Tag: BoC

  • Job Data and US-China Rapprochement Fuel Dollar Rebound Prospects

    Job Data and US-China Rapprochement Fuel Dollar Rebound Prospects


    Risk sentiment improved last week, driven by the solid US non-farm payroll report that helped ease fears of a deepening slowdown. Adding to the optimism was a thaw in US-China relations. While no concrete breakthrough emerged, the fact that both sides were willing to engage again offered some relief to global markets weary of tariff escalations.

    Dollar capitalized on this shift late in the week, rebounding after a string of weak data had previously weighed on sentiment. Although the greenback still finished as the second worst performer for the week, the technical picture points to scope for a near-term bounce.

    By contrast, Yen was the worst performer, pressured by improving risk appetite and technical breakouts in crosses, with further weakness likely if sentiment remains supported. Swiss Franc also underperformed, dragged down not just by reduced demand for safe-haven assets but also by a negative inflation print, which solidified expectations of another SNB rate cut this month.

    In the middle of the pack were Euro and Loonie. Both ECB and BoC delivered rate decisions in line with expectations. ECB cut by 25bps and BoC held steady. Yet, their respective advances against Dollar faded as improving trade prospects and rebounding US yields provided a floor for the greenback.

    NFP Rescues Sentiment, Fed Cut Bets Recede Further

    After a week dominated by downbeat US data—particularly the contractionary ISM manufacturing and services, sentiment got a needed boost from May’s non-farm payrolls. While hiring did slow, the headline print of 139k jobs, paired with a steady unemployment rate and stronger-than-expected wage growth, helped restore some confidence in the durability of the US labor market.

    For now, the economy appears to be holding up reasonably well against the growing cloud of tariff uncertainty. Rather than crumbling under pressure, the labor market continues to show resilience, suggesting the real economic drag from trade tensions may not fully materialize until later in the year—if at all.

    In response, market pricing for Fed policy has shifted. A rate hold at the June FOMC meeting is now virtually assured. Fed fund futures currently show an 83% chance of no change in July, up from 74% a week ago. September pricing has also adjusted notably, with odds of a hold rising to nearly 40%, from just 28% last week.

    This shift in expectations aligns with the more cautious wing of the Fed. As Minneapolis Fed President Neel Kashkari recently explained, two camps have emerged within the FOMC. One favors looking through tariff-induced price shocks as temporary and advocates rate cuts to support growth. The other sees a more prolonged inflation threat from drawn-out trade disputes and retaliatory measures, suggesting policy caution is warranted.

    Fed Governor Adriana Kugler has added detail to this latter view, identifying three channels through which tariffs may embed inflation. First, she cautioned that higher short-run inflation expectations may give firms more pricing power, extending inflation’s lifespan. Second, “opportunistic pricing” could allow businesses to raise prices even on goods unaffected by tariffs. Finally, she warned that reduced productivity, stemming from cost pressures and weakened investment, could feed longer-term inflation.

    For now, the labor market’s endurance gives the inflation-hawk camp more credibility.

    Renewed US-China Trade Talks Offer Glimmer of Hope

    Signs of thawing in US-China tensions added some additional cautious optimism. The long-awaited phone call between US President Donald Trump and Chinese President Xi Jinping finally took place last week, breaking weeks of silence and geopolitical posturing. More critically, the conversation was not just symbolic—it quickly translated into concrete steps, including a formal resumption of trade negotiations.

    Trump announced that Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer will meet Chinese counterparts in London on Monday for renewed trade talks. The resumption of dialogue is a modest but meaningful shift away from the stalemate that has plagued relations.

    Adding to the sense of tentative de-escalation, Beijing has quietly taken steps to ease the pressure on US supply chains. According to a Reuters report, China granted temporary export licenses to rare-earth suppliers servicing the top three US automakers. This comes after Beijing’s April decision to restrict exports of rare earths and magnets—critical inputs for automotive, aerospace, and tech industries—sparked widespread supply chain disruptions.

    The impact of these restrictions is already visible. Ford recently suspended production of its Explorer SUV at its Chicago plant for a week due to a rare-earth shortage. That incident highlights how deeply reliant advanced manufacturing has become on these materials—and how easily geopolitical leverage can disrupt production cycles. Beijing’s decision to grant temporary relief may signal a tactical concession ahead of negotiations, without altering its broader strategic posture.

