Tag: Australia

  • Australian Dollar falls due to risk-off sentiment amid escalating Israel-Iran tensions

    Australian Dollar falls due to risk-off sentiment amid escalating Israel-Iran tensions


    • The Australian Dollar declines due to dampened risk sentiment amid rising tensions in the Middle East.
    • Israeli military officials said that Israel attacked dozens of nuclear sites across Iran.
    • The US Producer Price Index rose 0.1% MoM in May, against the expectation of a 0.2% rise.

    The Australian Dollar (AUD) declines against the US Dollar (USD) on Friday, with over 1% losses. The AUD/USD pair depreciates due to escalating tensions in the Middle East.

    Israeli Minister of Defense Israel Katz warned his country to face a missile and drone attack following Israel’s preemptive attack on Iran. Katz declared a special state of emergency in the country, per Axios. Israeli military officials said that Israel attacked dozens of sites across Iran, as the Iranian nuclear program is an existential threat to Israel.

    Reuters reported that US President Donald Trump expanded steel tariffs starting June 23 on imported “steel derivative products,” including household appliances, such as dishwashers, washing machines, refrigerators, etc. The tariffs were initially imposed at 25% in March and later doubled to 50% for most countries. This is the second time the scope of affected products has been expanded.

    Australian Dollar depreciates as US Dollar advances due to improved safe-haven demand

    • The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is recovering losses and trading higher at around 98.10 at the time of writing. The US Michigan Consumer Sentiment will be eyed later on Friday.
    • The US Producer Price Index (PPI) climbed 0.1% month-over-month in May, compared to a decline of 0.2% (revised from -0.5%). This reading came in softer than the expected 0.2% rise. Meanwhile, the core PPI, excluding food and energy, increased 0.1% MoM in May versus -0.2% prior (revised from -0.4%), below the consensus of 0.3%.
    • President Trump posted on Truth Social on Wednesday that the trade deal with China is done and added that it is subject to his and Chinese President Xi Jinping’s final approval. “We are getting a total of 55% tariffs, China is getting 10%. Relationship is excellent! Thank you for your attention to this matter.”
    • China will grant only six-month rare-earth export licenses for US automakers and manufacturers, which suggests that China wants to have control over critical minerals as leverage in future talks, per the Wall Street Journal (gated).
    • The US Consumer Price Index (CPI) rose 2.4% YoY in May, slightly above 2.3% prior but below the market expectations of a 2.5% increase. The core CPI, which excludes volatile food and energy prices, climbed 2.8% YoY in May, compared to the consensus of 2.9%.
    • On Wednesday, President Trump stated that he would like to extend the trade talks deadline, but doesn’t think it will be necessary. Trump further stated that he will set unilateral tariff rates within two weeks.
    • The US Court of Appeals for the Federal Circuit extended an earlier, temporary respite on Tuesday for the government as it presses a challenge to a lower court ruling last month that blocked the tariffs. The federal appeals court has ruled that President Trump’s broad tariffs can remain in effect while legal appeals continue, per Bloomberg.
    • China’s Trade Balance (CNY) arrived at CNY743.56 billion in May, expanding from the previous surplus of CNY689.99 billion. Meanwhile, Exports rose 6.3% YoY against 9.3% in April. The country’s imports fell 2.1% YoY in the same period, from a 0.8% rise recorded previously.
    • Australia’s Trade Balance posted a 5,413M surplus month-over-month in April, below the 6,100M expected and 6,892M (revised from 6,900M) in the previous reading. Exports declined by 2.4% MoM in April, against a 7.2% rise prior (revised from 7.6%). Meanwhile, Imports rose by 1.1%, compared to a decline of 2.4% (revised from -2.2%) seen in March. China’s Caixin Services PMI rose to 51.1 in May as expected, from 50.7 in April.

    Australian Dollar falls toward 0.6450 near 50-day EMA

    AUD/USD pair trading around 0.6460 on Friday. The daily chart’s technical analysis indicates a weakening of the bullish bias as the pair has breached below the lower boundary of the ascending channel. Additionally, the pair moving below the nine-day Exponential Moving Average (EMA) suggests that short-term price momentum is weakening. However, the 14-day Relative Strength Index (RSI) is still positioned slightly above the 50 mark, indicating a bullish bias is in play.

    On the downside, the AUD/USD pair may further test the 50-day EMA at 0.6423. A break below this level may weaken the medium-term price momentum and put downward pressure on the pair to navigate the region around 0.5914, the lowest since March 2020.

    The immediate barrier appears at the nine-day EMA of 0.6495, followed by the seven-month high of 0.6538, which was reached on June 5. Further advances could prompt the pair to explore the region around the eight-month high at 0.6687, followed by the upper boundary of the ascending channel around 0.6730.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Swiss Franc.

    USD EUR GBP JPY CAD AUD NZD CHF
    USD 0.45% 0.45% 0.17% 0.22% 0.76% 0.77% -0.15%
    EUR -0.45% 0.04% -0.23% -0.16% 0.40% 0.29% -0.59%
    GBP -0.45% -0.04% -0.33% -0.28% 0.27% 0.23% -0.62%
    JPY -0.17% 0.23% 0.33% 0.09% 0.61% 0.59% -0.30%
    CAD -0.22% 0.16% 0.28% -0.09% 0.52% 0.55% -0.34%
    AUD -0.76% -0.40% -0.27% -0.61% -0.52% -0.02% -0.89%
    NZD -0.77% -0.29% -0.23% -0.59% -0.55% 0.02% -0.86%
    CHF 0.15% 0.59% 0.62% 0.30% 0.34% 0.89% 0.86%

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.



    Source link

  • AUD/USD climbs to new highs north of 0.6500

    AUD/USD climbs to new highs north of 0.6500


    • AUD/USD adds to the weekly advance, surpassing the 0.6500 mark.
    • The US Dollar remains under pressure from economic data, US-China trade deal.
    • The US CPI fell below consensus, rising by 2.4% YoY in May.

    The upward trend in the Aussie Dollar (AUD) continues unabated this week, with AUD/USD advancing for the third consecutive day and reaching new yearly peaks near the 0.6550 level.

    AUD/USD propped up by USD selling, trade optimism

    The pair keeps its weekly recovery well in place on Wednesday in response to further pessimism hurting the Greenback, while auspicious news on the trade front also alleviated concerns over a protracted trade war.

    Indeed, the US Dollar accelerated its losses after US inflation figures showed the CPI rising less than initially estimated by 2.4% in the year to May. The core reading followed suit, coming in short of expectations and rising 2.8% from a year earlier.

    The weaker-than-expected US data has prompted investors to accelerate their bets of a probable rate cut by the Federal Reserve at its September gathering.

    Back to trade, US and China officials appear to have reached some common ground regarding rare earths at their gathering in London, although the agreement still needs confirmation from both President Trump and China’s Xi Jinping.

    Next on tap in Oz

    Given the lack of data releases in Australia on Wednesday, investors’ attention shifts to the Melbourne Institute’s release of Inflation Expectations on Thursday.

    What about techs?

    AUD/USD is trading in the low-0.6500s and is expected to face initial resistance at the YTD peak of 0.6545 (June 11), seconded by the November 2024 high of 0.6687 (November 7) and the 2024 top of 0.6942 (September 30), all preceding the key 0.7000 hurdle.

    On the other hand, the resumption of the bearish trend could spark an initial drop to the critical 200-day SMA at 0.6434, prior to the May trough of 0.6356 (May 12). The latter appears reinforced by the proximity of the provisional contention at the 55-day and 100-day SMAs at 0.6379 and 0.6342, respectively.

    The RSI near 59 suggests that further gains should remain in the pipeline in the short-term horizon, while the ADX past 26 is indicative of a modest strength of the trend.



    Source link

  • Sterling Slumps as UK Jobs Data Fuels August BoE Rate Cut Bets

    Sterling Slumps as UK Jobs Data Fuels August BoE Rate Cut Bets


    Sterling is sold off notably today after dismal UK labor market data intensified expectations of a BoE rate cut in August. The most striking element was the -109k drop in payrolled employment—the largest non-pandemic decline since records began in 2014—coupled with a rise in the unemployment rate to its highest level since mid-2023.

    While wage growth remains elevated, its slowdown reinforces the view that inflationary pressures are easing. With signs that labour market cooling is gaining momentum, markets are increasingly pricing in not just an August rate cut, but a follow-up move in November. Traders will, however, closely monitor Chancellor Rachel Reeves’ fiscal statement tomorrow, which may influence expectations depending on the scale and orientation of policy shifts.

    Elsewhere, markets are also eyeing the second day of US-China trade talks in London. Ahead of the meeting, U.S. Commerce Secretary Howard Lutnick said that he expected a full day meeting today, while the negotiations are “going well”. Both sides are expected to issue updates later in the day.

    Overall in the currency markets, Sterling is currently the worst performer, followed by Swiss Franc, and then Dollar. Loonie is the best, followed by Aussie, and then Euro. Yen and Aussie are positioning in the middle.

    Technically, focus is now on 1.1045 support in GBP/CHF with today’s dip. Firm break there will complete a head and shoulder top pattern, which suggest that rise from 1.0610 has completed, at 1.1200. Deeper decline should then be seen to 38.2% retracement of 1.0610 to 1.1200 at 1.0975, and possibly further to 61.8% retracement at 1.0835.

    In Europe, at the time of writing, FTSE is up 0.53%. DAX is down -0.40%. CAC is up 0.01%. UK 10-year yield is down -0.094 at 4.543. Germany 10-year yield is down -0.035 at 2.535. Earlier in Asia, Nikkei rose 0.32%. Hong Kong HSI fell -0.08%. China Shanghai SSE fell -0.44%. Singapore Strait Times fell -0.06%. Japan 10-year JGB yield rose 0.002 to 1.480.

    ECB’s Villeroy: Favorable 2 and 2 zone is not static

    French ECB Governing Council member Francois Villeroy de Galhau said in a conference today that ECB is now in a favorable “2 and 2 zone. That means, inflation is forecast at 2% this year, while deposit rate is also at 2%.

    Nevertheless, he warned that with current uncertainties, this zone “does not mean a comfortable zone or a static zone”. “We will remain pragmatic and data-driven, and as agile as necessary,” Villeroy added.

    Separately, Finnish ECB policymaker Olli Rehn warned that as inflation is projected to stay below 2% this year, the central must be mind of “not slipping towards the zero lower bound.”

    “We must not grow overconfident — instead we must stay vigilant and monitor the risks in both directions,” Rehn said. “The ECB team must remain alert and ready to act with agility as and if needed.”

    Eurozone Sentix surges back into positive territory, recession fears recede

    Investor sentiment in the Eurozone turned notably upbeat in June, as Sentix Investor Confidence index climbed from -8.1 to +0.2—its first positive reading since June 2024 and well above expectations of -6. Current Situation Index also improved markedly from -19.3 to -13.0, while Expectations Index jumped from 3.8 to 14.3.

    Germany led the improvement, with its overall Sentix index rising to -5.9, the highest since March 2022. Expectations climbed by 12 points to 17.5, while current conditions advanced for the fourth consecutive month to -26.8.

    According to Sentix, fears of a recession triggered by the US tariff shock in April have largely dissipated, and the economic outlook for the Eurozone is now tilted toward a cyclical upswing.

    With economic momentum building and the Sentix inflation barometer showing signs of easing price pressures, ECB may view its policy as being in a “comfort zone.” While another rate cut isn’t off the table, any such move could be delayed if the upswing continues to solidify over the summer.

    UK labor market softens as unemployment rises to 4.6% and wage growth slows

    UK labor market data released today point to gradual cooling. In May, payrolled employment dropped by -109k, or -0.4% mom. Claimant count rose sharply by 33.1k, well above the expected 4.5k increase. Wage pressures are also easing, with median monthly pay rising by 5.8% yoy, down from 6.2% previously, though still within a relatively tight band seen this year.

    For the three months to April, unemployment rate ticked up to 4.6% as expected, while both average earnings measures came in softer than forecast. Regular pay (excluding bonuses) rose 5.2% yoy, and total pay increased 5.3% yoy, both under the 5.5% consensus.

    BoJ’s Ueda reaffirms gradual tightening path, cites limited room for rate cuts

    BoJ Governor Kazuo Ueda reiterated to parliament today that interest rate hikes will continue, though cautiously, once the central bank gains “more conviction that underlying inflation will approach 2% or hover around that level”.

    Ueda explained that BoJ still maintains negative real interest rates to support inflation momentum and ensure price growth remains both stable and sustained.

    However, Ueda also flagged a significant limitation in policy space should economic conditions deteriorate. With the short-term policy rate still only at 0.5%, the BoJ has “limited room” to cut rates in response to any sharp downturn in growth.

    Australia’s Westpac consumer sentiment edges higher as rate cuts clash with growth worries

    Australia’s Westpac Consumer Sentiment index rose a modest 0.5% mom in June to 92.6, reflecting a population still mired in what Westpac called a “holding pattern of cautious pessimism.”

    The data reveal “two clear opposing forces” shaping household attitudes: easing inflation and RBA’s May rate cut have improved perceptions around major purchases. On the other hand, sluggish domestic growth and global trade uncertainties continue to weigh heavily on expectations.

    Looking ahead, attention turns to the RBA’s next meeting on July 7–8. With economic data remaining mixed and labor market tightness still evident, Westpac expects the central bank to proceed with caution and keep the cash rate on hold. Nonetheless, a fresh round of economic projections in August could pave the way for another 25 basis point cut, as RBA recalibrates its stance amid still-sluggish growth.

    Australia’s NAB business confidence lifts to 2, but employment conditions erode

    Australia’s NAB Business Confidence index turned positive in May, rising from -1 to 2. However, the improvement in confidence was not matched by underlying business conditions, which weakened further. Business Conditions index slipped from 2 to 0, with trading conditions dipping slightly from 6 to 5, profitability remaining in the red at -4, and employment conditions dropping from 4 to 0 — all pointing to a stagnating environment.

    On the inflation front, cost indicators presented a mixed picture. Labor cost growth remained firm at a quarterly equivalent pace of 1.7%. Purchase cost and final product price growth eased to 1.1% and 0.5%, respectively. Retail price growth held steady at 1.2%, suggesting persistent margin pressures.

    NAB Chief Economist Sally Auld emphasized that business conditions are still weak and warned that continued softness could cap any recovery in confidence. She also flagged the labor market as a key area to monitor, with the employment index now below average.

    EUR/GBP Mid-Day Outlook

    Daily Pivots: (S1) 0.8419; (P) 0.8424; (R1) 0.8433; More…

    EUR/GBP’s rebound from resumed by breaking through 0.8448 resistance, and intraday bias is back on the upside for 38.2% retracement of 0.8737 to 0.8354 at 0.8500. Strong resistance could be seen from 0.8500 to complete the corrective bounce. On the downside, break of 0.8413 support will bring retest of 0.8354 low. However, firm break of 0.8500 will pave the way to 61.8% retracement at 0.8591 instead.

