With the trade figures illustrating a mixed picture of the second largest economy in the world, investors are likely to adopt a guarded approach ahead of first quarter earnings releases from two of the biggest banks in the United States. Investors may get a glimpse on how the fading impacts of tax cuts and the Federal Reserve’s cautious shift on interest rates have impacted JP Morgan and Wells Fargo. Should earnings from both banks disappoint, risk sentiment for global equities may take a hit.
Dollar Searches for new catalyst
The Dollar Index has surrendered much of its gains and is now trading below the 97 mark, even as the latest US Producers Price Index exceeded market expectations, while jobless claims surprisingly fell to their lowest levels since 1969.
Coupled with the March US inflation data released earlier this week, the data underscores the central bank’s “patience” on US interest rates, and this may remain unchanged for the rest of 2019.
Markets have now dialed back expectations of a US rate cut by December to just below 50 percent, from above 57 percent earlier this week. With such odds being priced into the Greenback, any data or event that tilts the balance of risks to either side could influence the Dollar’s direction, although which is the way forward remains uncertain for the time being.
Gold steadies after the biggest drop in two weeks
Meanwhile, markets are pushing the boundaries on risk sentiment as Gold fell by over 1 percent on Thursday before bouncing off the $1,290 mark. Although the IMF’s cut to its 2019 global growth forecast was a downer, investors are hoping that a not-too-distant US-China trade deal and a stabilizing Chinese economy may weaken headwinds currently felt by the global economy. However, should the outlook take a turn for the worse, that could jolt risk-off sentiment and rally support for the safe haven assets, including Bullion.
Oil set to post longest winning streak since 2016
Even as WTI futures have fallen below $64/bbl at the time of writing, Oil prices remain on course for its longest run of weekly gains since 2016.
The conflict in Libya and US sanctions on Venezuela and Iran are constraining Oil supplies, even as OPEC+ producers press on with output cuts through June. However, uncertainties on the demand side risk derailing attempts by OPEC+ to rebalance, as the International Energy Agency cautioned in its latest monthly report that it could lower global demand forecasts. Should global growth weaken further, that may result in Oil prices unraveling some of its year-to-date gains.
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