    Wall Street Ends Higher But Rally May Stall at Key Levels

    Despite ending the week on a positive note, major US stock indexes are showing signs of fatigue, with momentum staying unconvincing. Any further gains are likely to face stiff resistance ahead. Meanwhile, Dollar Index continued to struggle to breakout from recently established range. There is room for a bounce in Dollar as the near term consolidation is set to extend.

    DOW’s rise from 36611.78 is still seen as the second leg of the corrective pattern from 45073.63 high. While further rally might be seen, upside should be limited by 45073.63 to bring near term reversal. Also, considering that D MACD is now staying below signal line, firm break of 41352.09 support will at least indicate short term topping, and bring deeper pullback.

    NASDAQ’s picture is similar. Rise from 14784.03 is seen as the second leg of the consolidation pattern from 20204.58. While further rally might be seen, strong resistance should emerge from 20204.58 to bring near term reversal. Considering that D MACD is staying below signal line, firm break of 18599.68 support will at least indicate short term toping, and bring deeper pullback.

    Dollar index struggled to find decisive momentum to break through 97.92 low. Price action from there are seen as a corrective pattern to the decline from 110.17. Break of 100.54 resistance will indicate that the third leg of the consolidations has started, and target 38.2% retracement of 110.17 to 97.92 at 102.60.

    BoC Hold, ECB Cuts, EUR/CAD Ranges

    Two major central banks, BoC and ECB, delivered expected decisions last week. BoC left its overnight rate unchanged at 2.75% for the second straight meeting, as policymakers await greater clarity on the impact of global trade negotiations. While markets expect easing to resume later this year, the timing remains unclear. The central bank appears willing to act in the second half of the year but is seeking more definitive economic data before committing to further policy moves.

    Meanwhile, ECB followed through with a 25bps rate cut, lowering its deposit rate to 2.00%. After the meeting, a number of Governing Council members hinted at a possible pause in July. Some Governing Council members went further, suggesting the ECB may have already “won the battle” against inflation. With the policy rate now considered deep in neutral territory, the threshold for additional easing has risen substantially, especially amid persistent global trade and geopolitical risks.

    Technically, EUR/CAD continued to gyrate inside established range last week, as consolidation pattern from 1.5959 extended. Another dip cannot be ruled out in the near term. But downside should be contained by 1.5402 cluster support (38.2% retracement of 1.4483 to 1.5959 at 1.5395 to bring rebound. On the upside, break of 1.5759 resistance will bring retest of 1.5959 high.

    EUR/USD Weekly Outlook

    EUR/USD edged higher to 1.1494 last week but lost momentum again. Initial bias stays neutral this week first. Price actions from 1.1572 are seen as a corrective pattern to rally from 1.0716. While rebound from 1.1064 might extend, strong resistance should emerge from 1.1572 to limit upside. On the downside, break of 1.1356 support will argue that the correction is already in the third leg, and target 1.1209 support for confirmation.

    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 1.0875) holds.

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1278) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



    Source link

  • The BoC keeps its policy rate unchanged

    The BoC keeps its policy rate unchanged


    On Wednesday, the Bank of Canada (BoC) held its policy rate steady at 2.75%, aligning with the expectations of market analysts.

    BoC policy statement key highlights

    Uncertainty over US tariffs remains high; we will seek more information on US trade policy and its impacts.

    The BoC also cites unexpected firmness in recent inflation data and the fact the Canadian economy is softer, but not sharply weaker.

    We will support economic growth while ensuring inflation remains well-controlled.

    The Governing Council is proceeding carefully with particular attention to the risks and uncertainties facing the Canadian economy.

    We are focused on ensuring Canadians continue to have confidence in price stability.

    Says watching the extent to which US tariffs cut demand for exports, how quickly cost increases are passed on to consumer prices, and how inflation expectations evolve.

    The Canadian economy is expected to be considerably weaker in Q2 than in Q1, with strength in exports and inventories reversing.

    April’s annual inflation rate excluding taxes was 2.3%, slightly stronger than expected.

    The bank says it will continue to assess timing and strength of downward and upward pressures on inflation.

    Market reaction

    The Canadian Dollar (CAD) maintains its constructive stance on Wednesday, motivating USD/CAD to trade with modest losses around the 1.3700 neighbourhood following the BoC’s decision to leave rates unchanged.

