CPI pressure is slowing in Australia. The RBNZ intends to ignore temporary inflation spikes

On Tuesday, US stock indices lost yesterday’s optimism. By the end of the day, the Dow Jones Index (US30) fell by 0.18%. The S&P 500 Index (US500) declined by 0.37%. The Technology Index NASDAQ (US100) closed lower by 0.77%. The main drag on the market was the renewed rise in energy prices after Tehran officially denied Donald Trump’s statements about “productive negotiations.” Investor skepticism instantly pushed Brent crude back above 104 dollars per barrel, triggering a two‑percent jump in the energy sector – the only group within the S&P 500 that maintains positive returns for March. The high‑tech segment came under double pressure: geopolitical uncertainty overlapped with profit‑taking in leading artificial‑intelligence stocks. Oracle shares plunged 4.7%, despite analysts reaffirming positive predictions, and Microsoft shares also faced selling pressure.

It is also another day of disappointment for the CAD: the currency weakened to 1.375 per US dollar, updating from a two‑month low. Despite Canada being a major oil exporter, the loonie is not benefiting from rising energy prices. The reason lies in the strong demand for the safe‑haven US dollar. Investors are concerned that ongoing attacks on US bases in the Persian Gulf will keep oil prices at a high “war premium,” making inflation unmanageable.

The Mexican peso lost momentum in its recent recovery and fell below 17.8 per US dollar. The situation for the Bank of Mexico is complicated by fresh inflation data. The mid‑March reading came in at 4.63%, above analysts’ expectations. This puts the regulator in a “stalemate”: on one hand, the economy needs support due to a sharp production downturn; on the other, accelerating inflation and a weakening currency prevent monetary easing. In conditions where Mexico’s key trading partners are preparing for a prolonged period of high rates, the peso remains under crossfire from domestic stagnation and a global inflation shock.

European markets mostly rose. Germany’s DAX (DE40) fell by 0.08%, France’s CAC 40 (FR40) closed up 0.23%, Spain’s IBEX 35 (ES35) gained 0.13%, while the UK’s FTSE 100 (UK100) closed up by 0.72%. The main driver of growth was the technology sector, where ASML shares became the true star of the session. The Dutch giant’s stock jumped after news of a colossal order from South Korea’s SK Hynix for lithography equipment worth 8 billion dollars, confirming sustained demand for memory‑chip production capacity despite global instability. However, the overall picture remains troubling due to the continued rise in oil prices. The first official confirmation of these concerns came from preliminary March business‑activity data: Eurozone private‑sector growth slowed, clearly showing that high energy costs have already begun to erode industrial output.

The oil market showed a partial recovery after Monday’s collapse. WTI crude futures jumped 5%, reaching 92.4 dollars per barrel. This rise compensated for only half of Monday’s catastrophic 10.3% drop, as investors remain in extreme uncertainty regarding the true intentions of Washington and Tehran. Saudi Arabia and the UAE, whose territories were attacked, made it clear that their patience is running out. Reports emerged that Riyadh is seriously considering direct military strikes on Iranian facilities if its critical energy infrastructure is targeted again. The market is essentially frozen, awaiting the end of the five‑day period, after which it will become clear whether the conflict will escalate into a global energy collapse.

Asian markets also rose mostly yesterday. Japan’s Nikkei 225 (JP225) partially recovered by 1.43% higher, China’s FTSE China A50 (CHA50) fell by 2.15%, Hong Kong’s Hang Seng (HK50) rose by 2.79%, and Australia’s ASX 200 (AU200) posted a positive result of 0.16%. The Hang Seng Index rose by 0.9% on Wednesday, marking its second consecutive session of gains. The positive dynamics were driven by temporary stabilization in oil prices and a diplomatic pause in the Iran‑related conflict, allowing investors to ease fears of an immediate energy collapse. This optimism helped slow the massive outflow of foreign capital from Asian assets caused by the recent surge in global bond yields and stagflation fears.

On Wednesday, the Australian dollar fell to 0.70 US dollars, approaching a two‑week low. Pressure on the currency came from fresh inflation data in Australia: in February, consumer prices were unchanged month‑over‑month, while the annual figure slowed to 3.7% (down from 3.8%). Although inflation still exceeds the Reserve Bank of Australia’s target range (2-3%), weaker‑than‑expected numbers made markets doubt the need for an aggressive rate hike in May, the probability of which is now seen as 50/50.

The NZD fell to 0.582 US dollars as investors sharply revised their expectations regarding the RBNZ policy stance. The trigger was statements from Governor Anna Breman and Chief Economist Paul Conway, who made it clear that the regulator intends to “ignore” temporary inflation spikes caused by the war with Iran and rising oil prices. While earlier the market priced in a 68% probability of a rate hike in May, expectations collapsed to 44% after these comments, as the bank still sees signs of an economic slowdown and fears that excessive tightening could suppress domestic demand.