The first week of the new month brings about some ‘high’ rated risk events, with the Bank of England meeting and Non-Farm Payrolls at the center. Overall, pressure on central banks to take the foot off the accelerator, and start to scale back asset purchases in the second half of the year, will likely intensify.
Political risks are also on tap as the UK’s local elections could potentially embolden the Scottish independence movement. The rising toll of the pandemic on India will remain the focus, and continues to weigh on sentiment, as vaccine rollouts continue.
The Bank of England is likely to ease its foot off the stimulus pedal and reduce its pace of bond purchases as Britain’s economy appears to be bouncing back. The BoE and elections could bolster Sterling sentiment and volatility.
In the US, all roads lead to the employment release, which faces some upside risks for April. The April NFP consensus is for a further increase of around 850,000 jobs. The jobless rate should drop to 5.7% from 6.0% in March.
This week USD remains firm, breaking the link with Treasury yields in the latest phase, but holding at a 2-week high in the wake of rates talk. This comes after Mrs Yellen stressed the need to lift rates, catalysing a sell-off on Wall Street. The risk-off tone was also responsible for driving Treasuries slightly lower initially.
The USDIndex rose to 91.40. EURUSD ebbed below 1.1990 for the first time since April 19th. USDJPY lifted towards the 109.50 level, zoning back in on Monday’s 3-week high, and Cable posted a 2-day high but remains overall sideways ahead of BoE and elections. Key resistance remains at 1.4000.
Global stock markets continued to outperform but on more cyclical parts of the market and travel stocks. Tech stocks meanwhile depreciated this week as investors turned away, unnerved by indications that higher inflation was beginning to emerge. Speculation that stronger growth will see central banks take the foot off the accelerator also weighed on stocks that benefited from stay home orders.
Gold is unchanged, hovering within the 3-week range on firm USD as the possibility of higher US rates supports USD. Palladium soared to another record high this week, while Silver and Platinum sustain more than 2-month highs.
Ethereum extended gains, posting a new all-time high, pumping by 160% in value in a week. Bitcoin also sustains a bullish tone overall, however this week’s move will determine its direction after the rapid sell-off on Tuesday.
USOil prices spiked to $66.50 as more US states eased lockdowns and the European Union sought to attract travelers, improving the demand outlook for petrol and jet fuel.
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Andria Pichidi
Market Analyst
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