    Canadian Dollar PRICE Today

    The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the US Dollar.

    USD EUR GBP JPY CAD AUD NZD CHF
    USD -0.30% -0.18% -0.19% -0.15% -0.49% -0.40% -0.27%
    EUR 0.30% 0.08% 0.08% 0.12% -0.20% -0.12% -0.00%
    GBP 0.18% -0.08% -0.04% 0.04% -0.28% -0.20% -0.10%
    JPY 0.19% -0.08% 0.04% 0.05% -0.35% -0.15% -0.08%
    CAD 0.15% -0.12% -0.04% -0.05% -0.33% -0.25% -0.13%
    AUD 0.49% 0.20% 0.28% 0.35% 0.33% 0.08% 0.20%
    NZD 0.40% 0.12% 0.20% 0.15% 0.25% -0.08% 0.10%
    CHF 0.27% 0.00% 0.10% 0.08% 0.13% -0.20% -0.10%

    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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

    This section below was published as a preview of the Bank of Canada’s (BoC) monetary policy announcements at 09:00 GMT.

    • The Bank of Canada (BoC) is seen keeping rates unchanged.
    • The Canadian Dollar navigates the area of yearly highs vs. the US Dollar.
    • Headline CPI in Canada drifted below the central bank’s target.
    • Trade policies should prevail at Governor Macklem’s press conference.

    Market analysts generally predict that the Bank of Canada (BoC) will keep its interest rate at 2.75% on Wednesday, adding to the pauses recorded at the March and April monetary policy meetings.

    In the meantime, the Canadian Dollar (CAD) has been steadily appreciating since it fell to yearly lows in the 1.4400 zone against the US Dollar (USD). The Loonie is currently navigating the area of YTD highs in the proximity of the 1.3700 region.

    Meanwhile, the focus has been on US President Donald Trump’s trade policies, particularly those pertaining to tariffs, since he took office again in January. It is anticipated that this particular topic will take centre stage during the BoC event, influencing both Governor Tiff Macklem’s remarks and media enquiries.

    As growing global uncertainties, mostly caused by the White House’s inconsistent stance on tariffs, compel a reexamination of trade policy, the Bank of Canada is planning to keep interest rates paused once again for June. Given this uncertainty, it is probable that the BoC’s announcement and Governor Macklem’s subsequent news conference this week will be cautious in tone.

    Following the bank’s decision to keep rates unchanged on April 16, Governor Tiff Macklem underlined again the bank’s symmetric approach to its inflation objective, expressing worry when inflation veers either over or below the 2% level. He stressed that the phrase “decisively”, used in earlier exchanges, shouldn’t be taken as a policy cue.

    Regarding the general state of the economy, Macklem underlined the need for adaptation in view of continuous uncertainty, especially with regard to taxes. Once trade circumstances stabilise, the Bank may go back to a more defined base case projection.

    Carolyn Rogers, senior deputy governor, dismissed recent market swings, saying it is too early to draw fundamental conclusions. She underlined that institutions are properly funded with some ability to withstand volatility and that Canadian financial markets remain orderly.

    Regarding monetary policy, Macklem said that the Governing Council debated between maintaining rates constant or cutting 25 basis points. Rogers also mentioned several Council members who were really hopeful and not anticipating further inflationary pressure.

    Previewing the BoC’s interest rate decision, analysts Taylor Schleich and Ethan Currie at the National Bank of Canada noted, “We expect the Bank of Canada to leave its policy rate unchanged at 2.75%… The labour market—which carries a lot of weight—is consistent with further rate relief, but the inflation picture right now isn’t giving the green light. There are also still key unknowns on trade impacts, inflation expectations and fiscal policy which further obscure the picture.”

    When will the BoC release its monetary policy decision, and how could it affect USD/CAD?

    The Bank of Canada will announce its policy decision on Wednesday at 13:45 GMT, with Governor Tiff Macklem holding a press conference at 14:30 GMT thereafter.

    Market observers do not expect significant surprises; however, they anticipate that the central bank will maintain its emphasis on the effects of US tariffs on the Canadian economy. This perspective may also have repercussions for CAD fluctuations.

    Senior Analyst Pablo Piovano from FXStreet highlighted that “USD/CAD has recently broken below its key 200-day Simple Moving Average (SMA) at 1.4020, subsequently opening the taps for extra weakness in the next few weeks.”

