12 May 2026
Peter Dragicevich, Currency Strategist, APAC
• Market wobbles. Faster US inflation dampened the mood. US equities dipped, bond yields rose. USD firmer. AUD drifted back but still at elevated levels.• AU Budget. A lot of the big ticket items already known. More spending restraint would have been helpful. RBA still has more work to do in its inflation fight.
Global Trends
A few renewed wobbles across markets overnight. There have been no fresh developments related to the US/Iran conflict with hopes of a long-lasting peace deal fading and the Strait of Hormuz still effectively shut. Added to that, the economic aftermath of what has taken place continues to bubble to the surface. US CPI picked up in April with headline and core inflation both a bit higher than predicted. US headline inflation accelerated to 3.8%pa, its fastest pace since mid-2023, with a jump in gasoline and higher food prices coming through. There was also a noticeable quickening in core services inflation. More direct and indirect pass-through from the surge in...
12 May 2026
Karl Schamotta, Chief Market Strategist
The factors driving Israel’s currency higher may owe less to Jerusalem than to Silicon Valley
The Israeli shekel’s surge to a 33-year high against the dollar—breaching the psychologically significant threshold of three to the greenback for the first time since 1993—is one of the stranger puzzles in global currency markets. Up roughly 24% since early last year and nearly 10% in 2026 alone, the shekel is outpacing every one of its peers, even as the country remains embroiled in a multi-front conflict.
The most popular fundamental explanations for the rally are, on closer inspection, wanting.
Start with defence exports. Israel builds some of the world’s cheapest and most effective weapons systems, and order books have swelled in the aftermath of the country’s striking battlefield successes. Yet a boom in arms shipments has not prevented overall goods exports, adjusted for the exchange rate, from falling roughly 5% in the first quarter of 2026. Nor has it closed...
12 May 2026
Karl Schamotta, Chief Market Strategist
Underlying consumer prices climbed by slightly more than expected in the United States last month, reinforcing the case for a tightening bias from the Federal Reserve, and putting modest upward pressure on the dollar. According to data published by the Bureau of Labor Statistics this morning, the core consumer price index—with highly-volatile food and energy prices excluded—climbed 0.4% month-over-month, rising from the 0.2% pace set a month earlier, and was up 2.8% year-over-year. This topped consensus estimates among economists polled by the major data providers ahead of the release, which were set closer to the 2.7% mark. Headline prices rose 0.6% in April from the prior month, decelerating slightly from the prior 0.9% increase, and rising 3.8% over the same period last year.
Driven by the conflict in the Middle East, rising gasoline prices contributed almost 40% of the month-over-month headline increase as energy prices jumped another 3.8%. Food prices rose 0.5%, rebounding from a...
12 May 2026
Karl Schamotta, Chief Market Strategist
Good morning and happy US inflation day to all who celebrate. The dollar is advancing and Treasury yields are edging higher in the run-up to the week’s most important data release at 8:30, which is expected to show prices rising 3.7% in the year to April—the fastest rate since 2023. Most major currencies—including the euro, Swiss franc, Canadian dollar, Japanese yen, Australian dollar, and New Zealand dollar—are down roughly a third of a percent against the greenback from yesterday’s close.
Oil prices are on the ascent once again after President Trump called the latest Iranian peace proposal “garbage” and said last month’s ceasefire was on “massive life support,” raising the risk that the conflict in the Middle East could resume within days. Brent crude is trading at $107 a barrel and West Texas Intermediate at $101, both up more than 3.5% from yesterday’s session. Traffic through the Strait of Hormuz remains at an effective standstill, reducing global energy supplies by roughly a fifth...
11 May 2026
Karl Schamotta, Chief Market Strategist
The dollar is advancing against its major rivals, buoyed by Friday’s stronger-than-expected payrolls report and yet another collapse in US-Iran peace talks*. Days after the Trump administration triggered a relief rally in financial markets by dangling a peace offer, Tehran yesterday released a response that reportedly demanded an end to the US naval blockade, a lifting of sanctions, a cessation of military operations, and formal recognition of Iran’s control over the Strait of Hormuz—while deferring the nuclear question entirely. President Trump dismissed these terms as “totally unacceptable”. Front-month crude prices are up 2.5% from Friday’s close—with Brent trading at $103 a barrel and West Texas Intermediate nudging $98—and yields are pushing higher as inflation expectations climb. Equity futures are setting up for a strong open as robust earnings and rising artificial intelligence spending provide powerful tailwinds.
Declines against the dollar look relatively...
10 May 2026
Peter Dragicevich, Currency Strategist, APAC
• Push-pull forces. Positive US jobs offset by US rejecting Iran’s latest offer. US equity futures dipped & oil higher this morning. AUD at elevated levels.• Macro news. Australian budget in focus (Tues night). In the US, CPI inflation is due (Tues night). US producer prices & retail sales out later in the week.
Global Trends
Risk sentiment ended last week on positive footing as hopes for a US/Iran deal were compounded by a better than expected US jobs report. US non-farm payrolls surprised to the upside, rising by 115,000 in April. This broke the zig-zag pattern observed over the past few months, and the details were largely positive with a good breadth of jobs growth across sectors. US unemployment continues to hover at ~4.3%, inline with its one-year average. That said, it wasn’t all positive macro news out of the US with the University of Michigan consumer sentiment index showing a further deterioration in confidence about the future and conditions because of worries...
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Latest Analysis
US inflation pulse reawakening
12 May, 2026
• Market wobbles. Faster US inflation dampened the mood. US equities dipped, bond yields rose. USD firmer. AUD drifted back but still at elevated levels.• AU Budget. A lot of the big ticket items already...
The shekel paradox
12 May, 2026
The factors driving Israel’s currency higher may owe less to Jerusalem than to Silicon Valley
The Israeli shekel’s surge to a 33-year high against the dollar—breaching the psychologically...
US inflation slightly exceeds expectations, underpinning the dollar
12 May, 2026
Underlying consumer prices climbed by slightly more than expected in the United States last month, reinforcing the case for a tightening bias from the Federal Reserve, and putting modest upward pressure...
Dollar grinds higher as inflation data looms and oil prices rise
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Good morning and happy US inflation day to all who celebrate. The dollar is advancing and Treasury yields are edging higher in the run-up to the week’s most important data release at 8:30, which is expected...
US-Iran negotiations fall apart—again—leading to reversal in currency markets
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The dollar is advancing against its major rivals, buoyed by Friday’s stronger-than-expected payrolls report and yet another collapse in US-Iran peace talks*. Days after the Trump administration triggered...
Two steps forward, one step back
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• Push-pull forces. Positive US jobs offset by US rejecting Iran’s latest offer. US equity futures dipped & oil higher this morning. AUD at elevated levels.• Macro news. Australian budget in...
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The superpeso's next act
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