On Monday, Asian shares exhibited uncertainty as investors closely monitored the upcoming U.S. inflation data, with concerns that robust figures could disrupt expectations for lower interest rates. Additionally, the prospect of currency intervention by Japan momentarily halted the yen’s depreciation.
China’s central bank orchestrated a rally in the yuan by establishing a firmer fix for the currency, leading to a modest decline in the dollar across the board.
The focal point of the week will be the release of the U.S. core personal consumption expenditure (PCE) price index on Friday. Expectations suggest a 0.3% rise in February, maintaining the annual pace at 2.8%. Any deviation from these figures could be perceived as a setback to anticipations for a Federal Reserve rate cut in June.
Given the closure of many markets for Easter on Friday, the full impact of the PCE data is expected to manifest in the following week.
Federal Reserve Chair Jerome Powell, who adopted a dovish stance last week, is scheduled to participate in a moderated discussion at a policy conference on Friday. Other Fed governors, Lisa Cook and Christopher Waller, are also slated to make appearances during the week.
In Europe, inflation metrics from several countries, including France, Italy, Belgium, and Spain, are anticipated ahead of the overall EU CPI report on April 3. The Swedish central bank’s meeting on Wednesday is expected to maintain rates at 4.0%, although the recent unexpected easing by the Swiss National Bank (SNB) has led to speculation of a dovish statement.
The expectation of declining borrowing costs globally has buoyed equity markets, with the S&P 500 up nearly 10% year-to-date. However, on Monday, S&P 500 futures and Nasdaq futures experienced marginal declines of 0.1% each.
Similarly, EUROSTOXX 50 futures remained steady, while FTSE futures saw a slight dip of 0.14%.
The MSCI’s broadest index of Asia-Pacific shares outside Japan hovered around eight-month highs, registering a flat performance, while Chinese blue chips posted a modest gain of 0.23%.
Japan’s Nikkei, which surged 5.6% last week to reach a new all-time peak, retreated by 0.86%, influenced by the yen’s recent weakness.
Despite the dovish sentiment expressed by the Fed and other central banks, the dollar retained strength, partly attributed to the Swiss National Bank’s rate cut and the People’s Bank of China’s apparent decision to permit the renminbi to depreciate.
The dollar’s resilience persisted even amidst indications of a shift away from ultra-loose monetary policies by the Bank of Japan (BOJ). On Monday, the dollar saw a minor decline against the yen, reaching 151.25 yen after a weekly increase of 1.6%.
Market participants remained cautious around the 152.00 yen level, which historically prompted Japanese intervention in currency markets.
Japan’s senior currency official cautioned against the yen’s current weakness, emphasizing that excessive movements were undesirable.
The euro remained subdued at $1.0816, influenced by the Swiss franc’s decline following the SNB’s unexpected rate cut.
Although the dollar’s strength exerted some pressure on gold, the precious metal inched higher to $2,169 an ounce, rebounding from its record peak of $2,217.79 last week.
Oil prices found support from Ukraine’s attacks on Russian refineries and a decline in U.S. rig counts. Brent rose by 52 cents to $85.95 a barrel, while U.S. crude advanced by 56 cents to $81.19 per barrel.
