The consumer/producer price data for March dominated the financial markets last week and is the latest data indicating that the timing and extent of the Federal Reserve's easing will be later and smaller than many investors had previously expected. The market now expects that the FOMC will not begin to ease policy before the meeting on September 18th. The overheating of the U.S. Consumer Price Index and hawkish remarks from Federal Reserve officials supported the dollar's breakthrough of the 106 mark, but the threat of a comprehensive escalation in the Middle East conflict remains strong. As the halving countdown reaches a week, Bitcoin fell to $66,600, and funds seem to be flowing back to safe-haven assets like gold and the dollar.

Gold violently pulled back from slightly above $2,430 before the weekend and fell to around $2,343 at closing. A pullback of nearly $100 before the close is quite common, but its long-term trend is clear. As of now this year, the price of gold has risen by 15%, exceeding the 13% increase for the entire year of 2023. After hitting a three-year high last Friday, silver prices plummeted during intraday trading. The gray metal reached as high as $29.79 and then fell sharply to nearly $2.00.

As inflation overheats, the possibility of a Federal Reserve rate cut decreases, supporting the bullish dollar to break through 106. For the dollar, this is an important week, and this theme can run through the trading of 2024 because the dollar index has been rising since its lowest point on December 28th, 2023. This is not a straight path. However, the dollar broke through a key point on the chart last week, and after the breakthrough, bulls continued to push buying.

Israel is preparing to launch a direct attack on Iran this weekend, marking the largest escalation in tensions in the Middle East, and tensions have continued to rise as a result. International benchmark Brent crude oil rose by 0.8% to close at $90.45 per barrel. It briefly exceeded $92 yesterday and roughly returned to October levels. U.S. WTI crude oil rose to nearly $87 per barrel during trading but eventually closed at $84.82 per barrel.

With the heightened tensions in the Middle East, the U.S. stock market fell sharply last week. Under the dual impact of inflation concerns and geopolitical risks, all three major U.S. indices recorded declines last week, with the Dow down 2.37%, the S&P 500 down 1.56%, and the Nasdaq down 0.45%.

Meanwhile, government bonds in the bond market fell significantly, with the 10-year Treasury yield dropping from 4.58% to 4.50%.

The asynchronous actions of central banks around the world became the focus of people's attention this week. The European Central Bank maintained its monetary policy stability last week, but the accompanying statement is believed to lay the groundwork for easing policies in June. It is expected that the European Central Bank will cut interest rates by 25 basis points for the first time at its June meeting. The Bank of Canada also remained stable and is leaning towards a preliminary rate cut of 25 basis points at its June meeting.

This Week's Outlook:

Looking ahead to this week, without significant data releases in the U.S., China's economic growth data and geopolitical developments could influence the financial market trends for the week. Expectations that the Federal Reserve will cut interest rates later than expected further supported the U.S. dollar, pushing the dollar index to multi-month highs. There was no news from the European Central Bank meeting, and concerns about foreign exchange interventions have been lingering around the Japanese yen.

On the macroeconomic data front, the U.S. will release retail sales data for March on Monday. Additionally, several countries, including the Eurozone, the UK, Japan, and Canada, will publish CPI data. The Federal Reserve will release the Beige Book on Thursday, with the U.S. economic situation being one of the important considerations for Federal Reserve officials in deciding future monetary policy.

Geopolitical risks this week also weighed on the market. Earlier media reports suggested that Iran would attack Israel in retaliation for an airstrike on its embassy in Syria. This sparked investor risk aversion, leading to significant increases in assets like precious metals, and the price of gold hit a new historical high again.

In the early hours of Sunday (April 14th) local time, the Iranian Islamic Revolutionary Guard Corps began a large-scale missile and drone attack on Israeli targets.

The White House issued a statement saying that President Biden's national security team will maintain continuous communication with Israeli officials and other partners and allies, providing regular updates to Biden. Biden stated that the U.S. firmly supports Israel's security and helps it defend against threats from Iran.

As the timing of Iran's attack was over the weekend, the impact of this conflict on global financial markets will only begin to unfold at the beginning of this week. How the situation in the Middle East will evolve is also one of the major focal points for the week.


This Week's Important Events and Economic Data Overview (Beijing Time):

Important Events:

Tuesday (April 16th):

Federal Reserve Vice Chairman Jefferson speaks on monetary policy.

Wednesday (April 17th):

Bank of England Governor Bailey speaks.

Bank of Canada Governor Macklem participates in a fireside chat.

EIA releases the Monthly Short-Term Energy Outlook report.

Bank of Canada announces interest rate decision and monetary policy report.

Thursday (April 18th):

G20 Finance Ministers and Central Bank Governors meeting.

Bank of England Governor Bailey speaks at an event by the Institute of International Finance.

IMF and World Bank hold their 2024 Spring Meetings, running until April 20th.

Friday (April 19th):

2025 FOMC Voters, Chicago Fed President Guerlsby participates in a Q&A session.

Economic Data Overview:

Monday (April 15th):

UK March non-seasonally adjusted input PPI annual rate (%).

US March retail sales monthly/yearly rate (%).

US March core retail sales monthly rate (%).

Tuesday (April 16th):

China Q1 GDP annual rate - single quarter (%).

UK February unemployment rate - ILO standards (%).

Eurozone April ZEW Economic Sentiment Index.

US March housing starts annualized monthly rate (%).

Canada March non-seasonally adjusted CPI monthly/yearly rate (%).

US March industrial production monthly rate (%).

Wednesday (April 17th):

New Zealand Q1 CPI annual rate (%).

Japan March non-seasonally adjusted merchandise trade balance (100 million yen).

UK March core CPI annual rate (%).

UK March retail price index annual rate (%).

