Many countries are already on holiday today. As a result, today’s trading session will take place with much lower market liquidity, which also means that the impact of any new developments could be greater. Once again, markets have positioned themselves for the possibility of further escalation of the war over the weekend.
Many markets closed for the holiday
Good Friday is a specific kind of trading day. A large number of Western countries observe it as a public holiday. Easter Monday, by contrast, is much more of a regional holiday. It is observed not only in Poland, but also in the Czech Republic, Slovakia and Hungary. At the same time, it is important to remember that Monday is a working day in the United States. What does this mean for the markets? Even though we are working today, many exchanges, including commodity exchanges, will remain closed. Global crude oil trading ended yesterday and will not resume until after the weekend. On Easter Monday, however, US investors will be trading as usual. This matters because the market, despite the holiday in many countries, will be processing developments after the long weekend, and during a war that creates a real risk of sharp moves. In preparation for this scenario, investors bought oil very aggressively yesterday, pushing Brent crude up by more than eight dollars.
Has the oil market believed the president’s address?
Wednesday’s address by the US president was meant to calm the situation. It confirmed that fighting in the Persian Gulf is continuing, while also outlining possible scenarios ranging from further escalation to a gradual de-escalation of the conflict. There were also announcements about involving allies in efforts to stabilise the region, specifically by reopening the Strait of Hormuz. The clearest sign that the market did not fully believe in a calmer scenario is the fact that WTI crude in the United States became more expensive than Brent. There are several reasons for this, but one key factor is that strong demand from refineries has temporarily pushed up the price of US crude above the international benchmark. Until now, the United States had not suffered as much as the rest of the world from the war in the Persian Gulf, at least from the perspective of oil prices. Now, however, despite being the world’s largest oil producer, the country is being hit by a sharp rise in prices. Oil rose by almost 13 dollars yesterday alone. The fact that this happened just before a market holiday makes the situation even more complicated. The key question is how long the administration will be able to ignore high fuel prices. There are still seven months to go before the election, but support for the Republicans is declining, and rising fuel prices only make that worse. The more expensive fuel becomes, the more distant the prospect of interest rate cuts, which in turn supports a stronger dollar.
US data
Yesterday, two important sets of data were released in the United States. On the one hand, the number of initial jobless claims came in at 202,000. Before the era of anti-immigration measures, this would have been seen as a very strong result. Now, analysts point out that it is unclear by how much lower such readings should be expected to fall. Even so, it remains a solid figure. The US trade deficit also came in lower than expected. However, it should be remembered that the war in the Persian Gulf has clearly strengthened the dollar. The stronger the dollar, the less competitive exports become and the cheaper imports become. As a result, analysts indicate that current events are likely to worsen this indicator in the short term.
In today’s macroeconomic calendar, the key release to watch is at 14:30, when fresh US labour market data are due.
