions, including the prospect of a prolonged Iran conflict, are fueling renewed inflation concerns across global markets.