Eurozone March core harmonized CPI annual rate - non-seasonally adjusted final value (%).

US EIA crude oil inventory change up to April 12th (10,000 barrels).

Thursday (April 18th):

Australia March seasonally adjusted unemployment rate (%).

Australia March employment change (10,000 people).

US initial jobless claims for the week ending April 13th (10,000).

US April Philadelphia Fed Manufacturing Index.

US March existing home sales annualized total (10,000 units).

Friday (April 19th):

Japan March nationwide core CPI annual rate (%).

UK March seasonally adjusted core retail sales monthly rate (%).

Spot Silver:

Silver touched a high of $29.79 last week, the highest since August 2020.

Silver appeared to close higher for the third consecutive week last week, reaching a high of $29.79, the highest since August 2020. Geopolitical tensions and China's weak economic outlook have strengthened safe-haven demand, boosting precious metals. Israel bombed an Iranian embassy near Damascus, where seven members of the Islamic Revolutionary Guard Corps (IRGC), including two generals, were killed in the airstrike. Iran has vowed to retaliate against Israel's bombing. With Iran's direct intervention, the war situation between Israel and Palestine in Gaza may escalate further. Meanwhile, the Israeli government has vowed to invade Rafah, where displaced Palestinians seek refuge. Amid geopolitical uncertainty, investors are shifting funds to non-yield assets like silver. Meanwhile, U.S. Treasury yields have dropped significantly, reducing the opportunity cost of investing in non-yield assets. The 10-year U.S. Treasury yield fell from a more than four-month high of 4.60% to 4.55%. The U.S. dollar index is just a step away from reclaiming its five-month high of 106.00.

After reaching a high of $30.13 in August 2020, silver continues to rise, opening the door for further upward movement. The long-term outlook is bullish. The monthly chart shows strong momentum in silver, although the momentum oscillation indicator indicates it is overbought. The Relative Strength Index (RSI) is 69.83, still below the 80 level traders seek, which is an overbought state in a strong bullish trend. Therefore, the next resistance level for silver will be the high of $28.74 on May 18, followed by last week's high of $29.79. Further targets are towards $30.00 (a psychological market level). On the other hand, if bears push silver down to $27.00 (a psychological market level) and below $26.86 (last week's low), it will pave the way for further decline. The first support level is $26.22 (38.2% Fibonacci retracement from $49.81 to $11.64), followed by $25.52 (upper boundary of the triangle).

Conclusion for the Week: The silver price is approaching $30, the monthly high since August 2020. The long-term outlook is bullish as the 20-week exponential moving average at $24.56 is rising. The 14-period Relative Strength Index (RSI) has risen to 74.55, indicating strong buying momentum. With no divergence signals, more upside potential is still expected.

Weekly Range: $26.12–$30.00. Strategy for the Week: Buy silver on dips.

USDCHN:The Renminbi's performance among non-dollar currencies remains outstanding; the decline is relatively small.

The USD soared last week after the release of inflation data, with the USD against the offshore Renminbi briefly reaching a high of 7.2650. On the economic data front, China's March CPI and PPI rose by 0.1% and fell by 2.8% year-on-year, respectively. The CPI increase was weaker than the expected 0.4%, indicating insufficient effective demand, and recent economic improvements have not transmitted to the price level. To support the Renminbi exchange rate, it is expected that the authorities will continue to maintain the midpoint around 7.09, buying more time for the weakening USD and domestic sentiment recovery. The recent resistance level for the currency pair is at 7.2820, while the support level is seen at 7.2139. The recent performance of the Renminbi exchange rate tends to be volatile. This is mainly due to short-term overseas uncertainties disturbing the forex market sentiment. The domestic risk-free interest rate is already low, and the policy towards the exchange rate is clear, providing conditions for the Renminbi exchange rate to remain basically stable. After a brief depreciation, the Renminbi exchange rate has regained its upward momentum. However, overall, the Renminbi's performance among non-dollar currencies remains outstanding, with a relatively small decline. Secondly, the U.S. economy has shown resilience, and there still exists a certain degree of misalignment in the monetary policies between China and the U.S. Lastly, the release of the counter-cyclical factor signal in the Renminbi exchange rate. Currently, the onshore and offshore exchange rates deviate significantly from the Renminbi midpoint, which may be passively adjusted under a strong USD.

Market expectations continue to support large-scale monetary policy and fiscal support to stimulate domestic demand in China, including subsequent introduction of equipment updates and consumption of old goods. To support the Renminbi exchange rate, the authorities have continued to widen the gap between the midpoint pricing and market expectations since last Thursday's record. From the daily chart, the USD/Offshore Renminbi broke above and closed near the upper resistance line of the "symmetrical triangle" at 7.2600, to around 7.2650 at the end of last week. If the currency pair continues to rebound this week, breaking through 7.2818 (March 25th high) and 7.2900 (midpoint of the upward channel), it will directly target 7.3000 (psychological market level). On the downside, the support levels are seen at 7.2450 (lower support line of the symmetrical triangle) and 7.2460 (lower boundary of the upward channel), further targeting 7.2270 (trend line extending upward from the low point of 7.0874 on December 29th last year).

Conclusion for the Week: China's financial market opening up is steadily progressing, increasing the attractiveness of Renminbi assets to international investors; cross-border trade and investment facilitation have improved, the proportion of Renminbi international usage has increased, and the microfoundation for stable exchange rates continues to be solidified. The People's Bank of China will also adhere to the principle that the exchange rate is mainly determined by market supply and demand, maintaining Renminbi exchange rate flexibility.

Weekly Range: 7.2270—7.2900 Strategy for the Week: This week, it is recommended to sell the USD on rallies.



 

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