Who’s right on oil, commodity or bond markets?
The overarching question facing financial markets is whether traffic through the Strait of Hormuz, representing 20% of global oil supply, can resume in the near future. For now commodity markets have taken a relatively benign view, futures curves indicating Brent oil prices will still fall from $100pb this morning, to $75 by early next year. However, bond markets have been more cautious, building in expectations of an ECB rate hike by July and persistently higher inflation over the medium-term. Next week’s Central Bank policy meetings will also likely deliver a hawkish message, attempting to rein-in inflation expectations, signaling possible rate hikes and mindful of the experience following Russia’s invasion of Ukraine when persistent inflation lingered longer than anticipated.
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