Oil
Oil is once again trading lower as recent volatility calms, but is still a long way from petering out. Following around 6% swings over the previous two sessions, today’s 2% decline seems tranquil by comparison.
While the blockage in the Suez Canal and encouraging EIA data are preventing a larger sell-off in oil, concerns over future demand are dominating.
Europe tightening lockdown restrictions has unnerved the markets, but Covid cases are also rising sharply in key developing economies such as India and Brazil, whose oil consumption is also a key factor in supporting prices. In a short period, the outlook for global recovery has deteriorated, raising questions over future demand.
Attention will start turning towards the OPEC+ meeting on 1 April. Given the recent deterioration in the global economic recovery, it seems likely that the group will roll production cuts over rather than risk oversupplying this fragile market. Such a move would offer support to oil prices.
Gold struggles for direction
Gold is treading water, struggling for direction as the bears and the bulls tussle over rising Covid concerns and a stronger US dollar.
Renewed Covid jitters, fears of a third wave, tighter pandemic restrictions and delayed vaccine rollouts are all offering support to the safe haven. However, a stronger US dollar is limiting the upside. The optimistic economic outlook from Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen in their second day before Congress boosted the greenback to four-month highs. US futures are pointing to an upbeat start, which could prevent any meaningful upside for gold. Attention will now turn a slew of US data including GDP, jobless claims and PCE, in addition to a flurry of Fed speakers for further impetus.