    In the bigger picture, price actions from 0.8221 medium term bottom are merely forming a corrective pattern. Nevertheless, there is no clear momentum to break through 0.8201 key support (2022 low) yet. Hence, range trading is expected between 0.8221/8737 for now.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Retail Sales Monitor Y/Y May 0.60% 2.70% 6.80%
    23:50 JPY Money Supply M2+CD Y/Y May 0.60% 0.50%
    00:30 AUD Westpac Consumer Confidence Jun 0.50% 2.20%
    01:30 AUD NAB Business Confidence May 2 -1
    01:30 AUD NAB Business Conditions May 0 2
    06:00 JPY Machine Tool Orders Y/Y May 3.40% 7.70%
    06:00 GBP Claimant Count Change May 33.1K 4.5K 5.2K -21.2K
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Apr 5.20% 5.50% 5.60% 5.50%
    06:00 GBP Average Earnings Including Bonus 3M/Y Apr 5.30% 5.50% 5.50% 5.60%
    06:00 GBP ILO Unemployment Rate (3M) Apr 4.60% 4.60% 4.50%
    08:30 EUR Eurozone Sentix Investor Confidence Jun 0.2 -6 -8.1
    10:00 USD NFIB Business Optimism Index May 98.8 95.9 95.8

     



    Source link

  • Aussie Firmer in Quiet Markets as US-China Trade Talks Continue

    Aussie Firmer in Quiet Markets as US-China Trade Talks Continue


    Global markets remain in a state of cautious anticipation as high-level trade negotiations between the US and China continue for a second day in London. While there’s no definitive outcome yet, mild optimism lingers. Asian equities reflected that mood, with Japan’s Nikkei and Hong Kong’s Hang Seng Index both trading slightly higher. Yet the prevailing sense is one of hesitation, with limited conviction behind the moves. Investors are still waiting for substantive developments before making bolder positioning decisions.

    In the currency markets, Kiwi and Aussie continue to outperform for the week so far, buoyed by broad risk resilience and perhaps early hopes that renewed dialogue could reduce global trade frictions. However, upside momentum in both currencies has been sluggish. At the other end, Loonie is trading as the weakest, followed by Swiss Franc and Japanese Yen. Dollar, Euro, and British Pound are largely directionless, trading in the middle of the weekly performance board.

    The London meetings between US and Chinese officials mark the second day of high-stakes negotiations aimed at resolving the fallout from earlier tariff escalations. While Monday’s talks yielded no breakthrough, the inclusion of Commerce Secretary Howard Lutnick in this round is notable. His agency oversees export controls, signaling the centrality of rare earths in the ongoing discussions. These magnets, vital to EV production and defense equipment, have become a leverage point for Beijing as it holds a near-monopoly over global supply.

    Markets are not pricing in a full resolution just yet. Most expectations center around a tentative agreement on technical issues or interim concessions, such as expanded export licenses. However, structural divisions persist, particularly over technology and national security. Without more substantive signs of compromise, the fragile sentiment boost from the talks could quickly fade, especially if either side issues a combative post-meeting statement.

    Technically, EUR/AUD is now pressing 1.7460 support as the decline from 1.7705 extends. Firm break there will argue that choppy recovery from 1.7245 has completed as a correction, ahead of 38.2% retracement of 1.8554 to 1.7245. That would also suggest that fall from 1.8854 is ready to resume through 1.7245 low.

    In Asia, at the time of writing, Nikkei is up 0.89%. Hong Kong HSI is up 0.15%. China Shanghai SSE is down -0.13%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is down -0.002 at 1.476. Overnight, DOW closed down -0.00%. S&P 500 rose 0.09%. NASDAQ rose 0.31%. 10-year yield fell -0.028 to 4.482.

    BoJ’s Ueda reaffirms gradual tightening path, cites limited room for rate cuts

    BoJ Governor Kazuo Ueda reiterated to parliament today that interest rate hikes will continue, though cautiously, once the central bank gains “more conviction that underlying inflation will approach 2% or hover around that level”.

    Ueda explained that BoJ still maintains negative real interest rates to support inflation momentum and ensure price growth remains both stable and sustained.

    However, Ueda also flagged a significant limitation in policy space should economic conditions deteriorate. With the short-term policy rate still only at 0.5%, the BoJ has “limited room” to cut rates in response to any sharp downturn in growth.

    Australia’s Westpac consumer sentiment edges higher as rate cuts clash with growth worries

    Australia’s Westpac Consumer Sentiment index rose a modest 0.5% mom in June to 92.6, reflecting a population still mired in what Westpac called a “holding pattern of cautious pessimism.”

    The data reveal “two clear opposing forces” shaping household attitudes: easing inflation and RBA’s May rate cut have improved perceptions around major purchases. On the other hand, sluggish domestic growth and global trade uncertainties continue to weigh heavily on expectations.

    Looking ahead, attention turns to the RBA’s next meeting on July 7–8. With economic data remaining mixed and labor market tightness still evident, Westpac expects the central bank to proceed with caution and keep the cash rate on hold. Nonetheless, a fresh round of economic projections in August could pave the way for another 25 basis point cut, as RBA recalibrates its stance amid still-sluggish growth.

    Australia’s NAB business confidence lifts to 2, but employment conditions erode

    Australia’s NAB Business Confidence index turned positive in May, rising from -1 to 2. However, the improvement in confidence was not matched by underlying business conditions, which weakened further. Business Conditions index slipped from 2 to 0, with trading conditions dipping slightly from 6 to 5, profitability remaining in the red at -4, and employment conditions dropping from 4 to 0 — all pointing to a stagnating environment.

    On the inflation front, cost indicators presented a mixed picture. Labor cost growth remained firm at a quarterly equivalent pace of 1.7%. Purchase cost and final product price growth eased to 1.1% and 0.5%, respectively. Retail price growth held steady at 1.2%, suggesting persistent margin pressures.

    NAB Chief Economist Sally Auld emphasized that business conditions are still weak and warned that continued softness could cap any recovery in confidence. She also flagged the labor market as a key area to monitor, with the employment index now below average.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6496; (P) 0.6515; (R1) 0.6536; More…

    Intraday bias in AUD/USD remains neutral as it’s still staying below 0.6536 resistance. More consolidations could be seen, but even in case of another dip, further rise is in favor favor as long as 0.6406 support holds. On the upside, decisive break of 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6406 will turn bias to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6443) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fall through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Retail Sales Monitor Y/Y May 0.60% 2.70% 6.80%
    23:50 JPY Money Supply M2+CD Y/Y May 0.60% 0.50%
    00:30 AUD Westpac Consumer Confidence Jun 0.50% 2.20%
    01:30 AUD NAB Business Confidence May 2 -1
    01:30 AUD NAB Business Conditions May 0 2
    06:00 JPY Machine Tool Orders Y/Y May 7.70%
    06:00 GBP Claimant Count Change May 4.5K 5.2K
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Apr 5.50% 5.60%
    06:00 GBP Average Earnings Including Bonus 3M/Y Apr 5.50% 5.50%
    06:00 GBP ILO Unemployment Rate (3M) Apr 4.60% 4.50%
    08:30 EUR Eurozone Sentix Investor Confidence Jun -6 -8.1
    10:00 USD NFIB Business Optimism Index May 95.9 95.8

     



    Source link

  • Australian Dollar falls due to risk-off sentiment amid escalating Israel-Iran tensions

    Australian Dollar falls, downside seems limited amid market caution ahead US NFP


    • The Australian Dollar may consolidate as traders adopt caution ahead of the US NFP release.
    • President Trump described the call as productive, and negotiations on tariffs are set to continue.
    • US Nonfarm Payrolls could have added 130,000 jobs in May, meanwhile, the Unemployment Rate is expected to hold steady at 4.2%.

    The Australian Dollar (AUD) declines against the US Dollar (USD) on Friday. The AUD/USD pair may remain stable amid market caution, as traders await the upcoming US Nonfarm Payrolls (NFP) report, due later in the day, seeking fresh insights into the United States (US) economy.

    Market sentiment improved following a productive phone call between US President Donald Trump and Chinese President Xi Jinping. Trump expressed that the call was productive and prepared to continue tariff negotiations. However, Trump and his team struggled to stay composed with Chinese trade officials. It is essential to note that any changes in the Chinese economy could impact the AUD, as China and Australia are close trade partners.

    Reserve Bank of Australia (RBA) Minutes of its May meeting suggested that the policymakers viewed the case for a 25 basis point cut as stronger, preferring a policy to be cautious and predictable. RBA Assistant Governor Sarah Hunter expressed caution on Tuesday that “higher US tariffs will put a drag on the global economy,” and warned that higher uncertainty could dampen investment, output, and employment in Australia.

    Australian Dollar struggles as US Dollar recovers losses ahead of NFP data

    • The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is trading higher at around 98.80 at the time of writing. The upcoming US Nonfarm Payrolls is expected to have added 130,000 jobs in May, below the 177,000 increase in April. The Unemployment Rate is also expected to hold steady at 4.2%.
    • Weekly Initial Jobless Claims rose to 247,000, above the expected 235,000, as data released by the US Department of Labor. Thursday’s US ADP private sector employment rose 37,000 in May, against a 60,000 increase (revised from 62,000) recorded in April, far below the market expectation of 115,000.
    • Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) declined to 49.9 in May, from 51.6 in April. This reading surprisingly came in weaker than the expected 52.0. Meanwhile,
    • US President Donald Trump called upon, in a post published on Truth Social on Wednesday, Federal Reserve (Fed) Chairman Jerome Powell to lower the policy rate. “ADP NUMBER OUT!!! “Too Late” Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES,” Trump said.
    • On Wednesday, Minneapolis Fed President Neel Kashkari noted that the labor market is showing some signs of slowing down. However, persistent uncertainty prevails over the economy, and the Fed must stay in wait-and-see mode to assess how the economy responds to the uncertainty.
    • House Republicans passed Trump’s “Big Beautiful Bill,” a multitrillion-dollar tax and spending package, which could increase the US fiscal deficit, along with the risk of bond yields staying higher for longer. This scenario raises concerns over the US economy and prompts traders to sell American assets under the “Sell America” trend. Policy experts anticipate Senate changes as GOP lawmakers aim to finalize the “big bill” by July 4.
    • The former biggest Donald Trump backer, Elon Musk, has been attacking Trump’s ‘big beautiful budget bill’ this week via social media. Musk has been openly mocking the Trump budget, which he had played a key role in creating. He criticized that the Trump budget codifies functionally none of the federal spending cuts that he swiftly executed at the start of Trump’s second term without Congressional oversight.
    • Last week, Trump accused China of breaching a truce on tariffs reached earlier this month. Washington and Beijing agreed to temporarily lower reciprocal tariffs in a meeting in Geneva. Trump said that China had “totally violated its agreement with us.” US Trade Representative Jamieson Greer also said that China had failed to remove non-tariff barriers as agreed. In response, a spokesperson from China’s Ministry of Commerce said on Monday that China had complied with the agreement by cancelling or suspending relevant tariff and non-tariff measures aimed at US “reciprocal tariffs.”
    • China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) unexpectedly fell to 48.3 in May from 50.4 in April, falling short of the market expectations of a 50.6 expansion. However, the weekend data showed that the National Bureau of Statistics (NBS) Manufacturing PMI rose to 49.5 in May, from April’s 49.0 reading. Meanwhile, the Non-Manufacturing PMI declined to 50.3 from the previous 50.4 figure, falling short of the expected reading of 50.6. The Aussie Dollar could be impacted by Chinese economic data as both countries are close trading partners.
    • Australia’s Trade Balance posted a 5,413M surplus month-over-month in April, below the 6,100M expected and 6,892M (revised from 6,900M) in the previous reading. Exports declined by 2.4% MoM in April, against a 7.2% rise prior (revised from 7.6%). Meanwhile, Imports rose by 1.1%, compared to a decline of 2.4% (revised from -2.2%) seen in March. China’s Caixin Services PMI rose to 51.1 in May as expected, from 50.7 in April.
    • The Australian Bureau of Statistics (ABS) showed that Gross Domestic Product (GDP) grew by 0.2% quarter-over-quarter in Q1, declining from the previous 0.6% growth. Australia’s economy fell short of the expected 0.4% rise. Meanwhile, the annual GDP growth rate remained consistent at 1.3%, below the expected 1.5%.

    Australian Dollar stays above 0.6500, could target seven-month highs

    The AUD/USD pair is trading around 0.6510 on Friday. The daily chart’s technical analysis suggests the prevailing bullish bias as the pair remains within the ascending channel pattern. Additionally, the short-term price momentum remains stronger as the pair stays above the nine-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is also positioned above the 50 mark, suggesting a bullish outlook.

    On the upside, the AUD/USD pair may target a seven-month high of 0.6538, which was recorded on June 5. The pair can also explore the region around the upper boundary of the ascending channel around 0.6680, aligned with the eight-month high at 0.6687.

    The primary support appears at the nine-day EMA of 0.6478, aligned with the ascending channel’s lower boundary around 0.6470. Further decline could weaken the bullish bias and lead the AUD/USD pair to test the 50-day EMA at 0.6405.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Canadian Dollar.

    USD EUR GBP JPY CAD AUD NZD CHF
    USD 0.05% -0.00% 0.17% -0.08% 0.17% -0.04% 0.06%
    EUR -0.05% -0.04% 0.10% -0.12% 0.07% -0.08% 0.02%
    GBP 0.00% 0.04% 0.14% -0.07% 0.11% -0.03% 0.06%
    JPY -0.17% -0.10% -0.14% -0.18% 0.13% -0.07% -0.16%
    CAD 0.08% 0.12% 0.07% 0.18% 0.24% 0.05% 0.13%
    AUD -0.17% -0.07% -0.11% -0.13% -0.24% -0.14% -0.03%
    NZD 0.04% 0.08% 0.03% 0.07% -0.05% 0.14% 0.09%
    CHF -0.06% -0.02% -0.06% 0.16% -0.13% 0.03% -0.09%

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Risk sentiment FAQs

    In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

    Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

    The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

    The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.



    Source link

  • Muted Trading Persists as Trump Pressures Fed after ADP Miss

    Muted Trading Persists as Trump Pressures Fed after ADP Miss


    Trading remains subdued as markets drift into the US session, with little conviction across asset classes. US futures dipped slightly after a dismal ADP employment report showing only 37k job additions in May, sharply below expectations. Still, the reaction was contained, with no clear evidence of a broad risk-off move.

    US President Donald Trump added to the noise with another jab at Fed on Truth Social: “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE.” While such commentary adds political pressure, Fed officials have consistently stated they need to remain patient given the elevated uncertainty surrounding US tariff policies and ongoing trade talks. Fed is clearly reluctant to act prematurely.

    Trade remains a key driver of sentiment. The latest round of higher US tariffs on steel and aluminium took effect on Wednesday, affecting all partners except the UK, which has a preliminary agreement in place. Today also marks the Trump administration’s self-imposed deadline for trading partners to submit their “best offers” to avoid sweeping tariffs set to begin in early July. Markets are likely to see a pickup in volatility as the tariff pause approaches its final weeks.

