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The upcoming week is expected to shift market focus from optimism surrounding a potential US-Iran nuclear deal to the economic impact of ongoing conflicts in the Middle East. While hopes for a diplomatic resolution have temporarily boosted risk appetite, oil prices remain elevated due to geopolitical tensions. Key economic data, including March CPI figures from Canada, Japan, New Zealand, and the UK, along with flash April PMI reports, will precede central bank policy decisions. However, Kevin Warsh’s Senate hearing on the Federal Reserve’s role in inflation is likely to dominate US market sentiment.
For traders, the interplay between geopolitical risks and macroeconomic data will create volatility in energy markets and the US dollar. A delay in the US-Iran negotiations could pressure oil prices, while stronger-than-expected inflation data might prompt tighter monetary policy. Central bank officials’ comments on inflation and growth will also influence currency pairs like USD/JPY and EUR/USD. The Fed’s credibility and Warsh’s testimony could impact long-term interest rate expectations.
Investors should monitor the trajectory of oil prices and how central banks balance inflation control with economic growth. The Middle East’s geopolitical instability remains a wildcard, potentially affecting global supply chains and energy security. Traders should also watch for shifts in market sentiment as the US presidential election cycle intensifies, which could influence Fed policy timelines.