    “USD/CAD has hit a fresh 2025 bottom at 1.3673 on June 2, exclusively following dynamics around the US Dollar. Once this level is cleared, extra losses could extend to the September 2024 low at 1.3418 reached on September 25,” Piovano added.

    Piovano notes that “on the upside, the pair should encounter initial resistance at its May top of 1.4015 recorded on May 12 and May 13. This region of monthly peaks appears reinforced by the vicinity of the key 200-day SMA. If the pair manages to surpass the latter, it could embark on a potential visit to the next upside targets at the April high at 1.4414 set on April 1, ahead of the March top at 1.4542 recorded on March 4, and ultimately the 2025 peak at 1.4792 reached on February 3.”

    “Currently, the Relative Strength Index (RSI) has dropped below the 40 level, suggesting further weakness remains in the pipeline. In addition, the ongoing bearish trend looks solid, as indicated by the Average Directional Index (ADX) around the 27 zone,” Piovano concludes.

    Canadian Dollar FAQs

    The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

    The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.



    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

  • Cautious Mood in Asia as Markets Eye Trump-Xi Trade Call and Steel Tariff Fallout

    Cautious Mood in Asia as Markets Eye Trump-Xi Trade Call and Steel Tariff Fallout


    Asian markets traded with a mild risk-off tone to start the week, though overall activity remains subdued due to holidays in China, Malaysia, and New Zealand. Nikkei is under pressure, weighed down by rising US-China trade tensions and US President Donald Trump’s announcement of steeper steel tariffs. Hong Kong equities are also lower, reflecting regional unease. The muted mood extends to currency markets, where Dollar is softer, though the pullback remains modest. The Swiss Franc and Loonie are also on the weaker side, while Kiwi, Aussie, and Yen are firmer. Euro and Sterling are holding mid-pack.

    On the trade front, US National Economic Council Director Kevin Hassett said on Sunday that President Trump and Chinese President Xi Jinping could speak as soon as this week, raising hopes that communication channels remain open. “We expect a wonderful conversation about the trade negotiations,” Hassett said, expressing optimism about renewed dialogue. However, last week’s heated rhetoric casts a long shadow. Trump accused Beijing of violating their preliminary trade deal, prompting a swift rebuttal from Chinese officials today, who insisted they had “strictly implemented” their commitments and decried the US claims as “seriously contrary to the facts.”

    Further darkening the trade outlook, Trump announced late on Friday that tariffs on imported steel and aluminum will be doubled to 50% starting June 4, aiming to provide what he called “even further security” for the U.S. steel industry. The European Commission responded sharply over the weekend, warning that the move increases economic uncertainty and imposes higher costs on both sides of the Atlantic. Brussels confirmed it is prepared to retaliate, with countermeasures now under consideration. The threat of escalating tariff battles across multiple fronts continues to weigh on investor sentiment globally.

    With the lingering tension, markets in a cautious mood, waiting for clarity on whether the Trump-Xi call will materialize this week—and, more importantly, whether it brings any de-escalation. In the background, traders are also preparing for two major central bank decisions this week, with both ECB and Bank BoC set to meet. Key US data releases—including ISM manufacturing and services indexes, and the May non-farm payrolls report—will also be closely watched.

    Technically, EUR/CAD would be a pair to watch this week. Price actions from 1.5959 are seen as a consolidation pattern to rally from 1.4483, that is set to extend further. In case of another dip, downside should be contained by 1.5420 cluster support (38.2% retracement of 1.4483 to 1.5959 at 1.5395. Break of 1.5720 will bring stronger rebound, but upside should be limited by 1.5959 resistance. Some range trading setup could be used to capitalize on the moves.

    In Asia, at the time of writing, Nikkei is down -1.40%. Hong Kong HSI is down -2.20%. China is on holiday. Singapore Strait Times is down -0.49%. Japan 10-year JGB yield is up 0.006 at 1.511.

    Japan’s PMI manufacturing finalized at 49.5, firms eye recovery despite trade headwinds

    Japan’s PMI Manufacturing was finalized at 49.5 in May, up from April’s 48.7. S&P Global’s Annabel Fiddes noted that business conditions “moved closer to stabilisation,” as declines in sales eased and firms reported improved hiring activity.

    Global trade tensions stemming from US tariffs continue to weigh on demand, with businesses citing “increased client hesitancy” and weaker orders.

