Markets shrug off inflation concerns and geopolitics ahead of BOE, jobless claims

Investors seem to ignore rising signs of inflation, supply chain issues, and geopolitical tensions around Brexit and China’s relations with the West. The BOE may announce tapering down its bond buys and US jobless claims are eyed ahead of Friday’s Nonfarm Payrolls. Cryptocurrencies are consolidating their gains.

The US dollar and stock markets are holding up despite growing worries of inflation. The 5-year/5-year breakeven, one gauge of future price rises, is at its highest since 2008. Nevertheless, the Federal Reserve continues stating that price rises are transitory and that the economy still has a “long way to go.” The latest comments came from Eric Rosengren and Lauretta Mester on Wednesday. John Williams is set to speak on Thursday.

ISM’s Services Sector Purchasing Managers’ Index missed estimates with 60.7 points for April, indicating a slowdown due to supply chain issues. ADP’s private-sector labor statistics also came short of expectations, adding to lower forecasts for Friday’s Nonfarm Payrolls. Weekly jobless claims are set to remain around 553,000 reported last week.

Despite the increase in breakevens, Treasury yields remain stable, and the greenback is steady as well, with EUR/USD hovering around 1.20.

The Bank of England is predicted to leave its interest rate unchanged on “Super Thursday” and substantially raise its growth forecasts. Speculation is mounting about the BOE’s bond-buying scheme, with some predicting that Governor Andrew Bailey and his colleagues will announce they are tapering down on bond buys.

Brexit: Britain is sending gunships to Jersey, as a precaution ahead of a planned protest by French fishermen. The two countries are at loggerheads about using the waters around the island, which is close to the French mainland.

Brits go to the polls in local and regional elections, with Scotland’s parliamentarian vote standing out. A majority for pro-independence parties could raise tensions between Edinburgh and London. GBP/USD is clinging to 1.39 amid these three events.

Geopolitics: China canceled commercial talks with Australia, a mostly symbolic move, yet one that reflects growing tensions between the two countries. AUD/USD dropped in response. Foreign minister of the G-7 also singled out China for its practices and human rights abuses.

Coronavirus: Moderna announced its vaccines cope with new strains of COVID-19, providing optimism. On the other hand, India recorded another daily record of infections.

Cryptocurrencies have been stabilizing after an upward move. Bitcoin is hovering around $57,000, Ethereum at above $3,400 and XRP tops $1.60.

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