Risk markets hesitated early midweek as a string of negative news broke. Europe was struggling to distribute its vaccine, the third wave of COVID-19 threatened to slow down the eurozone economy, the Suez Canal was blocked, and oil prices fell sharply. However, the saving grace came in the form of much better than expected European PMI’s which halted a strong risk-off mood midweek and rising oil prices on news from Reuters that OPEC+ is ‘likely’ to extend production cuts. As we approach the turn of the month we can typically expect strong inflows into equity markets, which should support the major indices as long as the risk tone does not seriously turn sour. Be careful as the market is in the balance.

Other key events from the past week

  • EUR: PMI data, Mar 24: European PMI data breathed a hint of optimism into markets on Wednesday morning with strong prints across the board. However, watch out for signs of rising COVID-19 cases to weigh on the EURUSD.
  • CHF: Interest rate, Mar 25: The Swiss National Bank has the lowest interest rates of all the major central banks and kept rates unchanged at negative -0.75%. The SNB reminded markets it remains prepared to intervene to weaken the CHF. Remember, a weak CHF helps the Swiss export-based economy.
  • USD: US 10 y, Mar 26: US 10 year yields pulled back sharply this week as the market stabilised from its recent sell-off in bonds. As long as yields can stay below 2% then most investors think equities can rise alongside US 10 year yields.

Key events for the coming week

  • EUR: COVID case rise, Mar 29: Europe is currently behind the US in its vaccination program speed and is at risk of a third wave outbreak. If COVID-19 cases rise further next week that will most likely keep selling pressure on the EURUSD.
  • CAD: GDP, Mar 31: Expectations are rising that the Bank of Canada will start tapering their bond purchases. Strong GDP data will mean that anticipation will grow and that should support the CAD further, especially against the Euro.
  • USD: Non-Farm Payrolls April 02: US employment data is a key focus for the Federal Reserve. A strong print on Friday will add weight to the case for earlier US interest rate hikes and will likely support the USD.