Despite background noise that continues to reverberate with concerns about trade, markets in Europe look set to close higher for the fourth week in succession – despite a mixed session yesterday – helped at the start of the week by relief that last weekend’s cruise missile strikes didn’t prompt an escalation in tensions between Russia and the US.

Most of the attention has now returned to trade and concerns over further restrictive measures which has seen metals prices soar, along with oil prices. The recent momentum in US stocks underwent a pause after some decent gains over the past few days, with tech stocks leading the losses after a disappointing update from a Taiwan chipmaker pulled the wider sector lower, on concerns over slowing smartphone demand.

This week’s rise in commodity prices has seen the Reuters CRB index push to its highest levels since the middle of 2015. We’ve also seen a rise in bond yields as investors wake up to the prospect that these gains might well see inflationary pressures start to reassert themselves further down the line.

Market expectations around inflation do appear to be complacent at the moment, maybe because they think a lot of these commodity price gains may pass, and be transitory.

Oil prices in particular have been on a tear raising concerns that OPEC and Russia may well be overplaying their hand when it comes to pushing prices higher. Today’s OPEC meeting could go some way to reinforcing that narrative or oil ministers could decide to let some air out of this particular balloon. If ministers choose to extend the production cuts into 2019 Brent prices could extend to $80 a barrel.

In the short term there may be a brief benefit to higher prices but in doing this oil producers may well be hastening their own demise by hastening the push into renewable energy sources. US shale producers will also be more incentivised to ramp up production. Since last summer Brent crude prices have risen 57%, and at some point this will start to weigh on the global economy.

The pound initially shrugged off a disappointing March retail sales number for March which saw a decline of 1.2%, well above expectations of a decline of 0.6%. Most of this was down to a big drop in fuel sales, which shouldn’t have been too big a surprise given that a lot of the country ground to a halt in the ice and snow for several days in March. This means we should see a rebound in April.

The fall in the pound came later in the day as a result of comments from Bank of England governor Mark Carney, who suggested that interest rates may not rise next month after all. Recent guidance from UK policymakers, as well as the two votes to raise rates at the last meeting, had raised expectations that even if a rate rise were to take place in May, any effect wouldn’t be particularly material in the short term.

In this context, yesterday’s comments were a surprise as the governor, in another triumph for the bank's forward guidance, suggested that as a result of yesterday’s weak retail sales numbers, the timing of a rise might need to be pushed back. He did go on to say that rates were still expected to go higher over time, the only question being over timing.

Sterling traders could be forgiven for experiencing a significant case of déjà vu in the wake of yesterday’s remarks, as this isn’t the first time the Bank of England has led markets up the garden path. They did something similar in 2014, with the Bank of England governor earning the unfortunate moniker of the “unreliable boyfriend” from a UK MP for his flip-flopping on whether to raise rates. It would appear that after a short break he's back.

The US dollar also gained a degree of support on the back of firmer long-term yields as the US 10-year pushed back through 2.9%, to a four-week high. 

EUR/USD – watching paint dry with resistance above the 1.2400 area and support at the 1.2320 level, within the broader range of 1.2200/1.2500 range which continues to dominate. We need to see a break below 1.2160 or a break above 1.2540 to suggest a strong move in either direction.

GBP/USD – slid back sharply yesterday having falling back below the 200-week MA at 1.4250 yesterday. This failure to follow through higher could see a deeper move lower through the 1.4080 area in the short term and even a retest of the April lows at 1.3970.

EUR/GBP – pushed back above the 0.8750 area yesterday after this week’s move through the 0.8690 area and could well retest the 0.8820 area. Only a fall back below 0.8680 retargets the 0.8620 lows of earlier this week.

USD/JPY – while above the 106.60 area and last week’s lows, the risk remains for a move back towards the 108.20 area, on a move back above the 107.50 area. The 105.20 area also remains a key support with a break below 105.00 opening up a move towards 103.00. 

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