Investors upped bets that Western central banks — until recently on a rate-cutting cycle — would instead increase borrowing costs.
Reduced rates by the Federal Reserve, European Central Bank, and Bank of England would offer respite not just for their own economies but also those of developing countries that borrow in foreign currencies to attract global investors.
Instead, the Iran war has driven inflation worries, and Deutsche Bank research suggested policymakers were also likely to compensate for underestimating inflation in years past.
A month ago, traders were betting on a 93% chance of Fed rate cuts this year; that has now essentially flipped. JPMorgan and Goldman Sachs, meanwhile, forecast two rate hikes by the ECB, as well as increases by the BoE.