March 2nd. Due to the Middle East war driving up oil prices and sparking inflation concerns, the currency market on Monday scaled back bets on rate cuts in the U.S., UK, and Eurozone. The possibility of the Fed cutting rates three times in 2026 has dropped from nearly 50% last week to 20%. Traders no longer anticipate the Bank of England cutting rates three times this year and have reduced the probability of a rate cut in March from over 80% to 60%. The probability of a rate cut by the ECB this year has halved, pricing in only a 5-basis-point rate cut. The yield rise of two-year government bonds, most sensitive to monetary policy changes, in the U.S., UK, and Germany has outpaced long-term yields. Driven by the largest surge in Brent crude oil prices in four years, inflation indicators have surged significantly.Laura Cooper, Global Investment Strategist and Head of Macro Credit at Nuveen Investments, said: "The ongoing rise in oil prices will have a significant pass-through effect on the global economic and inflation path. A more prolonged energy pulse could complicate the disinflation process and delay further rate cuts." (FXStreet)