Imploded Investor Confidence in Euroland, Some Central Bank Decisions, and the Alleged Death of Another Top Iranian Official
March 17, 2026
In overnight financial market action,
- The dollar has dipped 0.3% against the Australian dollar following a rise in Australia’s Officials Cash Rate.
- The dollar is also down 0.2% versus the Mexican peso, and by 0.1% relative to the euro, Swissy and sterling but flat against the yen following more hints from Japan’s finance minister of possible intervention support for their currency.
- The price of oil rebounded somewhat more than 3.0% to $96.70 for WTI and $103.4 per barrel for Brent. Japan and other NATO governments are rejecting Trump’s call for their lent warship support to restore safe traffic through the Strait of Hormuz.
- Gold and silver prices have firmed marginally, while Bitcoin fell 1.1%.
- Equity markets in Asia recovered 1.6% in South Korea, 1.5% in Taiwan, 1.4% in Singapore, and 0.8% in Malaysia but fell 0.9% in China. Advances so far in major European equity markets range from 0.3% in Germany to 1.1-1.2% in Spain and Italy. U.S. stock futures are marking time near Monday’s higher closing levels.
- Ten-year sovereign debt yields have declined by six basis points in Australia, Italy and Great Britain, five bps in France and Spain, and three bps in Germany and Switzerland. The 10-year U.S. Treasury and Japanese JGB yields have stayed steady.
The German ZEW Institute’s monthly measures of investor confidence reveal an implosion of sentiment in March, presumably in response to the Middle East war, upsurge in energy costs, and fresh cracks in diplomatic relations between Europe and the United States. The German expectation index collapsed to a 10-month low reading of -0.5 from 58.3 in February and a 54-month high of 59.6 in January. The size of that month-to-month deterioration was only exceeded in April 2025 (associated with Trump’s original tariff hike threat) and March 2022 right after the outbreak of war in Ukraine. The index depicting perceived current conditions of -62.9 (a 3-month high) was still deeply negative but unaffected by the latest geopolitical shock. ZEW indices for the entire euro area swung to an 11-month low of -8.5 from +39.4 the month before. The accompanying sub-index for current conditions worsened to -29.9 from -13.6. Reflecting the energy price shock, Euroland’s measure of expected inflation leaped to +78.9 in March from +0.1 in February.
By a narrow 5-4 vote, the Board of the Reserve Bank of Australia pulled the trigger a a second consecutive 25-basis point hike of the Official Cash Rate, which at 4.10% will now represent its greatest elevation in ten months. Australian CPI inflation last month of 3.8% was above expectations and the central bank’s target range. The four dissenting votes favored leaving the OCR at 3.85%, but the majority’s view in a statement of explanation “judged that there is a material risk that inflation will remain above target for longer than previously anticipated and that the risks have tilted further to the upside.”
While part of the pick-up in inflation is assessed to reflect temporary factors, the Board judged that the labour market has tightened a little recently and capacity pressures are slightly greater than previously assessed. Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios could add to global and domestic inflation.
Central banks in Indonesia and Armenia left their policy interest rates unchanged. Bank Indonesia’s 7-day repo rate of 4.75% is a tad above the latest CPI inflation measurement. The interest rate underwent six 25-basis point cuts from September 2024 through September 2025 but has been kept at 4.75% for the past half year. The bank’s policy intentions are to lend support to the rupiah and to steer inflation into the medium-term target corridor of 1.5-3.5%.
The Central Bank of Armenia’s refinancing rate has been at 6.5% since a 25-basis point cut this past December. That was one of two such reduction in 2025 following a combined drop of 225 bps in 2024. Armenia’s central bank rate had peaked at 10.75% from December 2022 until an initial cut made in June 2023. A statement released by monetary officials today lays out double-sided risks and a landscape fraught with uncertainty. “geopolitical uncertainty, tensions in international trade relations, and concerns regarding potential disruptions in global supply chains continue to remain a key source of elevated price volatility in the global economy. Global oil prices have increased sharply amid escalating tensions in the Middle East, while uncertainty regarding their outlook has increased significantly. Food prices have also exhibited some volatility amid concerns regarding potential disruptions in global supply chains.”
Among price data released today, Switzerland’s combined index of producer and import prices slid 0.3% on month in February, deepening the 12-month rate of decline by half a percentage point to -2.7%, its most deflationary reading in 63 months. Domestic PPI and import prices were 2.3% and 3.5% lower than a year earlier, respectively. Italian consumer price inflation got revised 0.1 percentage point lower to 5-month high of 1.5% and was associated with 2.4% when food and energy are excluded. Croatian consumer price inflation accelerated to a 3-month high of 3.8% last month. Food prices in New Zealand were 4.5% higher than a year earlier in February, their most elevated point since October.
Japan’s tertiary index, a gauge of service sector activity, jumped by 1.7% in January. The 1.5% advance from a year earlier was down from 2.2% in the final quarter of 2025 and a gain of 2.0% on average for all of last year.
U.S. pending home sales will be reported soon.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank Indonesia, Central Bank of Armenia, German and Euroland ZEW expectations, Reserve Bank of Australia
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