[MARKET UPDATE]: Markets volatile after ECB and US PPI, but the primary driver is a surge in energy prices taking DXY above 200dma

Ahead of the ECB rate decision, oil prices were rallying amid further reports that the Houthis could be on the verge of taking control of the Bab al-Mandeb Strait. SNN also reported that initial indications suggested the Houthis had arrived on the island of Mayun, located in the Bab al-Mandeb Strait. The ECB rate decision initially sparked a dovish knee-jerk reaction, with the 2027 inflation forecast lower than some had expected, while it also reiterated its non-committal guidance. However, Bunds quickly reversed and moved lower as the market refocused on the surge in energy prices and associated inflation risks. The Euro also saw a bout of strength amid the ECB's concerns surrounding the inflation outlook, however this reversed after the PPI data was released. Following the US PPI report, which was broadly in line overall — with core M/M softer but headline Y/Y hotter than expected — the Dollar began to dominate as crude prices continued to surge, seeing the DXY rise above its 200dma. WTI has since reclaimed USD 100/bbl, while global government bond yields are surging. The US 30-year yield has risen to 5.34%, its highest level since 2007, returning to levels seen around the time Treasury announced it would increase the size of its long-end buyback operations. The Dollar Index has reclaimed its 200DMA, while USD/JPY is at session highs above 154.00. EUR/USD is testing 1.16 to the downside, while Cable is testing 1.35. AUD has fallen below 0.72, while the Kiwi is testing 0.58 at the time of writing. Gold prices are at session lows, trading around USD 4,340/oz, with the precious metal pressured as yields and the Dollar surge. Overall, the primary driver of the latest global market moves appears to be the surge in energy prices, amid escalating concerns surrounding the Houthis and the Bab al-Mandeb Strait. The rise in crude is exacerbating inflation concerns, driving global yields higher and supporting the Dollar, while weighing on equities and gold.