    In the currency markets, Dollar is currently the worst performer for the day so far, followed by Loonie and Yen. At the other end, Aussie is leading gains, followed by Kiwi and Swiss Franc. Euro and Pound are holding steady in the middle of the pack. Despite some movement, major currency pairs remain trapped within last week’s ranges.

    USD/CAD may come into sharper focus later in the session as BoC delivers its rate decision, alongside the release of the US ISM Services report.

    Technically, USD/CAD remains on the defensive and poised for further decline as long as the 1.3860 resistance level holds. 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603 might provide some support to bring rebound. However, decisive break there could prompt downside acceleration to 100% projection at 1.3349 rather quickly.

    In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.39%. CAC is up 0.57%. UK 10-year yield is down -0.041 at 4.606. Germany 10-year yield is flat at 2.523. Earlier in Asia, Nikkei rose 0.80%. Hong Kong HSI rose 0.60%. China Shanghai SSE rose 0.42%. Singapore Strait Times is up 0.24%. Japan 10-year JGB yield rose 0.023 to 1.505.

    US ADP jobs rise only 37k, but wages growth stays firm

    The US private sector added just 37k jobs in May, sharply below expectations of 120k, according to the ADP report.

    Weakness was most apparent in goods-producing sectors, which shed -2k jobs, while service providers managed a modest gain of 36k. By company size, medium-sized businesses led with 49k new jobs, while small firms lost -13k and large firms shed -3k.

    Despite the hiring slowdown, wage pressures remained firm. Annual pay growth for job-stayers held steady at 4.5%, while job-changers saw a 7% increase, unchanged from April.

    Nela Richardson, ADP’s chief economist, acknowledged the slowdown in hiring but noted that wage pressures have not yet eased meaningfully—suggesting lingering tightness in segments of the labor market even as overall momentum weakens.

    UK PMI services finalized at 50.9, rebound as tariff concerns ease

    The UK services sector returned to modest growth in May, with PMI Services finalized at 50.9, rebounding from April’s 27-month low of 49.0. Composite PMI also edged into expansion at 50.3, up from 48.5.

    Tim Moore of S&P Global highlighted that easing fears over US tariffs, firmer global markets, and renewed client confidence underpinned the service sector’s recovery. Business sentiment for the year ahead climbed to a seven-month high, driven by investment plans and improved sales expectations.

    However, the underlying job market remains soft. The eight-month stretch of declining employment in the sector now marks the longest non-pandemic downturn since the global financial crisis.

    But encouragingly, input cost inflation eased from April’s peak, while competitive pricing pressures led to the slowest increase in service charges since October.

    Eurozone PMI composite finalized at 50.2, ECB cuts and Germany to suhion tariffs impact ahead

    Eurozone’s services sector contracted modestly in May, with the final PMI Services reading falling to 49.7, down from April’s 50.1, marking a six-month low. This decline pulled the Composite PMI down to 50.2, indicating only marginal overall growth in private sector activity.

    The divergence in national performance was notable: Italy led with a 13-month high of 52.5, while Germany and France both remained in contraction, with Germany posting a five-month low of 48.5 and France improving to a nine-month high of 49.3.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, expressed confidence that expected ECB rate cuts and anticipated fiscal support from Germany would help cushion the impact of rising tariffs and growing uncertainty.

    However, inflation signals from the PMI survey were mixed. Services sector sales price growth moderated again, which may reassure the ECB on the disinflation front. Still, cost pressures picked up slightly, which could complicate the ECB’s job over the longer term. Nevertheless, with goods prices easing more quickly and overall inflation slipping below target.

    Australia’s GDP grows only 0.2% qoq in Q1, as weather and public investment drag

    Australia’s GDP expanded just 0.2% qoq in Q1, falling short of expectations for 0.4% qoq growth. On an annual basis, GDP rose 1.3% yoy. However, GDP per capita declined by -0.2% qoq, marking a renewed contraction in individual economic output.

    The ABS noted that severe weather disrupted key sectors including mining, tourism, and shipping, while also impacting domestic demand and exports.

    The most notable drag came from public investment, which fell -2.0%, contributing to the largest negative impact from public spending since Q3 2017. Net exports also weighed slightly, subtracting -0.1 percentage points from quarterly growth.

    Japan’s PMI composite finalized at 50.2, growth momentum falters

    Japan’s private sector lost steam in May as final PMI Services reading slipped to 51.0 from April’s 52.4, while Composite PMI declined to 50.2 from 51.2. The data point to only marginal growth in overall activity, with a slowdown in services combining with a mild deterioration in manufacturing output.

    S&P Global’s Annabel Fiddes noted that the rise in total new orders “moved closer to stagnation, as service sector sales grew at their slowest pace in six months and factory demand continued to decline. This moderation suggests that Japan’s private sector “may struggle to bounce back in the near-term”.

    Underlying concerns were linked to external and structural factors, including an uncertain global demand outlook, persistent labor shortages, and mounting cost pressures.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1338; (P) 1.1397; (R1) 1.1429; More…

    EUR/USD is staying in consolidations below 1.1453 temporary top and intraday bias remains neutral. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD GDP Q/Q Q1 0.20% 0.40% 0.60%
    07:50 EUR France Services PMI May F 48.9 47.4 47.4
    07:55 EUR Germany Services PMI May F 47.1 47.2 47.2
    08:00 EUR Eurozone Services PMI May F 49.7 48.9 48.9
    08:30 GBP Services PMI May F 50.9 50.2 50.2
    12:15 USD ADP Employment Change May 37K 120K 62K 60K
    12:30 CAD Labor Productivity Q/Q Q1 0.40% 0.60%
    13:45 CAD BoC Interest Rate Decision 2.75% 2.75%
    13:45 USD Services PMI May F 52.3 52.3
    14:00 USD ISM Services PMI May 52 51.6
    14:30 CAD BoC Press Conference
    14:30 USD Crude Oil Inventories -2.9M -2.8M
    18:00 USD Fed’s Beige Book

     



    Source link

  • Subdued Markets Drift as Tariff Tensions Resurface and BoC Decision Looms

    Subdued Markets Drift as Tariff Tensions Resurface and BoC Decision Looms


    Global markets remain subdued as investors struggle to find a firm direction. US stocks closed higher overnight, with NASDAQ extending to fresh multi-week highs, suggesting some resilience in tech-led risk appetite. Asian equities followed suit to some extent, but the overall momentum has been tepid.

    In the currency markets, Dollar is attempting to recover from recent losses, though the rebound so far lacks strong conviction. Loonie and Kiwi are mildly firmer. However, Aussie and Yen are both underperforming, sitting at the bottom of the performance table and highlighting the absence of a coherent risk-on or risk-off narrative. European majors are positioned in the middle of the pack, with Swiss Franc slightly outperforming.

    The trade backdrop remains tense. US President Donald Trump’s decision to double tariffs on most imported steel and aluminum to 50% took effect on today, marking a new escalation in the global trade conflict. According to economic adviser Kevin Hassett, the initial 25% steel tariffs delivered partial support, but “more help is needed,” hence the decision to double the rates. The move came just as the White House also demanded “best offers” from trade partners ahead of a self-imposed early July deadline. Attention now turns to the European Union, with markets awaiting any formal response or retaliatory measures.

    Technically, EUR/GBP’s recovery has stalled ahead of 0.8458 resistance and retreated notably. Focus is back on 0.8401 support. Firm break there will argue that fall from 0.8737 might be ready to resume through 0.8354. That, if happens, might be accompanied by extended pullback in EUR/USD or upside break out in GBP/USD, or both.

    In Asia, at the time of writing, Nikkei is up 0.92%. Hong Kong HSI is up 0.47%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -0.07%. Japan 10-year JGB yield is up 0.014 at 1.495. Overnight, DOW rose 0.51%. S&P 500 rose 0.58%. NASDAQ rose 0.81%. 10-year yield fell -0.002 to 4.460.

    Looking ahead, final PMI Services data from both the Eurozone and the UK will be released in European session. In the US, markets will closely watch the ADP employment report and ISM services index for clues on labor market momentum and service sector resilience. Still, the day’s main event is BoC policy decision, where the central bank is widely expected to hold, but guidance could lean dovish as trade risks intensify.

    BoC to hold rates at 2.75%, maintain dovish bias

    BoC is widely expected to leave interest rate unchanged at 2.75% for the second consecutive meeting today.

    While Q1 GDP surprised to the upside at 2.2% annualized, the growth was heavily front-loaded by export activity as US buyers rushed to stockpile Canadian goods ahead of impending tariffs. That one-off boost is unlikely to alter the central bank’s cautious stance in light of growing global and domestic uncertainties. Meanwhile, core inflation rose back to near the top of BoC’s 1-3% target range, offering a reasonable basis for a continued pause.

    Overall, expectations are firmly anchored toward further easing later this year. A Reuters poll found that 75% (17 of 23) of economists anticipate at least two more cuts in 2025, with two of them forecasting as many as four.

    Given the high degree of trade uncertainty, particularly around tariffs, BoC is likely to keep a flexible tone in its communication. While the rate is on hold today, policymakers are expected to leave the door open for adjustments ahead, depending on how the trade situation evolves.

    In the currently markets, today’s BoC decision may not be the key driver for USD/CAD. Instead, market direction is still largely dictated by sentiment around US trade policy.

    Technically, further decline is expected as long as 1.3860 resistance holds, to 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. There might be some support from 1.3603 to contain downside and bring a rebound, as a correction to the five wave decline from 1.4791 high. However, decisive break there could prompt downside acceleration to 100% projection at 1.3349 rather quickly.

    Australia’s GDP grows only 0.2% qoq in Q1, as weather and public investment drag

    Australia’s GDP expanded just 0.2% qoq in Q1, falling short of expectations for 0.4% qoq growth. On an annual basis, GDP rose 1.3% yoy. However, GDP per capita declined by -0.2% qoq, marking a renewed contraction in individual economic output.

    The ABS noted that severe weather disrupted key sectors including mining, tourism, and shipping, while also impacting domestic demand and exports.

    The most notable drag came from public investment, which fell -2.0%, contributing to the largest negative impact from public spending since Q3 2017. Net exports also weighed slightly, subtracting -0.1 percentage points from quarterly growth.

    Japan’s PMI composite finalized at 50.2, growth momentum falters

    Japan’s private sector lost steam in May as final PMI Services reading slipped to 51.0 from April’s 52.4, while Composite PMI declined to 50.2 from 51.2. The data point to only marginal growth in overall activity, with a slowdown in services combining with a mild deterioration in manufacturing output.

    S&P Global’s Annabel Fiddes noted that the rise in total new orders “moved closer to stagnation, as service sector sales grew at their slowest pace in six months and factory demand continued to decline. This moderation suggests that Japan’s private sector “may struggle to bounce back in the near-term”.

    Underlying concerns were linked to external and structural factors, including an uncertain global demand outlook, persistent labor shortages, and mounting cost pressures.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6439; (P) 0.6470; (R1) 0.6492; More…

    Intraday bias sin AUD/USD remains neutral for the moment. With 0.6406 support intact, further rally is expected. ON the upside, firm break of 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, decisive break of 0.6406 will confirm short term topping, and turn bias back to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6441) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fail through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD GDP Q/Q Q1 0.20% 0.40% 0.60%
    07:50 EUR France Services PMI May F 47.4 47.4
    07:55 EUR Germany Services PMI May F 47.2 47.2
    08:00 EUR Eurozone Services PMI May F 48.9 48.9
    08:30 GBP Services PMI May F 50.2 50.2
    12:15 USD ADP Employment Change May 120K 62K
    12:30 CAD Labor Productivity Q/Q Q1 0.40% 0.60%
    13:45 CAD BoC Interest Rate Decision 2.75% 2.75%
    13:45 USD Services PMI May F 52.3 52.3
    14:00 USD ISM Services PMI May 52 51.6
    14:30 CAD BoC Press Conference
    14:30 USD Crude Oil Inventories -2.9M -2.8M
    18:00 USD Fed’s Beige Book

     



    Source link

  • Australian Dollar edges lower as US Dollar recovers recent losses

    Australian Dollar edges lower as US Dollar recovers recent losses


    • The Australian Dollar offered its daily gains as the Greenback edged higher.
    • Australia’s Gross Domestic Product expanded 0.2% QoQ in Q1, against the previous 0.6% growth.
    • The US Dollar faced challenges as tariff uncertainty may hurt growth in the US economy.

    The Australian Dollar (AUD) loses ground against the US Dollar (USD) on Wednesday after offering its daily gains. However, the AUD/USD pair remained in positive territory following the release of mixed economic data from Australia.

    Australian Bureau of Statistics (ABS) showed that Gross Domestic Product (GDP) grew by 0.2% quarter-over-quarter in Q1, declining from the previous 0.6% growth. Australia’s economy fell short of the expected 0.4% rise. Meanwhile, the annual GDP growth rate remained consistent at 1.3%, below the expected 1.5%.

    Moreover, the S&P Global Australia Composite Purchasing Managers’ Index (PMI) fell to 50.5 in May from April’s 51.0 reading, expanding for the eighth successive month. However, the pace indicates marginal growth in business activity, albeit the slowest so far in 2025.

    The S&P Global Australia Services PMI came at 50.6 in May, marking a 16th straight month of expansion but at the slowest pace in six months. The Ai Group Manufacturing PMI posted a -23.5 reading, improved slightly from the previous -26.5. Manufacturers experience delays in major projects and rising market hesitation due to global and domestic uncertainty.

    Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter expressed caution on Tuesday that “higher US tariffs will put a drag on the global economy.” Hunter noted that higher uncertainty could dampen investment, output, and employment in Australia. However, she also added that Australia’s exporters are relatively well-placed to weather the storm and assumes that Chinese authorities will support their economy through fiscal stimulus.

