On Wednesday, April 16, St. Louis Fed President Musalem stated that rising oil prices are gradually transmitting to core inflation. He projected that core inflation could approach 3% this year, significantly above the 2% policy target, with potential for further upside risks. Against this backdrop, he indicated the Federal Reserve may need to maintain interest rates within the 3.5% to 3.75% range for an extended period to monitor economic data. This assessment aligns with recent market expectations. Initially, markets widely anticipated rate cuts within the year, but escalating Middle East conflicts and surging oil prices have shifted the policy outlook, with investors increasingly favoring a prolonged "wait-and-see" stance from the Fed. Currently, Brent crude oil remains around $95 per barrel, a notable increase from pre-conflict levels. Rising energy costs are not only driving up gasoline prices but are also gradually affecting sectors such as transportation, tourism, and food. Musalem noted that this round of oil price shocks, combined with tariff hikes and tighter immigration policies, constitutes the third major supply shock in the past year.
Additionally, the International Monetary Fund (IMF) warned in its latest Fiscal Monitor Report that the global government debt-to-GDP ratio has risen to nearly 94% in 2025 and is projected to exceed 100% by 2029 under current trends—a debt level previously seen only after World War II. The outbreak of war in the Middle East has further exacerbated an already fragile global fiscal landscape, systematically increasing global borrowing costs by disrupting energy supplies, tightening financial conditions, and raising inflation expectations. The window for orderly fiscal adjustment is narrowing, with the United States, Europe, and low-income countries each facing distinct yet equally severe fiscal challenges. "No room for complacency exists."
Key data to watch today include the UK February GDP monthly rate, UK February industrial production monthly rate, UK February goods trade balance, Eurozone March harmonized CPI annual rate, US initial jobless claims for the week ending April 11, the Philadelphia Fed Manufacturing Index for April, and US industrial production monthly rate for March.
Gold/USD Gold edged lower yesterday, closing slightly down for the day, with the exchange rate currently trading around 4825. Profit-taking exerted some downward pressure, while fading expectations for Fed rate cuts in 2026 also weighed on gold. However, the US dollar index retreating to the 98.00 level under multiple bearish factors limited the decline. Today, focus is on resistance near 4900, with support around 4750.
AUD/USD The Australian dollar rose yesterday, hitting a 5-week high, with the exchange rate currently trading around 0.7190. The primary support came from sustained weakness in the US dollar index, pressured by cooling expectations for Fed rate hikes among other factors. Additionally, expectations of easing Middle East tensions boosted market risk appetite, further supporting the pair. Today, watch for resistance near 0.7300, with support around 0.7100.
USD/CAD The USD/CAD pair declined yesterday, reaching a 3-week low, with the exchange rate currently trading around 1.3720. The main pressure came from continued weakness in the US dollar index, driven by reduced expectations for Fed rate hikes and cooling safe-haven demand. Moreover, stabilizing crude oil prices added downward pressure. However, weaker-than-expected Canadian economic data released during the session limited further losses. Today, monitor resistance near 1.3800, with support around 1.3650.