Markets Wanting Peace but Bracing for Inflation – Currency Thoughts
Markets Wanting Peace but Bracing for Inflation
April 10, 2026
Shipping traffic through the Strait of Hormuz remains minimal, and Iran is insisting that Israel’s continuing assault on Lebanon must be part of the discussion as a condition of Iranian participating in resumed peace talks with a U.S. delegation to be headed by VP Vance in Islamabad, Pakistan beginning tomorrow. The behavior of world financial markets this week in contrast to the month of March has made very clear the enormous economic consequences that hinge on whether politicians choose peace or war in the Middle East. In a separate but related matter, investors reacted positively to news that Russia and Ukraine have agreed to a 32-hour Easter ceasefire in their war that will run from 13;00 GMT on Saturday until midnight on Sunday. Russia has indicated a willingness to resume talks for a more extended halt to the conflict.
Yesterday’s upbeat mood that saw equities rally further has lost some momentum today. U.S. stock futures an hour before the release of U.S. March consumer prices showed no net change. Share prices in Indonesia, Japan, India and South Korea scored gains of 2.1%, 1.8%, 1.7% and 1.4%, but those in China, Singapore, Australia and New Zealand closed up 0.5%. Plus the Australian and New Zealand markets closed 0.1% and 0.7% lower.
The dollar has been narrowly mixed as investors await the U.S. release, with gains of 0.2% against the yen, Aussie dollar and loonie and 0.2% losses versus the euro and Swiss franc. Sterling is unchanged but hovering near a one-month high.
Long-term interest rates continue to swing widely. Today’s action has seen net gains in 10-year sovereign debt yields of seven basis points in France and Italy, six bps in the U.K, Australia and Spain, five bps in Germany and Japan but just a single basis point in Switzerland and the United States.
The all-important price of West Texas Intermediate oil has rebounded 0.3% further and is marginally above $98 per barrel. Precious metal prices have lost some ground.
Prior to the U.S. CPI release, price data reported in several other countries provided an early glimpse of how war has changed that landscape.
- Chinese producer prices jumped 1.0% on month in March and posted a 0.5% year-on-year rise to end a 41-month streak of negative year-on-year readings.
- Chinese consumer price inflation, however, settled back to 1.0% from February’s 35-month high of 1.3%.
- German consumer prices were confirmed to have risen 1.1% in March, lifting their 12-month rate of increase to a 25-month high of 2.7% from 1.9% in February and a cyclical low of 1.6% back in September 2024. The energy component swung from a year-on-year 1.9% decline in February to a rise of 7.2% booked in the following month. Core inflation printed at 2.5% for a third month in a row.
- Japanese domestic corporate goods prices jumped 0.8% in March and climbed to a 4-month year-on-year high of 2.6% after a February reading of 2.1%. Import price inflation catapulted from 0.4% in February to 2.2% in March.
- Latvian CPI inflation accelerated to 3.4% last month from 2.3% in February and a low of 0.1% back in May 2024.
- Moldovan CPI inflation rose to 5.8% in March from 5.1% in February and 4.9% in January.
- Norwegian core consumer price inflation held steady at 3.0%, but total inflation including energy climbed to 3.6% in March from 2.7% in the prior month.
- Danish CPI inflation of 1.2% last month followed a 22-month low of 0.7% in February.
- Colombian CPI inflation of 5.6% in March was the most in a year and a half.
- Croatian producer price inflation leaped to a 35-month high of 3.2% in March after readings of 0.9% in February, -1.2% in January and 0.1% in December. The 6.5% reading of Lithuania’s PPI inflation last month followed -2.9% in February.
Other than energy, the elements of the U.S. consumer price index were steady to lower in March, with food price inflation dropping to 2.7% from 3.1%, services dipping 0.1 percentage point to 3.1%, and shelter matching February’s 3.0% pace. To be sure, all of these more or less stalled components remain well above the 2.0% threshold that is considered to define the appropriate objective, and that level has been exceeded since 2021. Reflecting the supply shock caused by the Middle Eastern war, moreover, consumer price inflation among energy items accelerated to 12.5% from 0.5% in the previous month and -0.2% in January. That, in turn, lifted overall CPI inflation to a 22-month high of 3.3% from 2.4% in the first two months of 2026 and a cyclical low of 2.3% touched last April. This result matched market expectations and was associated with core CPI inflation (excluding food & energy) of 2.6%, which is a tad less than forecast but above the 58-month low of 2.5% seen in both January and February.
Two more central banks left policy interest rates steady. Late yesterday came word from the Central Reserve Bank of Peru that its rate would stay at 4.25%, the level since last September and down from a peak of 7.75% maintained during January-September of 2023. Peruvian consumer price inflation jumped to 3.8% in March from 2.2% in the prior month.
A planned announcement today from the Bank of Korea left its key interest rate unchanged at 2.5%. The last change, a cut of 25 basis points, occurred in May 2025 and the cyclical peak from January 2023 until October 2024 was 3.5%. Today’s statement predicts higher inflation in the near term, explaining that
The domestic economy is facing both increased upside risks to inflation and downside risks to growth due to the war in the Middle East, while uncertainty in the outlook remains significantly high. Regarding financial stability, it is necessary to remain cautious about the impact of increased exchange rate volatility and to continue to monitor whether a stabilization trend in housing prices in Seoul and its surrounding area and in household debt will be sustained. Therefore, the Board will make its policy decisions while closely monitoring changes in domestic and external policy conditions, such as the war in the Middle East, and examining the resulting impacts on inflation, growth, and financial stability.
Other data release highlights this Friday include industrial production figures from several countries for February. Output compared to levels from a year earlier rose by 7.0% in Sweden, 5.7% in Finland, 2.2% in Turkey, 0.5% in Italy, 1.1% in Austria and 3.3% in Norway but fell 2.5% in Slovakia, 1.3% in Mexico and 2.6% in Denmark.
Swiss consumer confidence weakened to a March reading of -43 (a 27-month low) from -30 in the first two months of 2025. Consumer sentiment in Indonesia dropped to a 5-month low this month.
New Zealand’s manufacturing purchasing managers index fell to a 4-month low in March of 53.2.
Canadian labor market statistics for March showed an unchanged but slightly lower-than-anticipated 6.7% jobless rate, a 14.1K rise in jobs after big drops in the first two months of the quarter, and a larger acceleration of on-year wage growth than had been forecast of 5.1%.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Korea, Canadian labor market data, Chinese CPI, Japanese PPI, U.S. CPI
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