Oil, the Yen, and Central Banks: Key Developments in Global Markets on April 28
28 April 11:24
Global markets remain under pressure due to the war in the Middle East, the blockade of the Strait of Hormuz, and rising oil prices. Against this backdrop, the Bank of Japan left its policy rate unchanged, but hawkish signals from within the central bank supported the yen and heightened expectations of a possible rate hike in the future. This was reported by "Komersant Ukrainian" citing Reuters.
On Tuesday, April 28, oil prices rose again, while stock markets generally held their ground. Investors are assessing several risks at once: the protracted conflict in the Middle East, uncertainty surrounding U.S.-Iran negotiations, inflationary pressure due to high fuel prices, and upcoming decisions by major central banks.
Bank of Japan kept rates unchanged
As analysts had predicted, the Bank of Japan kept its short-term interest rate at 0.75%. However, the decision was not entirely unanimous: three of the nine board members voted to raise the rate.
Markets interpreted this signal as a more hawkish stance. Investors are now closely watching to see if the Japanese regulator is prepared to continue raising rates, even amid external uncertainty and risks to economic growth.
Saxo’s chief investment strategist, Charu Chanan, noted that the 6-3 vote and the hawkisher language regarding future policy could mean that the threshold for another rate hike is lowering.
“The 6–3 vote and stronger wording regarding future policy adjustments suggest that the bar for another rate hike may be lowering,” said Charu Channana.
The yen strengthened but remains near a critical level
Following the Bank of Japan’s decision, the yen strengthened to 159.12 per dollar. At the same time, it remains near the psychologically important level of 160 yen per dollar.
It is precisely this level that is worrying markets, as breaking through it could increase the risk of currency intervention by Tokyo to support the national currency.
According to Charu Channani, the dollar/yen pair near 160 remains a “significant pressure point.” However, for a sustained recovery of the yen, markets need clearer evidence that the Bank of Japan is prepared to continue tightening its policy.
Brent crude rose above $109
Oil remains one of the key factors for the markets. Brent futures rose 1% to $109.52 per barrel, remaining near a three-week high.
U.S. WTI crude traded at $97.47 per barrel.
Oil prices remain significantly higher than pre-war levels. They are gradually rising as hopes for a quick peaceful resolution between the U.S. and Iran fade.
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Why the Strait of Hormuz Keeps Markets on Edge
The Strait of Hormuz remains a key risk for energy markets. About one-fifth of global oil and gas supplies typically pass through it.
Currently, according to Reuters, energy and other shipments through this critically important strait remain largely blocked. This is what is keeping oil prices above $100 per barrel.
The U.S. is considering Tehran’s latest proposal to resolve the conflict. However, a U.S. official stated that President Donald Trump is dissatisfied with this proposal because it does not address Iran’s nuclear program.
Central banks face a difficult choice
This week, markets are awaiting decisions from several leading central banks. Following the Bank of Japan, the following are expected to announce their decisions:
- the U.S. Federal Reserve;
- The Bank of England;
- the European Central Bank.
All are expected to leave rates unchanged. However, the key focus will not be the decisions themselves, but the regulators’ comments on inflation.
Fred Neumann, HSBC’s chief economist for Asia, noted that central banks face a dilemma: whether to tighten policy amid an energy shock that is simultaneously fueling inflation and harming economic growth.
“With every week that the Strait of Hormuz remains closed, pressure mounts on central banks to combat inflation,” Fred Neumann noted.
Stock markets are holding steady, but investors remain cautious
Asian markets traded cautiously on Tuesday. The MSCI Asia-Pacific ex-Japan index fell 0.42%, but remained close to the record close recorded the previous day.
Despite a 13.5% drop in March, the index could rise by about 17% in April .
The U.S. S&P 500 showed moderate growth on Monday and could end the month with a gain of about 10%. U.S. stock futures were nearly unchanged on Tuesday, while European futures pointed to a positive market open.
Investors are awaiting reports from Microsoft, Google, Amazon, Meta, and Apple
The market’s attention this week is focused on earnings reports from tech giants. Financial results are expected to be released by:
- Microsoft;
- Alphabet, Google’s parent company;
- Amazon;
- Meta Platforms;
- Apple.
These reports will serve as an important test for the April rally, which was fueled by optimism surrounding artificial intelligence.
Ameriprise Chief Market Strategist Anthony Saglimbene noted that the tech giants’ earnings reports will show whether investments in artificial intelligence are indeed translating into commercial results.
What’s happening with the dollar and the euro
The euro fell to $1.17105. The dollar index, which tracks the U.S. currency against six major currencies, stood at 98.542.
The dollar found support as a safe-haven asset in March following the outbreak of war in the Middle East, but lost most of those gains in April amid hopes for a peace deal.
In recent days, the U.S. currency has stabilized as negotiations between the U.S. and Iran have reached an impasse.
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