On Thursday, April 6th, the United States will release additional data on the labor market, amid increasing concerns about the risk of a recession. Ukraine has taken a small step towards peaceful resolution with Russia through negotiations. The European Central Bank is still seeking to raise interest rates in May, but surprisingly, India has decided to leave its key rate unchanged. These are the latest developments in financial markets that investors and traders interested in the foreign exchange market should know. The Forex market is the world’s largest financial market and involves the buying and selling of currencies.
1. The flow of data on the US labor market continues. A steady stream of data on the US labor market will continue with the release of weekly jobless claims and the Challenger Gray report on job cuts in March. Initial claims will be released at 8:30am Eastern Time (12:30pm GMT) and is expected to be at 200,000 for the second time since January.
The March job vacancy survey and private payrolls report from ADP showed that the labor market is quickly cooling down, coming off a “hot” level.
This prompted market participants to assess the possibility of a future interest rate cut: the yield on 2-year bonds has been falling for 5 consecutive days, ignoring repeated speeches from high-ranking Federal Reserve officials who still want to raise the target range for federal funds and maintain it for an extended period of time.
2. During a meeting between Emmanuel Macron and Ursula von der Leyen with Xi Jinping, Ukraine hinted at peaceful negotiations. Ukraine stated that it is willing to engage in talks with Russia regarding the future of Crimea under certain conditions, which marks the first softening of its official position in months. This shift creates a glimmer of hope for resolving the conflict that has seriously undermined the global economy and markets over the past year.
The President of the European Commission, Ursula von der Leyen, and the President of France, Emmanuel Macron, are in Beijing for negotiations with Xi Jinping. While these talks are likely to focus on the deterioration of economic relations between the two blocs, they may also touch on the issue of China’s support for Russia.
3. On the trading session, American stock market is expected to decline, emphasizing the risks of recession. Due to the upcoming holidays of Easter and Passover, the American stock indices are currently stagnant, and many are likely to stay on the sidelines until the official Friday market report. As of 05:30 EST (09:30 GMT), the Dow Jones futures fell by 6 points, showing virtually no change, while the S&P 500 futures declined by less than 0.1%, and the Nasdaq 100 futures fell by 0.2%. Three major currency indices were mixed on Wednesday, as Nasdaq lost more than 1% due to recession concerns, while Dow held up better.
Later, the attention may shift to Costco (NASDAQ: COST) stocks, which dropped by 2.0% in pre-market trading after disappointing sales data for March. Constellation Brands.
4. The ECB has maintained its course towards raising interest rates, as surprising data from Germany has created optimism. According to the Chief Economist at the European Central Bank, Philip Lane, the ECB intends to raise its interest rate at its next meeting on May 4th, assuming that the economy develops in line with the bank’s forecasts.
This announcement came after unexpectedly strong growth in German industrial production for February, which, when combined with strong data on factory orders on Wednesday, allowed the eurozone economy to avoid recession in the first quarter.
Other economic data from the previous day also yielded some surprises, such as the Caixin Chinese Services PMI index, which reached its highest level in almost three years. Housing prices in the UK rose 0.8% in March, further raising expectations that the Bank of England will raise interest rates again.
However, the most surprising interest rate decision of the day came from India, where the central bank maintained its key rate without any changes, instead of raising it by 25 basis points as expected.
5. The oil prices have consolidated after a rally caused by OPEC actions, with the ruble hitting a 12-month low due to sanctions. Crude oil prices have decreased, seemingly evaluating the unexpected reduction in OPEC production over the weekend and the unexpectedly large decrease in oil reserves in the US last week.
As of 6:20 AM Eastern Time, WTI futures decreased 0.1% to $80.53 per barrel and Brent futures decreased 0.1% to $84.94 per barrel.
The weakness in oil prices over the first two months of the year became apparent on Wednesday when Russia announced that revenue from oil and gas sales in March had decreased by 43% compared to last year. This news caused the ruble-to-dollar exchange rate to hit a 12-month low on Thursday.