FUNDAMENTAL REVIEW FOR THE WEEK (8 - 12 April 2024)

The past week allowed the “risks” to win back part of their losses against the dollar, however, Friday’s data on nonfarms in the classic scenario: “weak forecast - strong report - retroactive downward revision” managed to cool the ardor of the bulls of the euro, pound and co. Now the main question is how the market will digest this report “with a cool head” and prepare for new “digital carousels” on Wednesday, this time on US inflation.

It is the Stars and Stripes consumer prices for March that will confirm or refute Jerome Powell's assumptions about the seasonality of growth in spending indicators at the beginning of the year.

If the report records a continuation of the growth trend, then markets will shift expectations for the first Fed rate cut from June to September with a rise in the protective greenback as a reaction.

A potential reason for this increase is high oil prices amid a new round of escalation in the Middle East conflict, in particular the Israeli airstrike on the Iranian consulate in Damascus last week. The potential expansion of the confrontation in the Middle East and the possible involvement of Iran in it became the catalyst for the growth of “black gold” by almost 20% since the beginning of the year and by 5% over the past week.

US industrial inflation (PPI) on Thursday is no less important (the forecast is still in the fall), since after receiving reports on US CPI and PPI inflation, banks will issue a forecast for consumer inflation - the main benchmark for the Fed. The figures themselves will be published at the end of April, but they can be calculated quite well based on upcoming reports, which will lead to a final adjustment of market expectations regarding the time of the first Fed rate cut and the trend for the main major pairs.

Yes, the calendar still includes meetings and rates of the BoS (Wednesday) and the ECB (Thursday), but there doesn’t seem to be much point in waiting for any revelations here. Regulators will leave rates unchanged by 99% but may clarify their intentions regarding the time of the first-rate reduction. The main “volatility lever” is still in charge of the Fed.

Good luck and informed investment decisions!