Equity markets a slightly under pressure on Tuesday following a wide array of earnings releases and as investors eye further US data later in the week.
Interest rate expectations have become more hawkish in recent weeks but investors don’t appear convinced it’s going to unfold that way. We’re still looking for weaknesses in the labour market and signs of inflationary pressures softening, something we could see over the next couple of months at which point expectations could be pared back once more.
Ueda indicates BoJ tweaks unlikely this week
Earlier today, new Bank of Japan Governor Kazuo Ueda appeared to push back against the prospect of any changes to monetary policy ahead of the meeting on Friday. While the central bank was not expected to make any changes, there remained the possibility of a tweak to yield curve control given the higher inflation we’ve seen, possibly signaling a slight change in direction under the new leadership.
But Ueda appeared to indicate that isn’t something that will be considered at the current time, warning that if inflation or wages rise more than expected – despite the former still being driven by cost-push factors – a response such as rate hikes could be considered. But he insisted that tightening now could cause a grave situation in the future, which appears to have closed the door to such a consideration this week.
Calls for $100 oil premature
Oil prices are slipping again on Tuesday after paring losses over the last couple of sessions. It would appear crude prices have now settled back into their pre-OPEC+ intervention trading ranges, with Brent between $78-$88 and WTI $73-$83.
The move lower today could even be another push to close the OPEC+ gap from a few weeks ago after falling just short late last week. Calls for $100 in the aftermath of the OPEC+ decision may have been premature, although, amid such an uncertain outlook, it is still possible if a soft landing is achieved. The second half of the year is poised to be more challenging for the global economy though as conditions tighten further and prior tightening takes hold.
Consolidation in gold ahead of US economic data
Gold is relatively unchanged today, continuing the consolidation we’ve been seeing over the last week or so. Higher rate expectations have pushed it back from near-record highs but traders appear unconvinced by those expectations and reluctant to give up on all-time highs.
The yellow metal has remained choppy around $2,000, a big psychological level, albeit one that on this occasion hasn’t been the catalyst for a significant shift in either direction. Instead, traders appear willing to wait for further US data – of which there’s plenty to come this week – before making their mind up. In the interim, consolidation may continue.
Could we soon see sharp declines in bitcoin?
Bitcoin has pulled back into an interesting zone after briefly breaching $30,000 in recent weeks. It fell towards $27,000 earlier in the week, around $500 above the lows in the second half of March during the ascent. A break of $26,500 now could signal a much sharper decline, although some consolidation between here at $29,000 may be more likely for now.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
