FX Intervention Threat Turns up a Notch and Commodities Shine Ahead of PCE

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(AI Summary)

The value of the dollar hasn’t changed much compared to last week as markets appear to be waiting for the PCE inflation data that will be released on Friday. However, since it’s a public holiday on Good Friday, there might be low liquidity which can result in the dollar becoming more volatile. Despite a slight lift in the dollar, gold is still trying to increase in value and maintain its bullish bias. Central banks, especially China, have been buying gold to hedge a weaker currency as declining interest rates are also likely to elevate the allure of gold; while at the same time, gold benefits from its safe haven appeal amidst ongoing geopolitical tensions.

Sticking with commodities, cocoa has been performing better than cryptocurrencies and Nvidia this year. This is because there have been supply issues which have caused the price of cocoa to rise. In the oil market, storage data shows that there is an increase in stock levels. As a result, some traders and funds are selling and taking profit as the month and the quarter comes to a close. Lastly, OPEC has confirmed that the group will not alter output levels in Q2 and will reassess in June.

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In the foreign exchange market, the Bank of Japan and the finance ministry are not happy about the weakening Japanese yen. The level of 152.00 on the dollar-yen is causing concern as it may lead to intervention. There have been statements suggesting that authorities will take ‘decisive steps’ soon. It’s possible that intervention may happen during the upcoming Easter holidays when liquidity is lower, but the timing is still uncertain and this issue may drag out beyond the holiday period.

Looking forward, GDP data for Q4 will be released for both the UK and the US. However, it’s unlikely that there will be a major market response unless there are significant deviations from expectations. The market is more focused on the PCE print on Friday, as it is expected to have an impact on the foreign exchange market.

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