    Despite persistent external challenges around tariffs, sentiment around future output improved, and hiring rose at the fastest pace in over a year.

    China’s NBS PMI Manufacturing edges higher to 49.5, second month of contraction

    China’s official NBS PMI Manufacturing rose from 49.0 to 49.5 in May, signaling a modest improvement but still marking the second consecutive month of contraction.

    The lift was driven by an acceleration in production and more optimistic business sentiment. The production sub-index climbed 0.9 pts to 50.7. New orders index increased from 49.2 to 49.8. New export orders also rebounded from a low base of 44.7 to 47.5, as some firms reported improved trade activity with the US.

    Meanwhile, PMI Non-Manufacturing edged slightly lower from 50.4 to 50.3, lifting the PMI Composite to 50.4 from 50.2. Although still in expansion territory, the composite figure is consistent with the sluggish momentum seen over the past year.

    Fed’s Waller: Temporary tariff effects could clear path for “good news” rate cut later this year

    In a speech today, Fed Governor Christopher Waller struck signaled his support for “good news” rate cuts later this year, if inflation continues to ease and trade tensions don’t escalate significantly.

    In his view, any inflation resulting from tariffs “will not be persistent” and he supports “looking through” these effects when considering policy decisions.

    Waller added that the strong labor market and continued disinflation through April give the Fed time to assess the outcome of ongoing trade negotiations before making policy moves.

    Should tariffs remain near his “lower scenario” and inflation continue its downward path toward 2%, Waller said he would support so-called “good news” rate cuts, easing driven by a stable economy rather than distress.

    ECB to cut, BoC to hold, NFP and other data eyed

    Markets enter the week bracing for a dense calendar of central bank decisions and high-impact data releases, all unfolding under the shadow of unresolved global trade tensions. ECB is poised to deliver its another rate cut of the cycle, while BoC is widely expected to stay on hold. In parallel, a string economic indicators from the US, Canada, and China will be scrutinized for clues on the global outlook. But with sentiment increasingly shaped by geopolitics, markets may struggle to find a clear directional cue out of the economic events.

    ECB is all but certain to lower its deposit rate by 25bps to 2.00%. However, the bigger question is what comes next. With rates then clearly within the estimated neutral zone, many expect this week’s move to mark a pivot to a more cautious stance. A Reuters poll shows that 51 of 72 economists forecast the ECB will pause in July. Nearly 30% believe the June cut will be the final one of the cycle. Only 45% anticipate one more cut beyond this week.

    Much hinges on the tone President Christine Lagarde strikes in her post-meeting press conference. Investors will watch closely for signs of a formal shift to a wait-and-see stance. Updated ECB economic projections will also be key, particularly any revisions to inflation and growth forecasts in light of persistent trade tensions. Adding to the picture, Eurozone flash CPI for May, due earlier in the week, is expected to slow to the 2% target. Such a reading would reinforce the view that aggressive further easing is unlikely, at least in the near term.

    In Canada, BoC is widely expected to keep its benchmark interest rate unchanged at 2.75% for a second consecutive meeting. Markets are pricing in roughly a 75% chance of a hold. Although the Canadian economy remains fragile, the sharper-than-expected rebound in core inflation, specifically CPI excluding energy, which surged to 2.9% in April, has made policymakers wary of easing further too quickly. BoC appears inclined to wait for greater clarity on US-Canada trade developments before contemplating further policy moves. May employment data will also be watched closely for any signs of labor market weakening that could shift the policy calculus.

    In the US, attention turns to the ISM manufacturing and services indexes, as well as May non-farm payrolls report. Barring any major surprises, however, these releases are unlikely to dislodge the Fed from its patient stance. With inflation still trending lower but global risks elevated, Fed has made clear it will not rush into rate cuts again. Fed fund futures are currently pricing in a 73% chance of a rate cut in September, though that remains highly dependent on the outcome of trade negotiations—particularly with China and the EU.

    Elsewhere, investors will also parse Australia’s Q1 GDP and RBA meeting minutes, Swiss GDP and CPI, and China’s Caixin PMIs. But for now, it is trade headlines—not just data—that are likely to set the tone. With central banks turning more cautious and the global growth pulse still uncertain, volatility may persist, especially as June unfolds with little in the way of firm resolution to the issues most weighing on sentiment.