    Australian Dollar declines as US Dollar edges higher on technical correction

    • The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is trading lower at around 99.10 at the time of writing. The Greenback struggles as traders adopt caution amid rising tariff uncertainty and its potential to hurt growth in the US economy.
    • Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings on the last business day of April stood at 7.39 million, increasing from March’s 7.2 million openings. This figure surprisingly came in above the market expectation of 7.1 million.
    • Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index eased to 48.5 in May from 48.7 in April. This figure came in weaker than the expectation of 49.5.
    • US President Donald Trump said at a rally in Pennsylvania on Friday that he planned to double import tariffs on steel and aluminum to build up pressure on global steel producers and intensify the trade war. “We are going to be imposing a 25% increase. We’re going to bring it from 25% to 50% – the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States,” he said, per Reuters.
    • The US Court of Appeals for the Federal Circuit in Washington, on Thursday, temporarily put a hold on a federal court ruling and allowed President Trump’s tariffs to take effect. On Wednesday, a three-judge panel at the Court of International Trade in Manhattan halted Trump from imposing “Liberation Day” tariffs from taking effect. The federal court found that Trump exceeded his authority in imposing broad import tariffs and declared the executive orders issued on April 2 unlawful.
    • House Republicans passed Trump’s “Big Beautiful Bill,” a multitrillion-dollar tax and spending package, which could increase the US fiscal deficit, along with the risk of bond yields staying higher for longer. This scenario raises concerns over the US economy and prompts traders to sell American assets under the “Sell America” trend. Policy experts anticipate Senate changes as GOP lawmakers aim to finalize the “big bill” by July 4.
    • On Friday, Trump accused China of breaching a truce on tariffs reached earlier this month. Washington and Beijing agreed to temporarily lower reciprocal tariffs in a meeting in Geneva. Trump said that China had “totally violated its agreement with us.” US Trade Representative Jamieson Greer also said that China had failed to remove non-tariff barriers as agreed.
    • In response, a spokesperson from China’s Ministry of Commerce said on Monday that China had complied with the agreement by cancelling or suspending relevant tariff and non-tariff measures aimed at US “reciprocal tariffs.”
    • China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) unexpectedly fell to 48.3 in May from 50.4 in April, falling short of the market expectations of a 50.6 expansion. However, the weekend data showed that the National Bureau of Statistics (NBS) Manufacturing PMI rose to 49.5 in May, from April’s 49.0 reading. Meanwhile, the Non-Manufacturing PMI declined to 50.3 from the previous 50.4 figure, falling short of the expected reading of 50.6. The Aussie Dollar could be impacted by Chinese economic data as both countries are close trading partners.
    • RBA Minutes of its May monetary policy meeting suggested that the board viewed the case for a 25 basis point cut as stronger, preferring a policy to be cautious and predictable. The policymakers highlighted that US trade policy posed a significant and adverse impact on the global outlook, but had not yet affected the Australian economy, however, they did not persuade that a 50 bps was needed.
    • The Reserve Bank of Australia (RBA) is expected to deliver more rate cuts in the upcoming policy meetings. The central bank acknowledged progress in curbing inflation and warned that US-China trade barriers pose downside risks to economic growth. Governor Michele Bullock stated that the RBA is prepared to take additional action if the economic outlook deteriorates sharply, raising the prospect of future rate cuts.

    Australian Dollar finds immediate support at nine-day EMA near 0.6450

    AUD/USD is trading around 0.6470 on Wednesday, indicating a prevailing bullish bias. The daily chart’s technical analysis suggests that the pair remains within the ascending channel pattern. The short-term price momentum remains stronger as the pair stays above the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) is positioned above the 50 mark, indicating a persistent bullish outlook.

    On the upside, the AUD/USD pair could approach 0.6537, a seven-month high recorded on May 26. A break above this initial barrier could support the pair to explore the region around the upper boundary of the ascending channel around 0.6670.

    The immediate support appears at the nine-day EMA of 0.6456, aligned with the ascending channel’s lower boundary around 0.6450. A successful breach below this crucial support zone could dampen the bullish bias and lead the AUD/USD pair to test the 50-day EMA at 0.6395.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

    USD EUR GBP JPY CAD AUD NZD CHF
    USD 0.04% 0.05% 0.26% 0.02% 0.09% 0.02% 0.05%
    EUR -0.04% -0.01% 0.20% -0.03% 0.04% -0.03% 0.00%
    GBP -0.05% 0.01% 0.18% -0.02% 0.06% -0.02% 0.02%
    JPY -0.26% -0.20% -0.18% -0.21% -0.22% -0.18% -0.17%
    CAD -0.02% 0.03% 0.02% 0.21% 0.06% -0.01% 0.02%
    AUD -0.09% -0.04% -0.06% 0.22% -0.06% -0.08% -0.04%
    NZD -0.02% 0.03% 0.02% 0.18% 0.01% 0.08% 0.03%
    CHF -0.05% -0.01% -0.02% 0.17% -0.02% 0.04% -0.03%

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    RBA FAQs

    The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

    While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

    Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

    Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

    Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.



    Source link

  • Australia GDP Adds 0.2% On Quarter In Q1

    Australia GDP Adds 0.2% On Quarter In Q1


    Australia’s gross domestic product expanded a seasonally adjusted 0.2 percent on quarter in the first quarter of 2025, the Australian Bureau of Statistics said on Wednesday.

    That missed expectations for an increase of 0.4 percent and was down from 0.6 percent in the three months prior.

    On an annualized basis, GDP was up 1.3 percent – again shy of forecasts for an expansion of 1.5 percent and steady from the previous quarter.

    GDP capex was up 0.1 percent on quarter, slowing from 0.7 percent in the previous three months, while final consumption also slowed, to 0.2 percent on quarter from 0.5 percent.

    For comments and feedback contact: editorial@rttnews.com

    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





    Source link

  • Euro Slips on Softer CPI, But Trading Largely Listless

    Euro Slips on Softer CPI, But Trading Largely Listless


    The currency markets remain largely listless today, with all major pairs and crosses still trapped within last week’s ranges. Euro edged slightly lower following the release of Eurozone CPI data, which showed inflation falling below the ECB’s 2% target for the first time since September last year. The core measure also softened notably, reinforcing the view that disinflationary pressures—particularly within services—are well entrenched. With inflation now comfortably back within target, markets have little doubt that ECB will proceed with a 25bps rate cut this Thursday.

    Uncertainty over tariffs continues to hover as a key wildcard. With little clarity on whether the US will escalate its trade actions further, markets are reluctant to commit. A July pause from ECB remains the base case, but further action could hinge on whether tariffs ultimately push inflation up through cost channels—or suppress demand and contribute to disinflation. This dilemma is front and center as policymakers navigate crosscurrents in growth and prices.

    Adding to the cautious mood, the OECD revised its global growth forecasts downward. It now sees world GDP expanding just 2.9% in both 2025 and 2026, citing increased trade barriers and lingering policy uncertainty as key drags. OECD Secretary General Mathias Cormann warned that a further 10 percentage point hike in US bilateral tariffs could shave 0.3% off global output over two years, while likely adding to inflation in affected countries.

    Technically, AUD/JPY continues to press 38.2% retracement of 86.03 to 95.63 at 91.96. Firm break of this fibonacci level will extend the correction from 95.63 to 100% projection of 95.63 to 91.64 from 93.85 at 89.86. Nevertheless, strong bounce from current level, followed by break of 93.85 resistance, will argue that rise from 86.03 is ready to resume through 95.63.

    In Europe, at the time of writing, FTSE is up 0.17%. DAX is up 0.16%. CAC is down -0.15%. UK 10-year yield is down -0.038 at 4.632. Germany 10-year yield is down -0.019 at 2.51. Earlier in Asia, Nikkei fell -0.06%. Hong Kong HSI rose 1.53%. China Shanghai SSE rose 0.43%. Singapore Strait times rose 0.10%. Japan 10-year JGB yield fell -0.27 to 1.482.

    BoE’s Bailey: Rate path still downward, but clouded by unpredictability

    BoE Governor Andrew Bailey told the Treasury Committee today that while the direction for interest rates remains downward, the outlook has become increasingly uncertain.

    Declining to pre-commit to a vote at the upcoming June meeting, Bailey said, “the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty.”

    He emphasized the role of external forces, noting that the Bank has revised its language to reflect the “unpredictable” nature of the current global environment.

    His comments were echoed by fellow policymakers Catherine Mann and Sarah Breeden, who both acknowledged that rates are likely headed lower but stressed the difficulty in forecasting the exact pace or scale of future cuts.

    Mann warned against assuming a fixed glide path, while Breeden said “there is uncertainty about how far, how fast.”

    Eurozone CPI falls to 1.9%, below ECB target for first time since Sep 2024

    Eurozone inflation dipped back below the ECB’s 2% target for the first time since September 2024. Headline CPI fell from 2.2% yoy to 1.9% yoy in May, undershooting expectations of 2.0%. Core CPI (ex-energy, food, alcohol & tobacco) also eased more than forecast to 2.3% from 2.7%.

    The disinflation was led by a sharp slowdown in services inflation, which dropped from 4.0% yoy to 3.2% yoy. Non-energy industrial goods remained unchanged at 0.6% yoy. Energy prices continued to contract at -3.6% yoy, reinforcing the broader downward pressure. Despite a slight uptick in food and alcohol inflation to 3.3% yoy, the overall picture confirms easing price momentum across key sectors.

    Swiss CPI falls to -0.1% yoy, first negative since 2021

    Swiss consumer inflation turned negative in May for the first time since March 2021, with headline CPI falling -0.1% yoy, down from 0.0% in April yoy. Core inflation, which strips out volatile components such as fresh food and energy, slipped to 0.5% yoy from 0.6% yoy previously.

    On a monthly basis, both headline and core CPI rose 0.1%, in line with expectations.

    The breakdown reveals that domestic product prices grew just 0.2% mom and decelerated to from 0.8% yoy to 0.6% yoy. Imported goods prices were flat on the month and fell -2.4% yoy, ticked up from -2.5% yoy.

    BoJ’s Ueda: Ready to hike if wage growth recovers from tariff drag

    BoJ Governor Kazuo Ueda told parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations.

    He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures. However, Ueda expressed confidence that wage momentum would eventually “re-accelerate”, helping to sustain a moderate growth in household consumption.

    Looking ahead, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy evolves in line with its projections. “If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates,” he said.

    However, he cautioned that uncertainty surrounding the economic outlook remains “extremely high.”

    RBA’s Hunter: AUD’s recent resilience linked to global shift away from USD exposure

    RBA Chief Economist Sarah Hunter addressed the unusual behavior of the Australian Dollar in recent months in a speech today. She highlighted that while initial moves were consistent with past risk-off episodes, the currency’s subsequent rebound against the US Dollar stood out as “more unusual”.

    On a “trade-weighted” basis, AUD has remained broadly stable, even though it has appreciated against the greenback and the Chinese renminbi, while weakening against most other major currencies.

    This divergence, Hunter explained, stems from “offsetting factors”. Global growth concerns have pressured the AUD against safe-haven and cyclical peers, while simultaneous outflows from US assets have weakened the US Dollar.

    Hunter cautioned that it’s too soon to tell whether this trend will persist, but acknowledged that recent market behavior reflects shifting investor sentiment, particularly toward capital reallocation away from US assets. As a result, Australian Dollar’s relative resilience against USD may be underpinned by portfolio rebalancing and perceived relative economic stability.

    Hunter noted that the trade-weighted index has reverted to “pre-shock values”, suggesting minimal net change in the foreign-currency value of Australian exports. However, the “relative move of capital” into Australia, at a time when the US is facing policy and tariff-related volatility, could offer some support to “domestic investment activity”, providing a cushion to the broader economy amid global uncertainties.

    RBA Minutes: 25bps cut chosen for caution and predictability after debating hold and 50bps options

    RBA’s May 20 meeting minutes revealed that policymakers weighed three policy options—holding rates, a 25bps cut, or a larger 50bps reduction—before ultimately opting for a modest 25bps cut to 3.85%.

    The case for easing hinged on three key factors: sustained progress in bringing inflation back toward target without upside surprises, weakening global conditions and household consumption, and the view that a cut would be the “path of least regret” given the risk distribution.

    While members discussed a 50bps reduction after deciding to ease, they found the case for a larger move unconvincing. Australian data at the time showed little evidence that trade-related global uncertainty was materially harming domestic activity. Furthermore, some scenarios might even result in upward pressure on inflation, prompting caution. The Board also assessed that it was “not yet time to move monetary policy to an expansionary stance”.

    Ultimately, the Board judged that to move “cautiously and predictably” was more appropriate.

    Caixin PMI manufacturing drops to 48.3, as China faces marked weakening at start of Q2

    China’s manufacturing sector unexpectedly shrank in May, with Caixin PMI falling to 48.3 from 50.4, well below market expectations of 50.6. This marked the first contraction in eight months and the lowest reading since September 2022.

    According to Caixin Insight’s Wang Zhe, both supply and demand weakened, with a particularly notable drag from overseas demand. Employment continued to contract, pricing pressures remained subdued, and logistics saw moderate delays. Although business optimism saw a marginal recovery, the broader picture points to intensifying headwinds.

    The report highlights the fragile start to Q2, with Wang pointing to a “marked weakening” in key economic indicators and a “significantly intensified” level of downward pressure.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1377; (P) 1.1413; (R1) 1.1480; More…

    Intraday bias in EUR/USD is turned neutral with current retreat. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Terms of Trade Index Q1 1.90% 3.60% 3.10% 3.20%
    23:50 JPY Monetary Base Y/Y May -3.40% -4.20% -4.80%
    01:30 AUD RBA Meeting Minutes
    01:30 AUD Current Account (AUD) Q1 -14.7B -12.0B -12.5B -16.3B
    01:45 CNY Caixin Manufacturing PMI May 48.3 50.6 50.4
    06:30 CHF CPI M/M May 0.10% 0.10% 0.00%
    06:30 CHF CPI Y/Y May -0.10% -0.10% 0%
    09:00 EUR Eurozone Unemployment Rate Apr 6.20% 6.20% 6.20% 6.30%
    09:00 EUR Eurozone CPI Y/Y May P 1.90% 2.00% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y May P 2.30% 2.40% 2.70%
    14:00 USD Factory Orders M/M Apr -3.10% 3.40%

     



    Source link

  • Dollar Struggles, Gold Rally Stalls, Trade Uncertainty Caps Conviction

    Dollar Struggles, Gold Rally Stalls, Trade Uncertainty Caps Conviction


    Global markets remain mixed, reflecting a cautious investor mood amid heightened trade uncertainty and a lack of clear directional drivers. US stocks closed modestly higher overnight, reversing losses from earlier in the session. Asian equities broadly followed the rebound, seemingly brushing off disappointing Chinese manufacturing data. The overall tone, however, remains indecisive, with no strong commitment to risk assets or safe havens.

    In the currency markets, Dollar is recovering slightly after a brief selloff, but still stands as the week’s worst performer. Loonie and Aussie follow behind. Yen continues to lead on safe-haven demand. Kiwi and Euro are also holding firmer, with Sterling and Swiss Franc sitting mid-pack. The lack of clear directional bias reflects the broader market indecision, as traders await clarity on the outcome of key trade negotiations.

    Underlying this market hesitation is persistent uncertainty surrounding global trade. According to a Reuters report, the Trump administration is pressing trading partners to submit their “best offers” by Wednesday, as it pushes to fast-track negotiations ahead of the July 9 expiry of the current 90-day reciprocal tariff truce. The US is requesting commitments on tariff and quota concessions, along with action plans on non-tariff barriers.

    The draft communication from the US Trade Representative warns countries not to assume tariffs will be halted, even if court rulings go against the administration. The letter asserts that the White House intends to continue the tariff program under “other robust legal authorities” if necessary, signaling that tariffs remain a core policy tool in negotiations.

    With legal and diplomatic fronts both in flux, traders are taking a wait-and-see approach. Until there is clarity on the direction of US trade policy—particularly with key partners like China and the EU—market participants are likely to stay sidelined. For now, short-term positioning continues to be dictated more by event risk management than conviction.

