The month of April started with slight positive risk sentiment and markets might continue to trade this way for now. However, the positive risk sentiment might still fade during later this month. Currently, the upside potential seems to be fueled by profit taking. Traders might cash out of their recent short- trades in the S&P 500 among other markets, as prices of indices have mostly fallen. The rhetoric, that the war against Iran will end soon is also among the hopes of investors as the impact seems to be felt mostly with the rise in oil prices.

Yet, the bigger impact might be observed only in the next couple of months. About 30% of global supply in fertilizer products are being shipped via the Strait of Hormuz, which has been extremely limited in recent weeks. Another producer of such products is Russia, which accounts for about 20%. The shrinking supply and subsequently rise in prices will be felt by consumers in supermarkets everyday causing inflation to pick up steam again.

Important events this week:

– NZ- Interest rate decision– It is not expected that the Royal Bank of New Zealand will adjust interest rates at this meeting. Rates are expected to remain at 2.25%. However as described above, the Central Bank might proactively start to react increasing rates in order to dampen the potential chance that inflation will rise. Recent measures have been applied in Australia as well with two back- to- back rate hikes to cool inflation.

NZDUSD weekly chart

Based on the charting pattern above the NZD is heading lower. The currency typically also weakens, when risk sentiment fades, similarly to the AUD. With the NZDUSD currency pair trading below the 50- moving average level for now, the downside momentum might even increase. A break below the rising trendline at about 0.5640 might add more pressure to this market, potentially pushing the Kiwi down towards the 0.5500 region. On the flipside a rate hike might add positive sentiment to the New Zealand Dollar. Above the 0.5750 level, a retest of the 0.6000 zone might be observed. The rate decision will be held on Wednesday, the 08^th of April at 04:00 CET.

– US- Core PCE Price index– The core pce price index is the primary source of inflation data for the Central Bank in the United States. A rise in prices might cause the Fed not to cut interest rates, which is currently anticipated. That, in turn, might also cause stock markets to weaken again. A cut in rates typically helps equities to move higher.

S&P 500 weekly chart

The first trading days in the month of April have been positive for stock markets. Most indices were rising on hopes that the war again Iran will end soon. Based on technical levels, the market might rise above the resistance zone of 6,600. The market might then start to retest the all- time- high at about 7,000 points. Vice versa, the negative sentiment might also increase below the support level of 6,300. If negative headlines will cross the wires, the shift to the downside might quickly escalate and bears could be back in control. The PCE price index will be released on Thursday, the 09^th of April at 14:30 CET.