    Here are som ehighlights for the week:

    • Monday: Japan PMI manufacturing final; Swiss retail sales, GDP, PMI manufacturing; EUrozone PMI manufacturing final; UK PMI manufacturing final; Canada PMI manufacturing; US ISM manufacturing.
    • Tuesday: New Zeaand terms of trade; Japan monetary base; RBA minutes; China Caixin PMI manufacturing; Swiss CPI; Eurozone CPI flash, unemployment rate.
    • Wednesday: Australia GDP; Eurozone PMI services final; UK PMI services final; US ADP employment, ISM services, Fed’s Beige Book; BoC rate decision.
    • Thursday: Japan labor cash earnings; Australia goods trade balance; China Caixin PMI services; Swiss unemployment rate; Germany factory orders; UK PMI construction; ECB rate decsion; US jobless claims, trade balance.
    • Friday: Japan household spending, leading indicators; Germany industrial production, trade balance; Swiss Foreign currency reserves; Eurozone GDP final, retail sales; Canada employment; US non-farm payrolls.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6409; (P) 0.6431; (R1) 0.6454; More…

    Range trading continues in AUD/USD and intraday bias stays neutral. Further rally is expected with 0.6406 support intact. Above 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 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
    23:50 JPY Capital Spending Q1 6.40% 3.80% -0.20%
    00:30 JPY Manufacturing PMI May 49.4 49 49
    01:00 AUD TD-MI Inflation Gauge M/M May -0.40% 0.60%
    06:30 CHF Real Retail Sales Y/Y Apr 2.50% 2.20%
    07:00 CHF GDP Q/Q Q1 0.40% 0.20%
    07:30 CHF Manufacturing PMI May 48.1 45.8
    07:50 EUR France Manufacturing PMI May F 49.5 49.5
    07:55 EUR Germany Manufacturing PMI May F 48.8 48.8
    08:00 EUR Eurozone Manufacturing PMI May F 49.4 49.4
    08:30 GBP Manufacturing PMI May F 45.1 45.1
    08:30 GBP Mortgage Approvals Apr 65K 64K
    08:30 GBP M4 Money Supply M/M Apr 0.20% 0.30%
    13:30 CAD Manufacturing PMI May 45.3
    13:45 USD Manufacturing PMI May F 52.3 52.3
    14:00 USD ISM Manufacturing PMI May 49.3 48.7
    14:00 USD ISM Manufacturing Prices Paid May 70.2 69.8
    14:00 USD ISM Manufacturing Employment Index May 46.5
    14:00 USD Construction Spending M/M Apr 0.30% -0.50%

     



    Source link

  • Loonie strengthens for third day as core inflation rises, US Dollar stumbles

    Loonie strengthens for third day as core inflation rises, US Dollar stumbles


    • The Canadian Dollar extends gains against the US Dollar on Wednesday, with USD/CAD falling below 1.3900.
    • BoC rate cut expectations fade as underlying inflation remains sticky.
    • The US Dollar remains under pressure,  DXY slips to a fresh weekly low.

    The Canadian Dollar (CAD) strengthens further against the US Dollar (USD) on Wednesday, marking a three-day rally, with USD/CAD slipping below 1.3900 as markets digest stronger-than-expected Canadian inflation figures and a broadly subdued Greenback.

    The market reacted to the data released on Tuesday with renewed uncertainty as Canada’s inflation report showed an unexpected rise in core prices despite a steep drop in the headline figure. The headline Consumer Price Index (CPI) rose to 1.7% YoY in April, down from 2.9% in March.  On a monthly basis, the CPI fell 0.1% in April from 0.3% in March, well below market expectations. In contrast, the Bank of Canada’s (BoC) preferred measure, BoC core CPI, accelerated to 2.5% YoY, from 2.2%, and monthly CPI rose to 0.5% MoM from 0.1% in March.

    The fall in headline inflation was partly driven by weaker energy prices, which fell 12.7% YoY in April as the recent removal of the federal carbon tax intensified the impact of falling oil prices driven by OPEC’s decision to hike output.

    The latest inflation data paints a complex picture for the BoC ahead of its June rate decision. The BoC held its benchmark interest rate steady at 2.75% during its April policy meeting. Some economists now lean toward another pause in cuts.

    While the headline inflation figure eased, the rise in core measures indicates underlying price pressure picked up in April.

