Two Fed members moved the market yesterday. Neel Kashkari, the Minneapolis Federal Reserve Bank President, has estimated two interest rate cuts this year, but says if inflation continues to stall, none may be required. Austan Goolsbee, the Chicago Federal Reserve President, believes high inflation in the housing services sector is the biggest reason the Fed's can't bring inflation down to 2%. While most policymakers still expect at least three rate cuts this year, Atlanta Fed President Raphael Bostic now sees just one cut far into the fourth quarter. Goolsbee cautioned against the central bank waiting too long, as that could lead to a deterioration in the employment side of the Fed's mandate. Investors currently expect a first rate cut to come in June with a 60% probability.


A hawkish comment from a Fed member, questioning the necessity of a rate cut in a period of stagnant inflation, sparked a market selloff, with the S&P 500 posting its biggest single-day drop since February. Geopolitical tensions in the Middle East also weighed on sentiment, as oil prices rose and defence-related stocks gained. The tech sector has also taken a hit as the Cboe Volatility Index surged to a five-month high.


The gold price pulled back from 7 straight days of consecutive gains, although it is on track to finish the week about 2% higher, led by strong central bank buying and demand from momentum funds. Some analysts warn that gold is currently trading in overbought territory and see a high probability of a correction in the coming days, with $2,222 as the first target price.


Oil benchmarks are set to record more than 4% gains this week after six days of consecutive gains. This upward trend is largely attributed to the heightened geopolitical tensions in the Middle East, particularly after Iran vowed revenge against Israel for an attack that killed high-ranking Iranian military personnel, compounded by the UAE cutting ties with Israel. Additionally, a commodity buying spree that even spread to gold, cocoa, and coffee points to a potential war.


The dollar rebounded from a two-week low, mitigated by Fed member comments ahead of the crucial U.S. jobs report and heightened tensions in the Middle East. The dollar's performance has been volatile this week, falling from a five-month high until the comment, which was suspected to be intervention in a way. The BoJ Governor, Kazuo Ueda, hinted at another rate hike in store, as inflation is expected to accelerate. Top diplomat Yamazaki also hints at intervention if yen falls below 152 per dollar.