Investors are closely monitoring the potential inflationary impact of commodity prices, especially as Brent crude inches toward $87 per barrel.

Risk assets paused while the Dollar weakened slightly as investors awaited more precise signals from upcoming macroeconomic data. The Chinese Yuan’s more robust fix on Monday relieved the US dollar.

Insights from several Fed speakers, including Lisa Cook, Austan Goolsbee, and Raphael Bostic, shed light on the central bank’s stance. Bostic, Atlanta Fed President, mentioned his shift from two rate cuts to one was a close decision, emphasizing the need for a strong economy and robust employment. Governor Lisa Cook urged caution with rate cuts, balancing risks to employment and inflation. However, these remarks didn’t sway market sentiment towards dovishness.

Over in Europe, ECB Chief Economist Philip Lane noted progress in containing inflation, citing a return to normal wage growth levels.

A significant risk to watch is the trajectory of commodity prices and its potential impact on global inflation. Brent oil prices nearing $87 per barrel indicate OPEC+ delegates don’t foresee policy changes at their meeting. Additionally, the UN Security Council’s resolution for a Gaza ceasefire, with the US abstaining, adds to market dynamics.

In equity markets, dovish momentum has slowed due to concerns over bond supply, anticipation of higher core-PCE readings, and dovish Fed pushback. Market conditions ahead of Easter weekend and month-end activities may also influence sentiment.

The month-end effect persists despite being widely studied, challenging the notion of market efficiency. This phenomenon involves foreign holders of US equities selling USD to rebalance FX hedges, mainly when US equities see significant gains within a month.

Today, FX markets show mixed sentiment, with the dollar directionless. However, the Chinese Yuan has strengthened against the Dollar, easing pressure on the USD rally. PBOC Governor Pan Gongsheng’s optimism about the economy, particularly the property market and local debt risk management, is noted.

Overall, markets remain cautious amid upcoming data releases and geopolitical developments, shaping investor sentiment in Forex and Asia.

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