    Technically, Gold’s rise from 3120.34 resumed by breaking through 3365.92 resistance. Further rally should be seen to retest 3499.79 high. but strong resistance could be seen there to limit upside on first attempt, to bring more sideway trading in the near term. Nevertheless, decisive break of 3499.79 will confirm larger up trend resumption.

    In Asia, at the time of writing, Nikkei is up 0.07%. Hong Kong HSI is up 1.10%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -0.26%. Japan 10-year JGB yield is down -0.025 at 1.484. Overnight, DOW rose 0.08%. S&P 500 rose 0.41%. NASDAQ rose 0.67%. 10-year yield rose 0.046 to 4.462.

    Looking ahead, Swiss CPI and Eurozone CPI flash are the main focuses in European session. US will release factory orders later in the day.

    BoJ’s Ueda: Ready to hike if wage growth recovers from tariff drag

    BoJ Governor Kazuo Ueda told parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations.

    He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures. However, Ueda expressed confidence that wage momentum would eventually “re-accelerate”, helping to sustain a moderate growth in household consumption.

    Looking ahead, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy evolves in line with its projections. “If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates,” he said.

    However, he cautioned that uncertainty surrounding the economic outlook remains “extremely high.”

    RBA’s Hunter: AUD’s recent resilience linked to global shift away from USD exposure

    RBA Chief Economist Sarah Hunter addressed the unusual behavior of the Australian Dollar in recent months in a speech today. She highlighted that while initial moves were consistent with past risk-off episodes, the currency’s subsequent rebound against the US Dollar stood out as “more unusual”.

    On a “trade-weighted” basis, AUD has remained broadly stable, even though it has appreciated against the greenback and the Chinese renminbi, while weakening against most other major currencies.

    This divergence, Hunter explained, stems from “offsetting factors”. Global growth concerns have pressured the AUD against safe-haven and cyclical peers, while simultaneous outflows from US assets have weakened the US Dollar.

    Hunter cautioned that it’s too soon to tell whether this trend will persist, but acknowledged that recent market behavior reflects shifting investor sentiment, particularly toward capital reallocation away from US assets. As a result, Australian Dollar’s relative resilience against USD may be underpinned by portfolio rebalancing and perceived relative economic stability.

    Hunter noted that the trade-weighted index has reverted to “pre-shock values”, suggesting minimal net change in the foreign-currency value of Australian exports. However, the “relative move of capital” into Australia, at a time when the US is facing policy and tariff-related volatility, could offer some support to “domestic investment activity”, providing a cushion to the broader economy amid global uncertainties.

    RBA Minutes: 25bps cut chosen for caution and predictability after debating hold and 50bps options

    RBA’s May 20 meeting minutes revealed that policymakers weighed three policy options—holding rates, a 25bps cut, or a larger 50bps reduction—before ultimately opting for a modest 25bps cut to 3.85%.

    The case for easing hinged on three key factors: sustained progress in bringing inflation back toward target without upside surprises, weakening global conditions and household consumption, and the view that a cut would be the “path of least regret” given the risk distribution.

    While members discussed a 50bps reduction after deciding to ease, they found the case for a larger move unconvincing. Australian data at the time showed little evidence that trade-related global uncertainty was materially harming domestic activity. Furthermore, some scenarios might even result in upward pressure on inflation, prompting caution. The Board also assessed that it was “not yet time to move monetary policy to an expansionary stance”.

    Ultimately, the Board judged that to move “cautiously and predictably” was more appropriate.

    Caixin PMI manufacturing drops to 48.3, as China faces marked weakening at start of Q2

    China’s manufacturing sector unexpectedly shrank in May, with Caixin PMI falling to 48.3 from 50.4, well below market expectations of 50.6. This marked the first contraction in eight months and the lowest reading since September 2022.

    According to Caixin Insight’s Wang Zhe, both supply and demand weakened, with a particularly notable drag from overseas demand. Employment continued to contract, pricing pressures remained subdued, and logistics saw moderate delays. Although business optimism saw a marginal recovery, the broader picture points to intensifying headwinds.

    The report highlights the fragile start to Q2, with Wang pointing to a “marked weakening” in key economic indicators and a “significantly intensified” level of downward pressure.

    Fed’s Goolsbee warns against repeating ‘transitory’ mistake on tariff inflation

    Chicago Fed President Austan Goolsbee said in a webcast overnight that tariffs typically lead to a one-time price increase rather than sustained inflation.

    Drawing on textbook theory, he said a 10% tariff would create a 10% rise in prices for imported goods for “one year”, after which the inflationary effect dissipates. Such shocks are usually seen as “transitory” by central banks, Goolsbee explained.

    However, he warned against underestimating potential risks, citing lessons from the pandemic-era supply chain disruptions. “We learned the last time around” not to dismiss inflation too quickly, Goolsbee said, referencing how persistent inflation caught the Fed off guard.

    He added that scenarios combining rising prices and weakening labor markets, a stagflationary mix, present the most difficult challenge for monetary policy, as “there’s not an obvious playbook”.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8139; (P) 0.8189; (R1) 0.8222; More….

    Intraday bias in USD/CHF stays on the downside as fall from 0.8475 is in progress for 0.8038 low. Strong support could be seen from there to bring rebound, on first attempt. On the upside, above 0.8248 minor resistance will turn intraday bias neutral first. However, decisive break of 0.8038 will confirm larger down trend resumption.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8732) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Terms of Trade Index Q1 1.90% 3.60% 3.10% 3.20%
    23:50 JPY Monetary Base Y/Y May -3.40% -4.20% -4.80%
    01:30 AUD RBA Meeting Minutes
    01:30 AUD Current Account (AUD) Q1 -14.7B -12.0B -12.5B -16.3B
    01:45 CNY Caixin Manufacturing PMI May 48.3 50.6 50.4
    06:30 CHF CPI M/M May 0.10% 0.00%
    06:30 CHF CPI Y/Y May -0.10% 0%
    09:00 EUR Eurozone Unemployment Rate Apr 6.20% 6.20%
    09:00 EUR Eurozone CPI Y/Y May P 2.00% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y May P 2.40% 2.70%
    14:00 USD Factory Orders M/M Apr -3.10% 3.40%

     



    Source link

  • Trade Rhetoric Sours Sentiment Again as US-China Tensions Resurface

    Trade Rhetoric Sours Sentiment Again as US-China Tensions Resurface


    Market sentiment took another bearish turn today following renewed rhetoric from US President Donald Trump, who accused China of having “totally violated” its preliminary trade agreement with the U.S. The comments, delivered via social media, were echoed by Trade Representative Jamieson Greer in a CNBC interview, where he expressed concern over China’s delayed compliance. Greer emphasized that while the US had fulfilled its commitments under the temporary trade deal, China was “slow rolling” its response—raising fears that tensions between the two economic powers may be re-escalating.

    These remarks followed comments from Treasury Secretary Scott Bessent just a day earlier, who admitted that US-China trade talks were “a bit stalled,” though he hinted at possible high-level engagement in the coming weeks. However, the combined messaging from senior officials now points to growing frustration in Washington, increasing the risk of a renewed tariff cycle. That’s something the markets are highly sensitive to, especially with ongoing legal uncertainty surrounding the court-blocked reciprocal tariffs and their pending appeal.

    On the macro front, the US April core PCE price index ticked down to 2.5% year-on-year, reaffirming that disinflation is progressing, albeit slowly. With inflation trending lower but global uncertainty mounting, Fed is widely expected to hold rates steady in the near term. Fed funds futures currently price in a 95% chance of a hold at the June FOMC meeting and a 73% chance of another hold in July. The soft inflation reading does little to shift the central bank’s cautious stance, especially as trade risks remain firmly in focus.

    In the currency markets, Dollar is heading into the final house of the trading week as the strongest performer, followed by Swiss Franc and Euro. On the weaker end, Aussie struggles at the bottom, trailed by Yen and Loonie. Kiwi and Sterling are holding in the middle. However, with sentiment remaining fragile and trade headlines still in play, positioning could shift quickly before the weekly close.

    In Europe, at the time of writing, FTSE is up 0.55%. DAX is up 0.72%. CAC is up 0.09%. UK 10-year yield is up 0.21 at 4.672. Germany 10-year yield is up 0.019 at 2.529. Earlier in Asia, Nikkei fell -1.22%. Hong Kong HSI fell -1.20%. China Shanghai SSE fell -0.47%. Singapore Strait Times fell -0.57%. Japan 10-year JGB yield fell -0.015 to 1.505.

    US core PCE inflation cools to 2.5%, income surges

    US headline PCE price index rose 0.1% mom in April, in line with expectations, while annual inflation slipped from 2.3% yoy to 2.1% yoy, below the consensus of 2.2%.

    Core PCE, Fed’s preferred inflation gauge, also rose 0.1% mom and slowed from 2.6% yoy to 2.5% yoy, matching expectations. The data supports the view that disinflation remains intact, though the pace of moderation remains modest.

    At the same time, personal income data surprised to the upside, jumping 0.8% mom or USD 210.1B, well above the expected 0.3% mom. Personal spending rose a more modest 0.2% mom, matching forecasts.

    Canada GDP expands 0.1% mom in March, another 0.1% mom in April

    Canada’s GDP grew by 0.1% mom in March, in line with market expectations. Strength in goods-producing industries continued to support overall output. The sector expanded by 0.2%, marking its second lead contribution in the past three months.

    Services-producing industries also edged higher by 0.1%. In total, 9 out of 20 sectors posted growth.

    Looking ahead, preliminary data from Statistics Canada suggests another 0.1% increase in real GDP for April.

    ECB’s Panetta signals diminished room for further rate cuts

    Italian ECB Governing Council member Fabio Panetta said today that while the central bank has made meaningful progress in easing monetary policy, bringing the deposit rate down from 4% to 2.25%, “the room for further rate cuts has naturally diminished”.

    “However, the economic outlook remains weak, and trade tensions could lead to a deterioration,” he added. “It will be essential to maintain a pragmatic and flexible approach, considering liquidity conditions and the signals coming from financial and credit markets.”

    Panetta also highlighted the high-stakes nature of ongoing trade talks between the EU and the US, warning that even tensions are likely to have a “significant impact” on the region’s economy.

    BoE’s Taylor: Global headwinds justify lower monetary policy path

    BoE MPC member Alan Taylor reinforced his dovish position in an interview with the Financial Times, highlighting growing downside risks to the UK economy from global developments.

    Taylor, who alongside Swati Dhingra voted for a larger 50bps rate cut in May, argued that monetary policy should be on a “lower policy path” given the accumulating headwinds.

    He specifically pointed to impact of Trump’s tariffs on imports would “be building up over the rest of this year in terms of trade diversion and drag on growth”.

    While UK inflation unexpectedly jumped to 3.5% in April, Taylor downplayed the significance of the rise, attributing it to “one-time tax and administered price changes.”

    Swiss KOF rises to 98.5, but growth outlook remains subdued

    Switzerland’s KOF Economic Barometer edged up to 98.5 in May from 97.1, marking a modest improvement in economic sentiment. While the uptick is a positive signal, the barometer remains below its long-term average, suggesting that the broader outlook for the Swiss economy “remains subdued”.

    According to the KOF, the manufacturing sector showed notable strength, contributing to the overall improvement. However, indicators tied to foreign demand and private consumption remain under pressure, highlighting the ongoing drag from weak external conditions and cautious domestic spending.

    Japan’s industrial production falls -0.9% mom in April, but May rebound expected

    Japan’s industrial production fell by -0.9% mom in April, a milder decline than the expected -1.4%. The Ministry of Economy, Trade and Industry maintained its view that production “fluctuates indecisively,” reflecting ongoing uncertainty, particularly around global trade developments.

    While the ministry said the impact of US tariffs was limited in April, some firms have voiced concern about the manufacturing outlook as policy risks persist.

    The breakdown of the data shows a mixed picture: six of 15 industrial sectors saw declines, including production machinery, fabricated metals, and transport equipment excluding motor vehicles. However, eight sectors recorded gains, with electronic parts and business-oriented machinery showing notable strength.

    Manufacturers surveyed expect a sharp 9.0% rebound in May, followed by a -3.4% dip in June.

    Also released, Japan’s retail sales grew by a stronger-than-expected 3.3% yoy in April, outpacing the consensus of 2.9% yoy. Meanwhile, the unemployment rate remained steady at 2.5%.

    Tokyo core inflation accelerates to 3.6%, driven by food and services costs

    Tokyo’s core CPI (excluding fresh food) accelerated to 3.6% yoy in May, up from 3.4% yoy and above market expectations of 3.5% yoy, marking the fastest pace since January 2023. This marks the third consecutive year that core inflation has exceeded the Bank of Japan’s 2% target.

    While headline CPI ticked down slightly from 3.5% yoy to 3.4% yoy, the underlying core-core measure (excluding food and energy) also edged up fro 2.0% yoy to 2.1% yoy, suggesting broad-based inflation persistence.

    The surge in non-fresh food prices, up 6.9% yoy, remains a dominant driver—highlighted by a staggering 93.2% yoy jump in rice prices.

    Another notable development is the uptick in services inflation, which climbed to 2.2% yoy from 2.0% yoy , indicating that businesses are beginning to pass on higher labor costs.

    Australia retail sales down -0.1% mom in April, weighed by weak clothing demand

    Australia’s retail sales turnover unexpectedly declined by -0.1% mom in April, missing expectations for a 0.3% mom rise. On an annual basis, sales were up 3.8% compared to April 2024/

    The Australian Bureau of Statistics noted that the decline was driven primarily by reduced spending on clothing. The weakness was partly offset by a rebound in Queensland, where businesses recovered from disruptions caused by ex-Tropical Cyclone Alfred in March.

    RBNZ’s Silk: Data to guide timing and need for further cuts

    RBNZ Assistant Governor Karen Silk said that interest rates are currently within the estimated neutral band of 2.5% to 3.5%.

    She noted that the full impact of previous easing has yet to filter through the economy, making any future adjustments highly dependent on incoming data.

    The OCR track indicates “whatever we do is going to be data-dependent, and then we will be looking to the data to help us to decide when or if we cut further from here,” she added.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8182; (P) 0.8265; (R1) 0.8312; More….

