Scotiabank Notes Markets Highlight Increase in Inflation Risk
Oil prices continue to rally and are back up to where they were last Wednesday before sliding in false anticipation of a United States-Iran deal, said Scotiabank.WTI and Brent are up by about US$3 to US$4/barrel early Tuesday, with Brent at almost US$108, noted the bank. Higher oil prices on Monday and Tuesday follow President Donald Trump's "ineloquent" dismissal of Iran's counteroffer as "a piece of garbage," while saying the ceasefire is "unbelievably weak" and on "massive life support."Bond yields are accordingly higher on a perceived increase in inflation risk, stated Scotiabank. United Kingdom's Gilts are underperforming with borderline double-digit basis point increases at the longer-end, while all other major markets are cheaper by single-digit moves, led by Europe.Gilts have inflation worries and political instability on the mind as Prime Minister Keir Starmer digs in against a rebellious cabinet that is stoking fear that a freer-spending leader could step in, added the bank.Stocks are broadly lower by up to 1% in Germany, it pointed out.The US dollar (USD) is generally firmer against major crosses, but with oil-driven currencies like Norway's krone (NOK) and Canadian dollar (CAD or loonie) outperforming others.Iran has countered with a take-it-or-leave-it posture and noted it was "ready to respond and to teach a lesson for any aggression."And so, with that as the backdrop, it only seems appropriate to talk inflation, according to Scotiabank.