20.03.23 - 24.03.22
Results of the previous week
US indices once again saw a mixed performance. On the one hand, the US Federal Reserve increased its key interest rate by just 0.25%, which the market perceived as a more dovish decision. Stock indices responded by rising. However, concerns that a full-scale banking crisis could unfold are weighing on investor sentiment key indices, which prevented them from seeing a further upward push.
The Fed's interest rate hike helped the dollar experience a moderate strengthening. The rather reserved reaction was based on the fact that the Fed raised the rate by less than what the market had expected. What's more, inflation in the UK proved to be higher than forecast, which buoyed the pound. The euro also displayed relative stability as the ECB is prepared to tighten its monetary policy further.
Brent crude oil's attempts to pull away from low prices proved unsuccessful. By the end of the week, its price once again approached the $72 price point. Problems in the banking sector, the Fed's rate hikes and such developments are triggering concerns that a recession may take place and are thus hurting demand for black gold.
Key events of the current week
The US. EIA crude oil reserves data
Oil prices are at their lowest levels since December 2021. One of the key factors for the drop in prices is concerns that a global recession could take place amidst central banks around the world raising interest rates. What's more, US crude oil reserves have risen in the past several weeks despite the busy travel season fast approaching. If the indicator rises again, that would be yet another bit of bad news for black gold. In such a scenario, Brent (BRN) could test the key support level at $72.00 and aim for a further decrease to around $70.00.
The US. New jobless claims
The labour market remains one of the key areas the Federal Reserve looks at besides inflation when it takes interest rate decisions. An increase in initial unemployment claims would indicate a deterioration in employment. The Fed's latest interest rate hike was less aggressive than markets had anticipated, as it seems a banking crisis is beginning to unfold in the country. Furthermore, inflation is gradually dropping. Together, these factors will likely force the US regulator to pause its move to tighten its monetary policy and engage in less hawkish rhetoric. They could also support stock indices.In this scenario, we can't rule out that the S&P 500 (ES) will return to around 4040.
Germany. Unemployment figures
After the Composite BMI was down for a year, it rose above the 50 level, indicating a recovery in the manufacturing and service sectors. Still, some companies are cutting operations due to supply chain disruptions, which is leading to rather unpleasant changes in the labour market. A slight increase in the unemployment rate is expected. Weaker labour market indicators may lead to a decrease in consumer activity, hurting some key economic indicators. And if the report meets expectations, the euro may come under short-term pressure. In that case, the EUR/USD pair could drop to 1.0580.