Brent's 7% slide eases inflation fears as dollar slips and RBA eyes 2008-high rate
Brent crude fell more than 7% on Monday, its sharpest single-day drop in months, after Tehran said contacts with Washington aimed at ending their eight-month war were continuing. The slide in energy prices eased inflation concerns and dragged longer-dated US Treasury yields lower, with the 10-year note steady at 4.9145% and the 30-year at 5.2868% after both touched near two-month lows in the previous session.
The dollar index, which measures the currency against a basket of peers including the yen and euro, last traded a shade weaker at 101.76 after hitting a one-month low on Monday. The euro edged up to $1.1185, the yen was flat at 157.915 per dollar during a Japanese holiday, and sterling firmed 0.05% to $1.3414 after PMI data showed British manufacturers began the final quarter of 2026 with their strongest output growth in more than two years.
"Oil relief is growing, but conviction elsewhere remains thin," Sim Moh Siong, FX strategist at OCBC, said in a note. "Cheaper energy is reshaping FX dynamics, while AI concerns and US election risks reinforce our view that the USD remains supported." An AI-driven stock market slump showed little sign of slowing, hurting risk appetite and lending some support to the dollar, while tensions around the US midterm elections kept the currency's safe-haven bid intact.
The Reserve Bank of Australia is expected to raise its official cash rate by 25 basis points to 4.85% on Tuesday, which would be the highest level since December 2008 and bring total tightening this year across five increases to 125 basis points. The Australian dollar was little changed at $0.7002 and the New Zealand dollar flat at $0.5617.
Several central banks issue policy statements this week, including Britain, Australia, Norway and Sweden. Economists polled expect the Bank of England to raise its Bank Rate to 4.0% from 3.75%, its first hike since August 2023, when inflation was still more than triple its 2% target.
