Note: This week, instead of separate Currencies and Interest Rate Outlook publications, we're issuing one combined report covering both topics, due to the summer holiday period.

Higher oil prices increase inflation risks and raise the likelihood that central banks will need to tighten monetary policy further. We discuss the implications for U.S. and European interest rates, EUR/USD and the other major currency pairs.

Note: This week, instead of separate Currencies and Interest Rate Outlook publications, we're issuing one combined report covering both topics, due to the summer holiday period.

Higher oil prices increase inflation risks and raise the likelihood that central banks will need to tighten monetary policy further. We discuss the implications for U.S. and European interest rates, EUR/USD and the other major currency pairs.

The stock markets and the economy have been running on credit: companies are borrowing heavily to invest in AI, while investors increasingly buy shares with borrowed money, driving prices even higher. The resulting rise in share values then serves as collateral for loans used throughout the economy. As long as oil prices and inflation keep rising and central banks are forced to raise interest rates, this self-reinforcing mechanism becomes increasingly vulnerable, at a time when monetary and fiscal policy have little room left to intervene.