    Range trading continues in USD/CHF and intraday bias stays neutral. On the downside, break of 0.8187 will resume the fall from 0.8475 to retest 0.8038 low. On the upside, above 0.8346 will bring stronger rise to 0.8475. Firm break there will extend the corrective pattern from 0.8038 with another rising leg.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8713) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Building Permits M/M Apr -15.60% 9.60% 10.70%
    23:30 JPY Tokyo CPI Y/Y May 3.40% 3.50%
    23:30 JPY Tokyo CPI Core Y/Y May 3.60% 3.50% 3.40%
    23:30 JPY Tokyo CPI Core-Core Y/Y May 2.10% 2%
    23:30 JPY Unemployment Rate Apr 2.50% 2.50% 2.50%
    23:50 JPY Industrial Production M/M Apr P -0.90% -1.40% 0.20%
    23:50 JPY Retail Trade Y/Y Apr 3.30% 2.90% 3.10%
    01:30 AUD Retail Sales M/M Apr -0.10% 0.30% 0.30%
    01:30 AUD Private Sector Credit M/M Apr 0.70% 0.50% 0.50%
    01:30 AUD Building Permits M/M Apr -5.70% 3.10% -8.80% -7.10%
    05:00 JPY Housing Starts Y/Y Apr -26.60% -18.30% 39.10%
    06:00 EUR Germany Retail Sales M/M Apr -1.10% 0.30% -0.20%
    07:00 CHF KOF Economic Barometer May 98.5 98.3 97.1
    08:00 EUR Eurozone M3 Money Supply Y/Y Apr 3.90% 3.70% 3.60%
    12:00 EUR Germany CPI M/M May P 0.10% 0.10% 0.40%
    12:00 EUR Germany CPI Y/Y May P 2.10% 2.10% 2.10%
    12:30 CAD GDP M/M Mar 0.10% 0.20% -0.20%
    12:30 USD Personal Income M/M Apr 0.80% 0.30% 0.50%
    12:30 USD Personal Spending M/M Apr 0.20% 0.20% 0.70%
    12:30 USD PCE Price Index M/M Apr 0.10% 0.10% 0%
    12:30 USD PCE Price Index Y/Y Apr 2.10% 2.20% 2.30%
    12:30 USD Core PCE Price Index M/M Apr 0.10% 0.10% 0%
    12:30 USD Core PCE Price Index Y/Y Apr 2.50% 2.50% 2.60%
    12:30 USD Goods Trade Balance (USD) Apr P -87.6B -141.8B -162.0B -163.2B
    12:30 USD Wholesale Inventories Apr P 0% 0.40% 0.50%
    13:45 USD Chicago PMI May 45.1 44.6
    14:00 USD UoM Consumer Sentiment May F 50.8 50.8
    14:00 USD UoM 1-year Inflation Expectations May F 7.30% 7.30%

     



    Source link

  • Markets Turn Cautious Again on Trade Stalemates; Euro Picking Up Momentum in Some Crosses

    Markets Turn Cautious Again on Trade Stalemates; Euro Picking Up Momentum in Some Crosses


    Asian markets returned to a risk-off tone today, with investor sentiment once again weighed down by the lack of clarity on the US tariff front and the apparent stalling of key trade negotiations. The week’s earlier relief rally following the U.S. court ruling against President Trump’s sweeping reciprocal tariffs has faded, as the legal battle drags on and policy direction remains uncertain. The result is renewed market hesitancy, with equities pulling back and safe-haven flows nudging Yen higher.

    In currency markets, the tone is cautious and directionless, with almost all major pairs and crosses confined to last week’s ranges. After a volatile stretch, there’s little momentum to drive breakouts. For the day, Yen is the strongest performer, supported by risk aversion, followed by the Dollar and Kiwi. On the weaker side, the Euro is underperforming, trailed by the Aussie and Sterling. Swiss Franc and Loonie are trading near the middle of the pack.

    Thursday’s session in the US captured this shifting mood well as stocks closed well off their intraday highs. That optimism was first driven by the US Court of International Trade’s ruling that struck down most of Trump’s global tariff orders. However, the relief was short-lived. The US Court of Appeals paused that ruling to consider the administration’s appeal, setting a new timeline for responses from both plaintiffs and the government in early June. The pause has restored uncertainty to a situation markets briefly hoped was resolved.

    Further dampening sentiment were remarks from US Treasury Secretary Scott Bessent, who confirmed that US-China trade talks are “a bit stalled.” He did, however, hold out the possibility of further engagement in the coming weeks, including a potential leader-level call. Still, Bessent acknowledged that the magnitude and complexity of the negotiations likely require direct involvement from both presidents, a signal that near-term breakthroughs remain unlikely.

    Technically, however, EUR/GBP’s break of 0.8400 minor resistance suggests short term bottoming at 0.8354, on bullish convergence condition in 4H MACD. While the rebound might still be a corrective move, further rise is now in favor through 0.8458 resistance to 38.2% retracement of 0.8737 to 0.8354 at 0.8500.

    In Asia, at the time of writing, Nikkei is down -1.08%. Hong Kong HSI is down -1.54%. China Shanghai SSE is down -0.30%. Singapore Strait Times is down -0.24%. Japan 10-year JGB yield is down -0.015 at 1.506. Overnight, DOW rose 0.28%. S&P 500 rose 0.40%. NASDAQ rose 0.39%. 10year yield fell -0.053 to 4.424.

    Looking ahead, Germany CPI flash is the main focus in European sess. Switzerland will publish KOF economic barometer. Eurozone will release M3 money supply. Later in the day, attention will be on Canada GDP, and US PCE inflation.

    Japan’s industrial production falls -0.9% mom in April, but May rebound expected

    Japan’s industrial production fell by -0.9% mom in April, a milder decline than the expected -1.4%. The Ministry of Economy, Trade and Industry maintained its view that production “fluctuates indecisively,” reflecting ongoing uncertainty, particularly around global trade developments.

    While the ministry said the impact of US tariffs was limited in April, some firms have voiced concern about the manufacturing outlook as policy risks persist.

    The breakdown of the data shows a mixed picture: six of 15 industrial sectors saw declines, including production machinery, fabricated metals, and transport equipment excluding motor vehicles. However, eight sectors recorded gains, with electronic parts and business-oriented machinery showing notable strength.

    Manufacturers surveyed expect a sharp 9.0% rebound in May, followed by a -3.4% dip in June.

    Also released, Japan’s retail sales grew by a stronger-than-expected 3.3% yoy in April, outpacing the consensus of 2.9% yoy. Meanwhile, the unemployment rate remained steady at 2.5%.

    Tokyo core inflation accelerates to 3.6%, driven by food and services costs

    Tokyo’s core CPI (excluding fresh food) accelerated to 3.6% yoy in May, up from 3.4% yoy and above market expectations of 3.5% yoy, marking the fastest pace since January 2023. This marks the third consecutive year that core inflation has exceeded the Bank of Japan’s 2% target.

    While headline CPI ticked down slightly from 3.5% yoy to 3.4% yoy, the underlying core-core measure (excluding food and energy) also edged up fro 2.0% yoy to 2.1% yoy, suggesting broad-based inflation persistence.

    The surge in non-fresh food prices, up 6.9% yoy, remains a dominant driver—highlighted by a staggering 93.2% yoy jump in rice prices.

    Another notable development is the uptick in services inflation, which climbed to 2.2% yoy from 2.0% yoy , indicating that businesses are beginning to pass on higher labor costs.

    Australia retail sales down -0.1% mom in April, weighed by weak clothing demand

    Australia’s retail sales turnover unexpectedly declined by -0.1% mom in April, missing expectations for a 0.3% mom rise. On an annual basis, sales were up 3.8% compared to April 2024/

    The Australian Bureau of Statistics noted that the decline was driven primarily by reduced spending on clothing. The weakness was partly offset by a rebound in Queensland, where businesses recovered from disruptions caused by ex-Tropical Cyclone Alfred in March.

    RBNZ’s Silk: Data to guide timing and need for further cuts

    RBNZ Assistant Governor Karen Silk said that interest rates are currently within the estimated neutral band of 2.5% to 3.5%.

    She noted that the full impact of previous easing has yet to filter through the economy, making any future adjustments highly dependent on incoming data.

    The OCR track indicates “whatever we do is going to be data-dependent, and then we will be looking to the data to help us to decide when or if we cut further from here,” she added.

    Fed’s Logan: Policy well positioned, ready to respond to shifting risks

    Dallas Fed President Lorie Logan said overnight that with inflation “trending gradually back to target”, the labor market “holding strong”, and risks to Fed’s dual mandate are “roughly balanced.

    Speaking at an event, Logan emphasized that “monetary policy is in a good place”, and there is no immediate need for a policy shift.

    Logan also highlighted the potential impact of fiscal policy and regulatory changes, noting they could stimulate investment and consumer demand, while elevated economic uncertainty or financial volatility might dampen activity.

    Fed’s Daly: Modestly or moderately restrictive policy still needed

    San Francisco Fed President Mary Daly, in a Reuters interview, emphasized that above-target inflation remains her “focus” while the labor market is in “solid shape”.

    With inflation still running above the Fed’s 2% target and uncertainty around the pace of its decline, Daly said it’s appropriate for monetary policy to remain in a “modestly or moderately restrictive” stance to guide inflation back to target.

    Daly added that she’s closely watching for any signs of labor market weakening but hasn’t observed such signals yet. At the same time, she remains attentive to whether inflation continues to gradually ease or risks becoming sticky or re-accelerating.

    BoE’s Bailey stresses caution on rate cuts amid inflation surprises and trade uncertainty

    BoE Governor Andrew Bailey emphasized the need for a “gradual and careful” approach to future interest rate cuts in light of lingering global trade uncertainty and its impact on domestic inflation.

    His comments follow last week’s stronger-than-expected inflation data, which showed UK CPI jumping to 3.5% in April from 2.6%. Bailey noted it remains unclear how much of the increase is due to seasonal factors, and said the BoE will closely examine the next set of inflation data ahead of its June policy decision.

    Bailey acknowledged that while core inflation is “gradually grinding down”, the pace of improvement remains sluggish. He also highlighted a renewed rise in food price inflation, which—although not unique to the UK—has a significant influence on public inflation perceptions.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.7527; (P) 1.7591; (R1) 1.7709; More…

    EUR/AUD’s break of 1.7628 resistance argues that fall from 1.8554 might have completed as a correction at 1.7245. Intraday bias is back on the upside for 38.2% retracement of 1.8554 to 1.7245 at 1.7745. Firm break there will solidify this bullish case and target 61.8% retracement at 1.8054. On the downside, however, break of 1.7460 support will bring retest of 1.7245 instead.

    In the bigger picture, as long as 1.7062 resistance turned support (2023 high) holds, up trend from 1.4281 (2022 low) should still be in progress. Break of 1.8554 will target 100% projection of 1.4281 to 1.7062 from 1.5963 at 1.8744. However, sustained break of 1.7062 will confirm medium term topping and bring deeper fall back to 1.5963 support.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Building Permits M/M Apr -15.60% 9.60% 10.70%
    23:30 JPY Tokyo CPI Y/Y May 3.40% 3.50%
    23:30 JPY Tokyo CPI Core Y/Y May 3.60% 3.50% 3.40%
    23:30 JPY Tokyo CPI Core-Core Y/Y May 2.10% 2%
    23:30 JPY Unemployment Rate Apr 2.50% 2.50% 2.50%
    23:50 JPY Industrial Production M/M Apr P -0.90% -1.40% 0.20%
    23:50 JPY Retail Trade Y/Y Apr 3.30% 2.90% 3.10%
    01:30 AUD Retail Sales M/M Apr -0.10% 0.30% 0.30%
    01:30 AUD Private Sector Credit M/M Apr 0.70% 0.50% 0.50%
    01:30 AUD Building Permits M/M Apr -5.70% 3.10% -8.80% -7.10%
    05:00 JPY Housing Starts Y/Y Apr -26.60% -18.30% 39.10%
    06:00 EUR Germany Retail Sales M/M Apr 0.30% -0.20%
    07:00 CHF KOF Economic Barometer May 98.3 97.1
    08:00 EUR Eurozone M3 Money Supply Y/Y Apr 3.70% 3.60%
    12:00 EUR Germany CPI M/M May P 0.10% 0.40%
    12:00 EUR Germany CPI Y/Y May P 2.10% 2.10%
    12:30 CAD GDP M/M Mar 0.20% -0.20%
    12:30 USD Personal Income M/M Apr 0.30% 0.50%
    12:30 USD Personal Spending M/M Apr 0.20% 0.70%
    12:30 USD PCE Price Index M/M Apr 0.10% 0%
    12:30 USD PCE Price Index Y/Y Apr 2.20% 2.30%
    12:30 USD Core PCE Price Index M/M Apr 0.10% 0%
    12:30 USD Core PCE Price Index Y/Y Apr 2.50% 2.60%
    12:30 USD Goods Trade Balance (USD) Apr P -141.8B -162.0B
    12:30 USD Wholesale Inventories Apr P 0.40% 0.50%
    13:45 USD Chicago PMI May 45.1 44.6
    14:00 USD UoM Consumer Sentiment May F 50.8 50.8
    14:00 USD UoM 1-year Inflation Expectations May F 7.30% 7.30%

     



    Source link

  • Dollar Recovery Slows Ahead of FOMC Minutes as Market Seeks Clarity

    Dollar Recovery Slows Ahead of FOMC Minutes as Market Seeks Clarity


    Dollar’s near-term rebound is still intact as markets head into US session. But appears to be fading as traders await fresh catalysts. While the greenback has benefited from stabilizing sentiment, there’s a lack of conviction behind the move, particularly with no data releases of note today. Markets are now turning their attention to the upcoming FOMC minutes, though expectations for a clear policy signal remain low.

    The minutes from the May 6–7 FOMC meeting are expected to show a divided Fed grappling with increased volatility and an unpredictable policy backdrop, largely stemming from trade tensions. A key point of debate within the Fed may have been how to respond if elevated tariffs return and remain in place. While some officials may view tariff-driven inflation as transitory and argue for policy support to counteract the drag on growth, others may be more concerned about a shift in inflation expectations and the risk of persistent price pressures. Despite those differences, there is likely consensus around two core ideas: that tariffs are inherently stagflationary, and that it’s too early to commit to rate adjustments amid current uncertainty.

    As a result, today’s release is unlikely to shift the market narrative in a meaningful way. Trading may remain subdued unless there’s an unexpected shift in tone or language around inflation risks or rate sensitivity. With Fed still firmly in a no-hurry, data-dependent mode, the market may continue to drift until the next major inflation print or employment report.

    Looking across the broader currency markets, Dollar remains the week’s strongest performer so far. Kiwi follows as second, receiving a boost after RBNZ delivered a 25bps rate cut with a surprising dissent. Euro also finds modest support, ranking third on the performance board. In contrast, Yen remains the weakest major, weighed down by falling super-long JGB yields. Aussie and Swiss Franc also trail, while Sterling and Loonie remain in the middle.

    Technically, Ethereum might be ready to complete the near-term triangle consolidation pattern from 2737.57. Firm break of this resistance will resume the rally from 1382.55. Next target is 61.8% projection of 1382.55 to 2737.57 from 2507.39 at 3344.79. However, break of 2507.39 support will extend the corrective pattern with another falling leg instead.

    In Europe, at the time of writing, FTSE is down -0.06%. DAX is down -0.45%. CAC is down -0.13%. UK 10-year yield is up 0.012 at 4.683. Germany 10-year yield is down -0.001 at 2.541. Earlier in Asia, Nikkei closed flat. Hong Kong HSI fell -0.53%. China Shanghai SSE fell -0.02%. Singapore Strait Times rose 0.41%. Japan 10-year JGB yield rose 0.052 to 1.518.

    ECB survey shows short-term inflation expectations climb as growth outlook worsens

    ECB’s latest Consumer Expectations Survey for April showed a modest but notable uptick in short-term inflation expectations.

