While oil prices test new highs, the global monetary landscape is shifting from “when will they cut?” to “how long can they hold?” Here are the key pillars of today’s market movement:

• Fed’s “Hawkish Hold”: The Fed kept rates steady, but the internal “vibe” has shifted. Three members officially dissented against the easing bias, effectively signaling that for them, the rate-cutting cycle is over.
• The Hormuz Factor: With no resolution in the Strait of Hormuz, US 10-year yields have gapped higher to 4.4%. As long as the blockade continues, the “scare factor” remains the primary driver for a flatter yield curve.
• ECB’s Dilemma: Brent oil climbing above $115/bbl is stoking inflation fears. While a hike today is a “tail risk” (10% probability), expect a very hawkish tone to protect credibility against mounting stagflationary pressures.
• UK Political Risk Premium: The Bank of England is facing a perfect storm. Not only is inflation sticky, but Prime Minister Starmer’s fragile position is re-introducing a “political risk premium” to Gilts. 10Y Gilt yields are already testing levels well above 5%.
• Data Avalanche: Today is a macro-heavyweight day. Watch for Eurozone Q1 GDP and CPI (forecast 3%), alongside US PCE inflation (expected to rise to 3.5%). These prints will confirm if the “inflation second wave” is officially here.