On Monday, Asian shares showed little movement as investors remained apprehensive ahead of key U.S. inflation data, which could influence the outlook for interest rates. Meanwhile, concerns over potential currency intervention from Japan put a temporary halt to the yen’s decline.
China’s central bank orchestrated a rally in the yuan by setting a stronger fix for the currency, causing the dollar to weaken against a basket of currencies.
The spotlight for the week is on the U.S. core personal consumption expenditure (PCE) price index, scheduled for release on Friday. Analysts anticipate a 0.3% increase in February, with the annual pace staying at 2.8%. Any deviation from these expectations could impact hopes for a Federal Reserve rate cut in June.
With many markets closed for Easter on Friday, the full impact of the PCE data will be seen in the following week.
Federal Reserve Chair Jerome Powell is expected to participate in a moderated discussion at a policy conference on Friday, alongside Fed governors Lisa Cook and Christopher Waller.
In Europe, inflation data from various countries, including France, Italy, Belgium, and Spain, will be released ahead of the overall EU CPI report on April 3. Additionally, Sweden’s central bank meeting on Wednesday is anticipated to maintain rates at 4.0%, although the surprise rate cut by the Swiss National Bank (SNB) has prompted expectations for a dovish statement.
The prospect of declining borrowing costs globally has buoyed equities, with the S&P 500 up nearly 10% year-to-date. However, on Monday, S&P 500 futures and Nasdaq futures experienced slight declines.
Asian-Pacific shares outside Japan remained flat, hovering just below eight-month highs, while Chinese blue chips saw a modest increase. Japan’s Nikkei dipped 0.86% after recording a 5.6% surge last week to reach a new all-time peak, driven by yen depreciation.
Despite the Bank of Japan’s (BOJ) potential shift away from ultra-accommodative policies, the dollar remained resilient, with investors interpreting it as a singular event rather than a series of hikes. The dollar was marginally lower against the yen at 151.25, cautious of breaching the 152.00 level that could prompt Japanese intervention.
Japan’s top currency official reiterated concerns over the yen’s weakness, cautioning against excessive moves not reflecting fundamentals.
In currency markets, the euro traded at $1.0816, subdued by the Swiss franc’s decline post-SNB rate cut.
While the dollar’s strength has slightly dimmed gold’s appeal, the metal inched higher to $2,169 an ounce after reaching a record peak of $2,217.79 last week.
Oil prices were supported by Ukraine’s attacks on Russian refineries and a decline in U.S. rig counts, with Brent rising to $85.95 a barrel and U.S. crude firming to $81.19 per barrel.