    Median expectations for inflation over the next 12 months rose to 3.1%, the highest since February 2024. However, medium- and long-term inflation expectations remained steady, with the three-year outlook unchanged at 2.5% and the five-year projection holding at 2.1% for the fifth straight month.

    Alongside the rise in short-term inflation forecasts, the survey revealed an increase in uncertainty about inflation over the coming year, matching levels last seen in June 2024.

    More concerning, however, is the deepening pessimism around growth and employment. Expectations for economic growth over the next 12 months dropped sharply to -1.9% from -1.2% in March. Expected unemployment ticked up slightly from 10.4% to 10.5%.

    RBNZ cuts OCR to 3.25%, one member favors holding steady

    RBNZ lowered the Official Cash Rate by 25 basis points to 3.25%, in line with market expectations. The decision was not unanimous, passed by a 5-1 vote.

    The central bank emphasized that inflation is now within the target band and is “well placed” to respond to both domestic and international developments.

    Meeting minutes revealed that some committee members favored holding the rate steady at 3.50%, citing a desire to monitor elevated global uncertainty and potential inflation risks stemming from recent tariff increases.

    Maintaining the OCR, they argued, could have helped anchor inflation expectations more firmly around the 2% midpoint.

    In its accompanying Monetary Policy Statement, RBNZ revised down its rate path projections slightly. The OCR is now expected to fall to 3.12% by September 2025 (previously 3.23%), and to 2.87% by June 2026 (previously 3.10%).

    Australia’s monthly CPI unchanged 2.4%, core inflation edges higher

    Australia’s monthly CPI held steady at 2.4% yoy in April, slightly above expectations of 2.3% yoy, marking the third consecutive month of unchanged headline inflation.

    However, underlying inflation measures moved higher, with CPI excluding volatile items and holiday travel rising to 2.8% yoy from 2.6% yoy. Trimmed mean CPI also tickd up from 2.7% yoy to 2.8% yoy.

    These developments suggest that while headline inflation appears stable, price pressures beneath the surface remain persistent.

    Key contributors to the annual inflation rate included food and non-alcoholic beverages (+3.1%), recreation and culture (+3.6%), and housing (+2.2%).

    BoJ’s Ueda highlights focus on short- and medium-term rates

    BoJ Governor Kazuo Ueda told parliament today that shifts in short- and medium-term interest rates have a more pronounced impact on economic activity than movements in super-long yields.

    He explained that corporate and household debt is more concentrated in those shorter maturities, making the economy more sensitive to changes in that segment of the yield curve.

    However, Ueda also acknowledged the spillover effects of volatility in super-long bond yields, noting that sharp moves in that part of the curve can ripple through to shorter maturities and influence overall financial conditions.

    “We’ll carefully watch market developments and their impact on the economy, he emphasized.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8214; (P) 0.8247; (R1) 0.8306; More….

    Range trading continues in USD/CHF and intraday bias stays neutral. Another fall is in favor as long as 0.8305 minor resistance holds. Below 0.8187 will target a retest on 0.8038 low first. Firm break there will resume larger down trend. Nevertheless, sustained break of 0.8305 will argue that pullback from 0.8475 has completed, and turn bias back to the upside to extend the pattern from 0.8038 with another rising leg.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8713) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD Monthly CPI Y/Y Apr 2.40% 2.30% 2.40%
    02:00 NZD RBNZ Interest Rate Decision 3.25% 3.25% 3.50%
    03:00 NZD RBNZ Press Conference
    06:45 EUR France Consumer Spending M/M Apr 0.30% 0.80% -1%
    06:45 EUR France GDP Q/Q Q1 F 0.10% 0.10% 0.10%
    07:55 EUR Germany Unemployment Change Apr 34K 10K 4K
    07:55 EUR Germany Unemployment Rate Apr 6.30% 6.30% 6.30%
    08:00 CHF UBS Economic Expectations May -22 -51.6
    18:00 USD FOMC Minutes

     



    Source link

  • Tariff Truce Wobbles at Halfway Mark; Risk Sentiment Falters on Renewed Threats

    Tariff Truce Wobbles at Halfway Mark; Risk Sentiment Falters on Renewed Threats


    Trade war roared back into focus late last week, derailing fragile market sentiment already strained by concerns over the ballooning US deficit. The catalyst came in the form of a sharp threat from US President Donald Trump on European Union imports. This abrupt escalation shattered hopes that the 90-day truce period would lead to calmer trade diplomacy, and instead reignited fears of a broader trade war just as markets were struggling to absorb fiscal uncertainty.

    US equities tumbled in response, with heavy losses across major indices, while European bourses weren’t spared either. Risk aversion swept through global markets, pushing investors toward traditional safe-haven assets.

    Dollar, which had already been under pressure from Moody’s downgrade and debt sustainability concerns, took another hit and ended the week as the worst-performing major currency. Confidence in US assets appears increasingly fragile as both fiscal and trade risks deepen.

    Aussie followed as the second weakest, burdened not just by global risk aversion but also by the dovish tone from RBA earlier in the week, while Loonie also suffered at the bottom.

    In contrast, the Japanese Yen and Swiss Franc surged to the top of the FX leaderboard, clearly benefiting from haven demand. Gold also staged a powerful rally, with its bullish momentum signaling deep market unease.

    Euro and Sterling settled in the middle of the pack. While the Euro showed some vulnerability to Trump’s tariff threat, it remained relatively supported. Sterling, meanwhile, was underpinned by a series of stronger-than-expected economic data, including upside surprises in inflation and retail sales.

    Trade War Returns to Spotlight as Trump’s Tariff Threat on EU Hammers Markets, Dollar Slides

    The global financial markets, which had been preoccupied with US sovereign debt concerns and the impact of a Moody’s downgrade earlier in the week, saw sentiment quickly shift as trade war tensions re-emerged. The trigger came late Friday, when US President Donald Trump declared he is “recommending a straight 50% Tariff on the European Union,” citing frustration with stalled negotiations. The announcement stunned investors and reignited fears of a wider spiral, sending US stocks and Dollar sharply lower into the weekly close.

    Equity markets, which had enjoyed a strong six-week rally driven by optimism from the 90-day tariff truce with major trading partners, were caught off guard. As little tangible progress was made halfway through the truce period, Trump’s shift back to hardline tactics was interpreted as a sign that the administration may be preparing to walk away from negotiation tables. The renewed threat has not only clouded the outlook for trade but also raised concerns over the policy direction in Washington.

    Speaking at a White House event, Trump made clear his stance: “I’m not looking for a deal. I mean, we’ve set the deal. It’s at 50%.” Treasury Secretary Scott Bessent echoed the sentiment, suggesting the tariff threat was intended to “light a fire under the EU.” These remarks hinted at a deliberate strategy to escalate pressure on Brussels ahead of the June 1 deadline.

    In response, European Commission Vice President Maros Sefcovic stated the EU remains “fully engaged” and committed to securing a mutually beneficial deal. He emphasized that negotiations must be “guided by mutual respect, not threats,” and warned the EU stands ready to defend its interests. Despite diplomatic overtures, the tone on both sides suggests little ground has been gained, making further market volatility likely as the deadline nears.

    In summary, the re-ignition of trade tensions with the EU has thrown markets back into uncertainty. With US fiscal policy already under scrutiny and tariff escalation threatening global growth, investors may remain on the defensive until clearer direction emerges, either through a breakthrough in negotiations or a change in Washington’s rhetoric. Until then, volatility and risk aversion are likely to dominate.

    Technically, DOW’s extended decline last week indicates that a short term top was already formed at 42842.04. More consolidations would be seen with risk of deeper decline. But overall near term outlook will stay bullish as long as 38.2% retracement of 36611.78 to 42842.04 at 40462.08 holds.

    However, rise from 36611.78 is seen as the second leg of the medium term corrective pattern from 45073.63 high. So, even in case of another rise, DOW should start to lose momentum again as it approaches 45073.63.

    Dollar Index’s late break of 99.17 support argues that corrective rebound from 97.92 might have completed at 101.97 already. Further decline is now in favor in the near term to retest 97.92 low first. Firm break there will resume the larger down trend to 61.8% projection of 100.17 to 97.92 from 101.97 at 94.40.

    European Stocks Also Hit by Tariff Shock; DAX and CAC Signal Near-Term Tops

    European equities also slumped in tandem with the US on Friday on Trump’s tariff threat. The announcement dealt a direct blow to investor sentiment across the region, with Germany’s DAX and France’s CAC 40 each falling around -1.6% on the day.

    However, Germany’s equity outlook, and to a lesser extent the region’s, should remain underpinned by fiscal expansion at both national and EU levels, which could cushion downside risks and support a medium-term bullish outlook.

    Technically, the late selloff in DAX indicates that 24154.24 record high should already be a short term top. Near term risk is mildly on the downside for pull back to 55 D EMA (now at 22610.12). Nevertheless, strong support should emerge from 38.2% retracement of 18489.91 to 24154.24 at 21989.23 to contain downside to bring rebound.

    CAC should have formed a short term top at 7955.53, and turned into consolidations. Given CAC’s underperformance comparing to DAX, there is risk of dipping through 38.2% retracement of 6763.76 to 7955.53 at 7500.27. But strong support should be seen above 61.8% retracement at 7219.02 to contain downside.

    Aussie Under Fire as RBA’s Dovish Cut Fuels July Easing Bets

    Aussie ended last week as one of the weakest performers among major currencies, additionally weighed down by the dovish 25bps rate cut from RBA. While the move was widely expected, RBA Governor Michele Bullock revealed that the board had actively considered a larger 50bps reduction before settling on the more measured step.

    Bullock also deliberately leave the door open for fasting easing, as she indicated that “if we need to move quickly, we can. We have got space.”

    Alongside the cut, RBA downgraded its 2025 GDP growth forecast from 2.1% to 1.9% and revised year-end CPI projections sharply lower, from 3.7% to 3.0%.

    These adjustments cemented the market’s view that the easing cycle has room to run, with rate futures now assigning more than 50% probability to another cut as early as July and fully pricing in a second 25bps cut by August.

    Technically, AUD/JPY failed to sustain above 38.2% retracement of 109.36 to 86.03 at 94.94, and retreated from there. Focus is now on 92.10 cluster support (38.2% retracement of 86.03 to 95.63 at 91.96).

    Strong rebound from 91.96/92.10 will retain near term bullishness. Further break of 95.63 will solidify the bullish case that whole fall form 109.36 has completed as a three-wave correction to 86.03.

    However, firm break of 91.96/92.10 will argue that the rebound has completed. More importantly, the down trend from 109.36 is likely still in progress for another low below 86.03.

    Gold Eyes Fresh Record High as Safe Haven Flows Persist

    Gold rallied strongly last week, supported by a confluence of factors including persistent concerns over the US fiscal outlook and escalating global trade tensions.

    With global equities showing signs of strain and long-dated US Treasury yields on the rise, capital has flowed steadily into Gold. The precious metal’s resilience suggests it may be gearing up to break above the record high of 3500, especially if risk aversion intensifies in the days ahead.

    Technically, corrective decline form 3499.79 should have completed with three waves down to 3120.34. That came after strong support from 55 D EMA (now at 3177.32) and 38.2% retracement of 2584.24 to 3499.79 at 3150.04.

    Further rise is expected as long as 3279.22 support holds, to retest 3499.79 high first. Decisive break there will resume larger up trend to 61.8% projection of 2584.24 to 3499.79 from 3120.34 at 3686.14 next.

    GBP/USD Weekly Outlook

    GBP/USD’s up trend resumed by breaking through 1.3442 resistance last week. Initial bias remains on the upside this week for 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593, and then 100% projection at 1.3874. On the downside, below 1.3389 minor support will turn intraday bias neutral again first.

    In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2843) holds, even in case of deep pullback.

    In the long term picture, for now, price actions from 1.0351 (2022 low) are still seen as a corrective pattern to the long term down trend from 2.1161 (2007 high) only. However, firm break of 1.4248 resistance (38.2% retracement of 2.1161 to 1.0351 at 1.4480) will be a strong sign of long term bullish reversal.



    Source link

  • Dollar Recovers as Markets Stabilize, Euro Pressured by PMI and Dovish ECB Accounts

    Dollar Recovers as Markets Stabilize, Euro Pressured by PMI and Dovish ECB Accounts


    Dollar staged a broad recovery today as financial markets found some footing following a volatile stretch dominated by US deficit concerns. US futures are trading flat, while 10-year Treasury yield has pared back modestly from recent highs, signaling a pause in the bond selloff. The calmer tone helped the greenback regain some traction.

    Support for Dollar came even after a narrow passage of a sweeping tax and spending bill in the US House of Representatives. The legislation, central to President Donald Trump’s policy agenda, introduces a range of tax breaks, most notably on tips and car loans, while substantially boosting military and border enforcement budgets. The Congressional Budget Office estimates the bill would add approximately USD 3.8 Trillion to debt over the next decade.

    In Europe, Euro came under some pressure following disappointing PMI data. The services sector unexpectedly slipped back into contraction territory in May, highlighting the fragility of the region’s recovery. The PMI Composite also dipped below 50, reinforcing the view that growth momentum is stalling again after a weak start to the year.

    Adding to Euro’s woes, ECB’s latest meeting accounts revealed internal discussions over a more aggressive 50 basis point rate cut in April, although the final decision was a unanimous 25 basis point reduction. While the accounts reflect growing confidence in disinflation trends, they also underscore a heightened sense of caution about weakening growth and the evolving global trade environment.

    Overall in the currency markets, Yen stands out as the strongest performer today so far, followed by Dollar, and then Sterling. Kiwi leads the losers, followed by Euro and Aussie. Loonie and Swiss Franc are positioning in the middle. Overall, today’s market tone isn’t clearly risk-on.

    Technically, Bitcoin finally surged to new record high above 110000 this week. Upside momentum remains strong as seen in D MACD. Current up trend could now be targeting 100% projection of 49008 to 109571 from 73473 at 134936 next. For now, outlook will remain bullish as long as 100692 support holds, in case of retreat.

    In Europe, at the time of writing, FTSE is down -0.77%. DAX is down -0.08%. CAC is down -1.05%. UK 10-year yield is up 0.008 at 4.769. Germany 10-year yield is down -0.002 at 2.652. Earlier in Asia, Nikkei fell -0.84%. Hong Kong HSI fell -1.19%. China SSE fell -0.22%. Singapore Strait Times fell -0.06%. Japan 10-year JGB yield rose 0.041 to 1.562.

    US initial jobless claims fall to 227k vs exp 230k

    US initial jobless claims fell -2k to 227k in the week ending May 17, below expectation of 230k. Four-week moving average of initial claims rose 1k to 232k.

    Continuing claims rose 36k to 1903k in the week ending May 10. Four-week moving average of continuing claims rose 18k to 1888k, highest since November 2021.

    UK PMI composite ticks up to 49.4, price pressures ease from April spike

    UK PMI Services rose modestly from 49.0 to 50.2, while Manufacturing PMI edged lower from 45.4 to 45.1. As a result, the Composite PMI ticked up from 48.5 to 49.4, still below the 50-mark that separates expansion from contraction.

