Markets dismiss oil strategic reserve release impacts; US inflation unchanged, impact dismissed; China new car sales weak; RBA shifts sharply on inflation risks; UST 10yr at 4.21%; gold falls and oil rises; AU$1 = 71.5 USc;

Here's our summary of key economic events overnight that affect Australia with news markets seem to be ignoring current economic data releases, building higher risk settings.

First, oil prices have risen despite official fanfare that strategic oil reserves are being released. Secondly, 'risk-free' benchmark interest rates are rising despite US inflation coming in unchanged. And thirdly, the sudden twist in Aussie rate expectations has seen their currency appreciate significantly, up +2.5% from the start of the week, up almost +7% since the start of 2026.

But first in the US CPI inflation in February came in at the expected 2.4% rate, unchanged from January. But of course this survey was for a period that predates the current war impacts. Their core inflation rate rose slightly in February from January, to be 2.5% in February. In this data year-on-year petrol prices fell -5.6% to give these results, and we all know they have actually risen +22% in the past month. No doubt consumers there will be wonder why, if the US is a net energy exporter. But Trump's billionaire mates won't be turning down a grift.

US mortgage applications rose for a fourth consecutive week last week, up +3.2% from the prior week, driven largely by new home purchase activity, and in spite of rising interest rates. There may by FOMO operating here, fear of even higher rates locked in for the future.

Chinese new vehicle sales fell sharply in February from January. But that sort of seasonal shift isn't unusual. However, February sales were actually -15.5% lower than February 2025, and actually even lower than in February 2016. After a very strong run over the past three years, the Chinese car-making industry will be looking at the developing 2026 trends nervously. Beijing doesn't need this sector to repeat what went on in their residential housing sector.

In Europe, ECB boss Lagarde has been out emphasising that they will be redoubling their efforts to keep inflation under control with an active monetary policy in the face of oil price pressures, and "will take the necessary measures to control inflation".

In England, we should note that their central bank's prudential regulators have given on-line fintech Revolut a full banking license. This is expected to see them attack mainline banks in their most profitable sectors, lending, although Revolut will not be encumbered with branches or any broad requirements to provide full service offerings. Revolut has been a haven for crypto transactions.

And staying in Europe, we should note there is an election in three weeks in Hungary, and EU member state. Current polling shows Prime Minister Viktor Orbán is heading for defeat. The pressure is on Orbán, and he has called for Russian help to smear his opponents.

Here in Australia, there are more stories about panic buying of fuel, especially diesel, as farmers and fishers worry about availability to keep their operations going. They worry that food prices will be next.

And staying in Australia, Westpac among others are suddenly forecasting that the RBA will hike its cash rate target by +25 bps on March 17 to 4.1% and again in May to 4.35%. The sudden rise in inflation threats are behind the sharp change, with their central bank "feeling compelled to act".

The UST 10yr yield is now just on 4.21%, up +7 bps from yesterday. The key 2-10 yield curve is marginally steeper at +57 bps (+1 bp). Their 1-5 curve is much steeper +20 bps (+5 bps) and the 3 mth-10yr curve is now at just on +51 bps (+9 bps). The China 10 year bond rate is also unchanged at just on 1.81%. The Japanese 10 year bond yield is lower by -3 bps at 2.16%. The Australian 10 year bond yield starts today at 4.91%, up +6 bps from yesterday.

On Wall Street, the S&P500 was little-changed in Wednesday trade Overnight European markets were lower between Frankfurt's -1.6% and Paris's -0.2%. Yesterday Tokyo partially rose +1.4%. Hong Kong dipped -0.2% and Shanghai was up +0.2%. Singapore was little-changed, up +0.1%. The ASX200 rose +0.6%.

The price of gold will start today down -US$58 from yesterday at US$5170/oz. Silver is down -US$4 at US$85.50/oz today.

American oil prices are up +US$3, at just under US$87.50/bbl, while the international Brent price is now just over US$91.50/bbl. The Straits of Hormuz remain essentially closed. But even if they reopened today, the status quo is unlikely to be restored. So the echo of this crisis may last a very long time. At least, that is what markets are pricing in.

The Australian dollar is up +20 bps against the USD from yesterday, now just over 71.5 USc. But against the Japanese yen we are up +80 bps at ¥113.6. Against the euro we are up +50 bps at 61.8 euro cents. 

The bitcoin price starts today at US$70,706 and down -0.7% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.6%.