    “It is going to make it a much more challenging backdrop for the Bank of Canada to continue cutting rates, at least in the near term,” said Benjamin Reitzes, Managing Director of Canadian Rates and Macro Strategist at BMO Capital Markets.

    On top of that, the impact of US trade tariffs is adding to the uncertainty, potentially keeping inflation higher for longer and making it harder for the central bank to move ahead with its easing plans.

    Meanwhile, the US Dollar Index (DXY), which measures the USD against a basket of six major currencies, briefly slipped below the 100.00 mark to a fresh weekly low, down over 1.2% this week. The Greenback remains under pressure amid a broader weakness in the US economy after Moody’s cut the US sovereign credit rating to Aa1 on May 16 and a cautious economic outlook from the Federal Reserve (Fed).

    Looking ahead, traders will keep a close eye on the US Purchasing Managers Index (PMI) data due on Thursday and Canada’s upcoming Retail Sales data on Friday. At the same time, shifts in US economic policy and ongoing global trade developments will continue to play a key role in shaping the direction of the USD/CAD pair.



    Source link

  • Loonie Lifts on Hot Core Inflation, But BoC Cut Still in Play

    Loonie Lifts on Hot Core Inflation, But BoC Cut Still in Play


    Canadian Dollar firmed modestly in early US trading after inflation data showed a sharper-than-expected pickup in core price pressures. While headline CPI slowed to 1.7% in April, the drop was largely due to a steep decline in energy prices. In contrast, underlying inflation picked up pace, with core measures such as CPI-median, trim, and common all rising more than expected, driven in part by higher grocery and travel costs.

    The market response was swift. Traders pared back expectations for a BoC rate cut at its June 4 meeting, with swaps now pricing in around a 48% chance, down from 65% prior to the release. Still, attention will now turn to Canada’s Q1 GDP report on May 30, which is likely to be the key data point in determining whether BoC will proceed with a cut or hold off amid resurging inflation pressures.

    In the currency markets, Loonie is currently leading gains for the day, followed by Swiss Franc and Yen. Meanwhile, Aussie is the day’s worst performer, weighed down by RBA’s dovish rate cut and downgrade in inflation and growth projections. Kiwi is the second weakest, and then Sterling. Euro and Dollar are positioning in the middle.

    Technically, however, USD/CAD is still bounded firmly inside range of 1.3898/4014. Further rise is still in favor and break of 1.4014 will resume the rebound from 1.3749 short term bottom to 1.4150 cluster resistance (38.2% retracement of 1.4791 to 1.3749 at 1.4147). However, firm break of 1.3898 will bring retest of 1.3749 low instead.

    In Europe, at the time of writing, FTSE is up 0.72%. DAX is up 0.46%. CAC is up 0.71%. UK 10-year yield is up 0.039 at 4.704. Germany 10-year yield is up 0.013 at 2.606. Earlier in Asia, Nikkei rose 0.08%. Hong Kong HSI rose 1.49%. China Shanghai SSE rose 0.38%. Singapore Strait Times rose 0.16%. Japan 10-year JGB yield rose 0.035 to 1.523.

    Canada’s headline CPI slows to 1.7% on energy, but core measures jump

    Canada’s headline consumer inflation eased to 1.7% yoy in April, down from 2.3% yoy in March, slightly above the expected 1.6% yoy. The deceleration was primarily due to a steep drop in energy prices by -12.7% yoy, with gasoline down -18.1% yoy and natural gas falling -14.1% yoy. On a monthly basis, overall CPI declined by -0.1% mom.

    However, the details beneath the surface were less comforting for policymakers. Excluding energy, inflation actually accelerated, with CPI rising 2.9% yoy compared to 2.5% yoy in March.

    Moreover, all three core inflation measures rose notably. CPI-median rose from 2.9% yoy to 3.2%, above expectation of 2.9% yoy. CPI trimmed rose from 2.8% yoy to 3.1% yoy, above expectation of 2.8% yoy. CPI common jumped from 2.3% yoy to 2.5% yoy, above expectation of 2.3% yoy.

    BoE’s Pill: Quarterly rate cuts may be too rapid given increasing intrinsic inflation persistence

    BoE Chief Economist Huw Pill explained his vote to keep the Bank Rate unchanged at the May MPC meeting as a “skip” rather than a pause in the broader easing cycle.