    According to S&P Global’s Chris Williamson, business confidence has improved since April, helped in part by easing trade tensions. However, output across the private sector shrank for a second consecutive month, suggesting that the UK economy may be slipping into contraction for Q2.

    On a more encouraging note, inflationary pressures appear to have cooled significantly from April’s spike. This moderation in price growth, combined with lackluster output and emerging job losses, strengthens the case for further monetary easing by BoE in the coming months.

    ECB accounts: Some members see April rate cut as frontloading a June move

    ECB’s April 16–17 meeting accounts revealed unanimous support for the 25 basis point rate cut, the inflation shock was “nearly over”. The cut was not only as a response to improving inflation outlook but also as insurance against mounting downside risks to growth, driven by escalating global trade tensions.

    Several members specifically cited recent developments around tariffs as rationale for acting sooner rather than later. In their view, a cut at the April meeting could be seen as “frontloading a possible cut at the June meeting”, helping to anchor sentiment amid elevated market volatility.

    Some members noted that the tariff-driven uncertainty did not appear to be translating into inflationary pressure, partly due to Euro’s appreciation role as a “safe-haven currency”. Instead, tariff-related headwinds were increasingly viewed as disinflationary, especially as growth prospects weakened and financial conditions tightened.

    A minority on the Council even argued for a more aggressive 50 bps cut, citing a deterioration in the balance of risks since March. These members emphasized that “even in the event of a relatively mild trade conflict, uncertainty was already discouraging consumption and investment.

    Eurozone PMI composite falls to 49.5, services falter, manufacturing holds tentatively

    Eurozone’s private sector returned to contraction in May, with PMI Composite falling from 50.4 to 49.5, a six-month low. The drag came from the services sector, where the PMI dropped from 50.1 to 48.9, its weakest reading in 16 months. While the manufacturing index rose modestly from 49.0 to 49.4, marking a 33-month high, it remained in contractionary territory.

    According to HCOB Chief Economist Cyrus de la Rubia, the region’s economy “cannot seem to find its footing,” as growth signals remain elusive and sentiment subdued.

    The modest improvement in manufacturing may reflect front-loaded activity as firms seek to get ahead of US tariffs, rather than underlying demand strength. However, the downturn in services, typically more domestically oriented and less exposed to global trade, raises concern about internal demand softness.

    For the ECB, the numbers are “likely to leave it with mixed feelings”. While service sector inflation appears to be moderating, input costs — likely driven by wages — are ticking higher again. Manufacturing purchase prices, by contrast, continue to fall.

    German Ifo rises to 87.5, economy stabilizing with uncertainty eased

    Germany’s Ifo Business Climate Index rose to 87.5 in May, up from 86.9 in April, offering cautious optimism that the economy may be stabilizing.

    The improvement was driven by a notable rise in the Expectations Index, which climbed from 87.4 to 89.9, a sign that firms are growing more confident about future conditions. However, the Current Situation Index dipped slightly from 86.4 to 86.1.

    The Ifo Institute noted that “sentiment among German companies has improved” and that the recent surge in uncertainty has begun to ease.

    BoJ’s Noguchi: Must tread carefully with step-by-step policy normalization

    BoJ board member Asahi Noguchi emphasized the importance of a “measured, step-by-step” pace in raising interest rates, stressing the need to carefully assess the economic impact of each hike before proceeding further.

    Noguchi also addressed the upcoming interim review of BoJ’s bond tapering strategy, indicating that he sees no need for any major adjustments to the current plan, which runs through March 2026.

    He noted that the central bank should approach its long-term reduction in the balance sheet with flexibility, taking the time needed to ensure stability while maintaining the capacity to respond to “sudden market swings”.

    Any emergency increase in bond purchases, he noted, would be strictly conditional and “only be implemented during times of severe market disruption.”

    Japan’s PMI composite falls to 49.8, private sector contracts again

    Japan’s private sector activity fell back into contraction in May, with PMI Composite declining from 51.2 to 49.8. Manufacturing output edged higher from 48.7 to 49.0, but remained below the neutral 50 mark. The services sector, however, lost more momentum, with its PMI falling from 52.4 to 50.8.

    The decline in composite output reflects weakening domestic and external demand, as new business volumes fell for the first time in nearly a year.

    S&P Global’s Annabel Fiddes noted that elevated uncertainty around trade policy and foreign demand weighed heavily on business confidence, which sank to its second-lowest level since the pandemic’s onset.

    RBA’s Hauser: Post-tariff China outlook positive but incomplete

    In a speech focused on his recent visit to China following the sweeping tariff shifts of “Liberation Day”, RBA Deputy Governor Andrew Hauser noted there was a sense of “strong hand” in managing the economic fallout from US-imposed tariffs. Additionally, Australian firms operating in China perceived “opportunities amidst the risks”, as trade patterns began to shift.

    However, Hauser was quick to stress that this view was inherently limited, anchored to a moment in time and shaped by a single national perspective.

    Hauser laid out four key caveats. First, global tariff settings remain fluid, and data on their real-world economic effects is just beginning to emerge. Second, the assessments he heard may prove overly optimistic, domestic stimulus in China may underperform, and public tolerance for economic pain may be lower than expected.

    Third, indirect “general equilibrium” effects could emerge, including the possibility of intensified competition from Chinese firms offloading excess supply originally intended for US markets. While sectoral overlap with Australia is limited, it is a concern shared across the Asia-Pacific region.

    Finally, Hauser acknowledged the broader strategic uncertainties at play—factors beyond economics that could shape Australia’s position.

    Australia’s PMI Composite slips to 50.6; firms cite election drag on demand

    Australia’s private sector showed signs of slowing in May, with PMI Composite falling from 51.0 to a 3-month low of 50.6. Manufacturing index held steady at 51.7. But services weakened from 51.0 to 50.5, its lowest level in six months.

    According to S&P Global’s Andrew Harker, the sluggishness may be tied in part to election-related uncertainty, which “contributed to slower growth of new orders”. Still, firms remained cautiously optimistic, continuing to hire at a “solid pace”. With the political noise expected to ease, attention will turn to whether demand picks up in the months ahead.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8211; (P) 0.8251; (R1) 0.8251; More….

    Intraday bias in USD/CHF is turned neutral first with current recovery. But risk will remain on the downside as long as 0.8475 resistance holds. Corrective rebound from 0.8038 should have completed already. Below 0.8208 will bring retest of 0.8038 first. Firm break there will resume larger down trend to 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757 next.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8765) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:00 AUD Manufacturing PMI May P 51.7 51.7
    23:00 AUD Services PMI May P 50.5 51
    23:50 JPY Machinery Orders M/M Mar 13.00% -1.60% 4.30%
    00:30 JPY Manufacturing PMI May P 49 49 48.7
    00:30 JPY Services PMI May P 50.8 52.4
    06:00 GBP Public Sector Net Borrowing (GBP) Apr 20.2B 17.7B 16.4B
    07:15 EUR France Manufacturing PMI May P 49.5 48.9 48.7
    07:15 EUR France Services PMI May P 47.4 47.7 47.3
    07:30 EUR Germany Manufacturing PMI May P 48.8 49 48.4
    07:30 EUR Germany Services PMI May P 47.2 49.5 49
    08:00 EUR Eurozone Manufacturing PMI May P 49.4 49.4 49
    08:00 EUR Eurozone Services PMI May P 48.9 50.4 50.1
    08:00 EUR Germany IFO Business Climate May 87.5 87.7 86.9
    08:00 EUR Germany IFO Current Assessment May 86.1 87 86.4
    08:00 EUR Germany IFO Expectations May 88.9 88.3 87.4
    08:30 GBP Manufacturing PMI May P 45.1 46.2 45.4
    08:30 GBP Services PMI May P 50.2 50 49
    11:30 EUR ECB Meeting Accounts
    12:30 CAD Industrial Product Price M/M Apr -0.80% -0.50% 0.50% 0.30%
    12:30 CAD Raw Material Price Index Apr -3.00% -2.20% -1% -0.70%
    12:30 USD Initial Jobless Claims (May 16) 227K 230K 229K
    13:45 USD Manufacturing PMI May P 49.9 50.2
    13:45 USD Services PMI May P 51 50.8
    14:00 USD Existing Home Sales Apr 4.10M 4.02M
    14:30 USD Natural Gas Storage 118B 110B

     



    Source link

  • US Deficit Jitters Roil Markets as Yields Surge, Dollar Sinks, Bitcoin Hits Record

    US Deficit Jitters Roil Markets as Yields Surge, Dollar Sinks, Bitcoin Hits Record


    The dominant driver in global markets at the moment is rising concern over the US fiscal deficit. 30-year yield surged toward 5.1% overnight, its highest level since October 2023. 10-year yield also breached the 4.6% mark for the first time in months. Equity markets responded accordingly, with major US indexes closing sharply lower. Gold has broken above 3330, supported additionally by geopolitical uncertainty. Bitcoin hit a new all-time high. Both reflected risk-hedging demand and a search for alternatives.

    In the currency markets, Dollar is suffering, now the worst performer among majors for the week. Meanwhile, commodity currencies like Aussie, Kiwi, and Loonie are struggling near the bottom of the FX board, a reflection of broader risk aversion. Yen leads the pack, joined by Swiss Franc and Euro, as investors seek safety outside the US. Sterling is trading in the middle.

    This spike in long-dated yields has sent a clear signal: investors are becoming increasingly uneasy about the US’s worsening debt profile and its implications for long-term stability. A poorly received 20-year bond auction only amplified these fears, fueling speculation that appetite for US debt is waning just as supply pressures are set to increase.

    On the trade front, tensions remain high. Japan’s Finance Minister Katsunobu Kato labeled recent US tariffs as “regrettable” and reiterated Tokyo’s position that no trade deal would be worthwhile unless automobile duties are scrapped. At the G7 meeting in Banff, Kato and US Treasury Secretary Scott Bessent agreed that the dollar-yen exchange rate should reflect market fundamentals. However, the lack of concrete progress raises doubts over any near-term breakthrough in US-Japan trade talks.

    Technically, US 10-year yield’s break of 4.592 resistance confirms resumption of whole rally from 3.886. Near term outlook will stay bullish as long as 4.388 support holds. Further rally should be seen to 100% projection of 3.886 to 4.592 from 4.124 at 4.830. Further selloff in US treasuries could keep US stocks and Dollar pressured.

    In Asia, at the time of writing, Nikkei is down -0.94%. Hong Kong HSI is down -1.05%. China Shanghai SSE is down -0.13%. Singapore Strait Times is down -0.42%. Japan 10-year JGB yield is up 0.031 at 1.552. Overnight, DOW fell -1.91%. S&P 500 fell -1.61%. NASDAQ fell -1.41%. 10-year yield rose 0.115 to 4.596.

    Looking ahead, Eurozone PMI flash, Germany Ifo business climate, and UK PMI flash will be the main focus in European session. ECB will also release monetary policy meeting accounts. Later in the day, US jobless claims and PMI flash will be the main feature.

    BoJ’s Noguchi: Must tread carefully with step-by-step policy normalization

    BoJ board member Asahi Noguchi emphasized the importance of a “measured, step-by-step” pace in raising interest rates, stressing the need to carefully assess the economic impact of each hike before proceeding further.

    Noguchi also addressed the upcoming interim review of BoJ’s bond tapering strategy, indicating that he sees no need for any major adjustments to the current plan, which runs through March 2026.

    He noted that the central bank should approach its long-term reduction in the balance sheet with flexibility, taking the time needed to ensure stability while maintaining the capacity to respond to “sudden market swings”.

    Any emergency increase in bond purchases, he noted, would be strictly conditional and “only be implemented during times of severe market disruption.”

    Japan’s PMI composite falls to 49.8, private sector contracts again

    Japan’s private sector activity fell back into contraction in May, with PMI Composite declining from 51.2 to 49.8. Manufacturing output edged higher from 48.7 to 49.0, but remained below the neutral 50 mark. The services sector, however, lost more momentum, with its PMI falling from 52.4 to 50.8.

    The decline in composite output reflects weakening domestic and external demand, as new business volumes fell for the first time in nearly a year.

    S&P Global’s Annabel Fiddes noted that elevated uncertainty around trade policy and foreign demand weighed heavily on business confidence, which sank to its second-lowest level since the pandemic’s onset.

    Australia’s PMI Composite slips to 50.6; firms cite election drag on demand

    Australia’s private sector showed signs of slowing in May, with PMI Composite falling from 51.0 to a 3-month low of 50.6. Manufacturing index held steady at 51.7. But services weakened from 51.0 to 50.5, its lowest level in six months.

    According to S&P Global’s Andrew Harker, the sluggishness may be tied in part to election-related uncertainty, which “contributed to slower growth of new orders”. Still, firms remained cautiously optimistic, continuing to hire at a “solid pace”. With the political noise expected to ease, attention will turn to whether demand picks up in the months ahead.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1286; (P) 1.1324; (R1) 1.1369; More…

    EUR/USD’s rally from 1.1064 is in progress and intraday bias stays on the upside. Correction from 1.1572 could have completed at 1.1064 already. Further rise should be seen to retest 1.1572 high first. Firm break there will resume larger up trend. Next near term target will be 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, break of 1.1217 minor support will delay the bullish case and turn intraday bias neutral again.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0818) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:00 AUD Manufacturing PMI May P 51.7 51.7
    23:00 AUD Services PMI May P 50.5 51
    23:50 JPY Machinery Orders M/M Mar 13.00% -1.60% 4.30%
    00:30 JPY Manufacturing PMI May P 49 49 48.7
    00:30 JPY Services PMI May P 50.8 52.4
    06:00 GBP Public Sector Net Borrowing (GBP) Apr 17.7B 16.4B
    07:15 EUR France Manufacturing PMI May P 48.9 48.7
    07:15 EUR France Services PMI May P 47.7 47.3
    07:30 EUR Germany Manufacturing PMI May P 49 48.4
    07:30 EUR Germany Services PMI May P 49.5 49
    08:00 EUR Eurozone Manufacturing PMI May P 49.4 49
    08:00 EUR Eurozone Services PMI May P 50.4 50.1
    08:00 EUR Germany IFO Expectations May 88.3 87.4
    08:00 EUR Germany IFO Current Assessment May 87 86.4
    08:00 EUR Germany IFO Business Climate May 87.7 86.9
    08:30 GBP Manufacturing PMI May P 46.2 45.4
    08:30 GBP Services PMI May P 50 49
    11:30 EUR ECB Meeting Accounts
    12:30 CAD Industrial Product Price M/M Apr -0.50% 0.50%
    12:30 CAD Raw Material Price Index Apr -2.20% -1%
    12:30 USD Initial Jobless Claims (May 16) 230K 229K
    13:45 USD Manufacturing PMI May P 50.2
    13:45 USD Services PMI May P 50.8
    14:00 USD Existing Home Sales Apr 4.10M 4.02M
    14:30 USD Natural Gas Storage 118B 110B

     



    Source link