Central Banks in Focus: Market Reaction to Policy Decisions

Global markets are watching economic data and central bank decisions. The Caixin Manufacturing PMI boosts oil prices. The USD index and ISM Manufacturing are the focus.

As the global markets kick off a new week, investors closely monitor key economic data releases and central bank decisions for clues about the trajectory of major currencies and commodities. With European markets closed for Easter Monday, Global markets also closely focus on US and Asian developments.

Caixin Manufacturing PMI Boosts Crude Oil Prices

China’s manufacturing sector showed resilience in the first quarter of 2024, with the Caixin Manufacturing PMI expanding for the fifth consecutive month. Furthermore, the sector’s growth was underpinned by increased inflows of new work, domestically and abroad. Consequently, this positive momentum has fueled optimism about the demand for crude oil, contributing to WTI oil prices breaking above $83 per barrel. Therefore, analysts anticipate continued growth in China’s manufacturing sector to support oil prices soon.

USD Index and ISM Manufacturing Data

In the US, all eyes are on the ISM Manufacturing index, which has contracted for the past 16 months, signaling weakness in the manufacturing sector. While March’s estimate suggests another month of contraction, market participants are particularly attentive to the prices component of the report. Rising prices for raw materials could reignite concerns about inflationary pressures, potentially bolstering the dollar. The Dollar Index (DXY) remains under scrutiny amid expectations of the Federal Reserve’s monetary policy stance.

Central Banks in Focus: Market Reaction to Policy Decisions

Central banks around the world are maintaining a cautious approach amid economic uncertainties. The Federal Reserve, Bank of England, and Bank of Canada have kept interest rates unchanged in recent meetings, emphasizing the need for data-dependent policy decisions. The European Central Bank’s (ECB) decision to steady interest rates in Europe reflects concerns about subdued economic activity and declining inflation. Similarly, the Swiss National Bank (SNB) eased monetary policy by lowering its key policy rate, citing subdued inflation and moderate economic growth.

Currency Outlook for AUD, NZD, JPY, EUR, CHF, GBP, and CAD

The Australian Dollar (AUD) and New Zealand Dollar (NZD) will likely experience limited trading activity as financial markets in both countries are closed for Easter Monday. Meanwhile, the Japanese Yen (JPY) faces pressure amid positive sentiment in the USD/JPY currency pair. Central bank decisions and economic data influence the Euro (EUR) and Swiss Franc (CHF), while the British Pound (GBP) awaits further guidance from the Bank of England. The Canadian Dollar (CAD) awaits the Bank of Canada’s Business Outlook Survey, which could impact the currency’s performance.

Investors remain cautious amid lingering uncertainties as global markets navigate economic data releases and central bank decisions. The outlook for currencies and commodities hinges on developments in key economies and central bank policies. With Easter Monday keeping European markets subdued, traders will increase trading activity as attention shifts to the US and Asia.

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