Week of 27 april

Markets trended lower throughout the week as there was little progress toward opening the Strait of Hormuz and no flare-up in tensions, largely overshadowing PMI readings and UK inflation data. Brent opened the week at around $95 per barrel after US-Iran negotiations stalled. Despite an extension of the ceasefire, concern that the Persian Gulf would be closed for an extended period contributed to Brent rising back above $105 toward the end of the week.

A busy economic calendar awaits in the week ahead, with highlights including policy decisions from the Fed, ECB, BOE, and BOJ.

Week in Review

Markets started the week on a sour note after hopes of a breakthrough in negotiations between the US and Iran fell through over the weekend. Brent rose 6% over the weekend, while WTI rose 4%, restoring the price ratio between the two to normal levels. Markets recovered optimism mid-week after US President Donald Trump extended the ceasefire with Iran, but the Strait of Hormuz remained closed. Attention turned to the confirmation hearings for Kevin Warsh as the next Fed chair after he said he had made no promises to Trump to cut rates. Gold dipped below $4,700 per ounce on Tuesday after faster US retail sales, the ceasefire extension and Warsh's comments.

The UK CPI rose to 3.3% from 3.0%, as expected, after the unemployment rate surprised at 4.9% rather than remaining at the expected 5.2%. The data showed the effect of the war in the Middle East on the UK economy but failed to substantially shift expectations for the BOE's rate hike in June.

Global flash April PMIs showed economic pressure and rising inflation amid the impact of the war, with the Eurozone composite PMI unexpectedly falling into contraction. This contrasted with US and UK readings, which unexpectedly moved back into expansion, highlighting the war's disparate effects on global economies.

Japan's March CPI was slightly hotter than expected, but the "core-core" rate fell to 2.4%, as expected, the lowest growth since the end of 2024. Markets still expect the BOJ to maintain its hawkish stance and gradual rate-hiking trajectory.

Biggest Market Movers

• The dollar index gained through the week as markets lost hope of a quick resolution to the war in Iran and as economic indicators diverged from those in the euro zone.
• The yen was the worst performer among the major currencies as the government implemented measures to address higher energy costs, while the Nikkei broke above 60K to a new record high.
• Gold underperformed amid higher US yields, declining 3.3% in the week.
• All three major US stock indices – Nasdaq, DJIA and S&P 500 – rose to record highs on Wednesday after Trump extended the ceasefire with Iran.
• The STOXX 600 is set for a 3% decline, breaking four consecutive weeks of gains after flash PMIs disappointed.

Top Events in the Week Ahead

The coming week has plenty of events that might finally distract the markets from the latest developments in the Middle East. Trump declined to provide a timeline for his ceasefire extension on Tuesday, but staffers speculated it could be up to five days, which would be in the middle of the weekend. Trump has a habit of timing his geopolitical interventions when the markets are closed. Barring that, traders have a multitude of central bank meetings to keep an eye on.

The Fed, ECB, BOE and BOJ are all meeting this week, but there is a pretty solid consensus that none will change their policy. However, traders will be keen to see if they update their outlook now that they've had data indicating how the war is impacting their economies.

Additionally, more political wrangling over Kevin Warsh's nomination to replace Jerome Powell as Fed chair is expected. The week will be shortened a bit, as most of Europe and many Asian countries will be closed on Friday for a holiday.

Fed Holding Amid Uncertainty

Wednesday's FOMC meeting could be the last presided over by Jerome Powell, but markets are not expecting any major policy or outlook changes amid economic uncertainty. Traders will likely focus on whether the Fed is firming up its stance now that it has seen data since the war started. The Fed's preferred inflation metric won't be published until Thursday, with the market expecting March core PCE to rise to 3.1% from 3.0% in February. The Fed’s trajectory will determine whether the Nasdaq continues to print fresh highs toward 28K.

ECB No Longer in a "Good Place"

Europe's central bank is widely expected to hold rates unchanged on Thursday, as its members face the threat of higher prices and a slowing economy. Markets will likely assess the level of urgency around price pressures that President Christine Lagarde conveys in her press conference, as that would indicate how likely the ECB is to raise rates in the near term. Flash April Eurozone CPI data will be released just hours before the meeting and is expected to rise to 2.9% from 2.6% in March, while the core rate is expected to tick up to 2.4%. With 1.1700 revisited at the end of the week, the question is whether bulls can flip it or if it will hold and send prices back to 1.1600.

BOE Vote Back in Focus

The Bank of England is also widely expected to keep rates unchanged, with the focus on whether it will hike rates in June, as markets currently price in. The last meeting had a unanimous hold, as MPC members wanted March data to gauge the impact of the war. Traders will now look at the vote split to count hawks and doves, with 1.3400 and 1.3600 both in play.

BOJ on Hike Watch

The BOJ meeting is more likely to surprise markets, with the odds of a June hike at around 60%. This means the BOJ would likely give some hint of a hike at its Tuesday meeting. With the exchange rate near the critical 160 level, there will be a focus on whether the BOJ addresses the exchange rate situation as well.

Other Events and Earnings

German GfK consumer confidence comes out on Monday. Tuesday has the US Conference Board consumer confidence data. Wednesday includes US building permits and housing starts. For Thursday, China PMI is expected. Friday sees the US ISM manufacturing PMI.

Earnings season will be heading towards its peak this week, with a multitude of major names reporting, such as Verizon, Visa, Coca-Cola, Novartis, Corning, Alphabet, Microsoft, Amazon, Meta, AstraZeneca, Apple, Eli Lilly, Merck, ConocoPhillips, Exxon Mobil, Chevron, Berkshire Hathaway and NatWest.