Oil rises ahead of this week’s OPEC+ meeting. Inflation is rising in Indonesia

The dollar index settled at 104.5 in post-holiday trading on Monday. Investors are digesting the latest PCE Price Index report, searching for clues about the Federal Reserve’s future monetary policy. Data released on Friday showed that the Fed’s recommended inflation rate rose by 0.3% month-on-month in February, slowing from an upwardly revised 0.4% increase in January, which was also in line with the consensus predicted. The report also showed that consumer spending last month rose by the most in a year, indicating the economy is resilient. Meanwhile, Fed Chairman Jerome Powell reiterated on Friday that the central bank is in no rush to cut interest rates and that the latest PCE inflation data aligns with what the Fed wants. Markets now believe there is a nearly 70% chance that the Fed will start cutting rates in June, with a total rate cut of 75 basis points this year.

The UK economy remains weak, and rate cuts will be welcomed across sectors. The latest ONS data showed that the UK economy entered a technical recession in Q4 2023. The Spring Budget is forecast to boost GDP by around a quarter of one percentage point, but domestic growth needs more stimulus. Against this economic backdrop, the economy needs stimulus, with inflation falling rapidly and the labor market stagnant or marginally weaker. Therefore, the Bank of England has every reason to plan for a series of rate cuts this year, starting with its June 20 meeting.

According to the latest forecasts from ECB staff, Eurozone inflation will continue to fall in the coming months and quarters. With price pressures easing rapidly, the European Central Bank has additional certainty and flexibility regarding the timing of the first interest rate cut. Financial markets certainly believe this is the most likely scenario, which will put pressure on the euro in the weeks and months ahead.

Gold rose above $2,250 an ounce on Monday, extending its rally to record levels. Softer-than-expected US inflation data bolstered bets that the Federal Reserve will begin cutting interest rates in June. Lower interest rates reduce the opportunity cost of holding bullion, increasing its investment value.

WTI crude oil prices rose to around $83.5 a barrel on Monday, hitting their highest level in five months, as investors look ahead to this week’s joint OPEC+ ministerial meeting. The group is expected to review market fundamentals and OPEC representatives’ adherence to production targets, which will continue to support oil prices.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) declined by 1.05%, China’s FTSE China A50 (CHA50) gained 0.05% over 5 trading days, Hong Kong’s Hang Seng (HK50) fell by 0.35% last week, and Australia’s ASX 200 (AU200) was positive 1.48%.

Asian stock markets were mixed on Monday as investors assessed several regional economic reports. A private survey showed that China’s manufacturing activity in March grew rapidly since February 2023 amid robust demand. Meanwhile, the Bank of Japan’s quarterly Tankan survey showed that sentiment among large manufacturers in Japan declined in Q1 for the first time in a year as automobile plant closures over the past few months took a heavy toll.

Indonesia’s annual inflation rate rose to 3.05% in March 2024 from 2.75% in February, beating expectations of 2.91%, above the BI (Bank Indonesia) target range of 1.5 to 3.5%. It was the highest inflation rate since August last year, with food prices rising the most in 18 months amid fasting in Ramadan and ahead of the Eid-el-Fitr holiday.