    In speech today, Pill said that while disinflation remains on track, the pace of quarterly 25bps cuts since last summer may be ” too rapid” given current inflation dynamics.

    He expressed particular concern that structural changes in wage and price-setting behavior have heightened the “intrinsic persistence” of inflation in the UK.

    As a result, Pill argued that a more cautious approach to monetary easing is warranted, reinforcing the need to slow the pace of rate reductions while continuing the broader policy normalization.

    ECB’s Schnabel: Disinflation on track, steady hand needed amid new shocks

    ECB Executive Board member Isabel Schnabel said the Eurozone’s disinflation process remains on track, but “new shocks” — particularly from trade tariffs — are presenting emerging risks.

    While tariffs may dampen inflation in the short term, Schnabel warned they pose medium-term upside risks, warranting a “steady hand” in monetary policy.

    She emphasized the importance of not overlooking “supply-side shocks” if they appear persistent, as doing so could risk “de-anchoring inflation expectations”.

    Schnabel also highlighted the Eurozone’s relative resilience following the tariff escalation on April 2, noting Euro’s appreciation and a shift in perception toward the region as a “safe haven.” She characterized this as a “historical opportunity” to strengthen the international role of Euro.

    ECB’s Knot: June rate cut possible, but not confirmed

    Dutch ECB Governing Council member Klaas Knot said today that a rate cut at the June meeting remains on the table but is far from a done deal.

    “I can’t exclude we will decide to have another rate cut in June, but I also can’t confirm it,” he told reporters, emphasizing that ECB must remain focused on medium- to long-term inflation risks rather than short-term fluctuations.

    Knot said the new staff projections next month will incorporate scenarios reflecting the impact of recent US trade policies and potential EU countermeasures.

    While the outlook may show lower inflation in 2025 and 2026, the bigger concern lies beyond that window, given the longer-term effects of tariff-related distortions. “It is more interesting to see what happens after that period,” he noted.

    RBA cuts rates to 3.85%, lowers 2025 growth and inflation forecasts

    RBA delivered a widely expected 25 bps rate cut, lowering the cash rate to 3.85%. In its statement, RBA said the risks to inflation had become “more balanced,” with headline inflation now within the target range and upside pressures “appear to have diminished” amid deteriorating global economic conditions.

    Still, the central bank remains cautious, citing significant uncertainty around both demand and supply dynamics, as well as the evolving impact of global trade tensions and geopolitical developments.

    The Board acknowledged a “severe downside scenario” and emphasized that monetary policy is “well placed” to respond decisively if global shocks materially affect Australia’s outlook. RBA flagged the unpredictability of global tariff policies and noted that households and businesses may hold back on spending amid heightened uncertainty. These concerns have contributed to a weaker outlook across growth, employment, and inflation.

    In its revised forecasts, RBA downgraded GDP growth for 2025 to 1.9% (from 2.1%) and for 2026 to 2.2% (from 2.3%). End-2025 headline CPI was revised down to 3.0% from 3.7%, with end-2026 projection lifted from 2.8% to 2.9%. Trimmed mean forecasts for the end-2025 and end 2026 were both cut slightly from 2.7% to 2.6%.

    RBA’s Bullock: Debated 25 vs 50bps cut debated; trade risks tilt toward disinflation

    Following RBA’s decision, Governor Michele Bullock revealed in the post-meeting press conference that the Board briefly considered holding rates but quickly moved to debate between 25 and 50 basis point reductions.

    Ultimately, the more measured 25bps cut was preferred, given that inflation is within target and unemployment remains resilient. Bullock emphasized that while easing was justified, “it doesn’t rule out that we might need to take action in the future.”

    Bullock also noted that the Board views recent global trade developments as broadly “disinflationary” for Australia. However, she cautioned that risks remain tilted both ways.

    “There is a risk to inflation on the upside, trade policies could lead to supply chain issues, which could raise prices for some imports, much as we saw during the pandemic,” she emphasized.

    China cuts loan prime rates for first time in seven months

    China’s central bank lowered its key lending benchmarks for the first time since October, delivering a long-anticipated move to support the economy.

    PBoC lowered the one-year loan prime rate by 10 bps to 3.0%. The five-year LPR, a key reference for mortgages, was also trimmed by 10 bps to 3.5%.

    The October 2025 easing was more aggressive at 25 basis points, but today’s cuts still mark a meaningful step in the ongoing monetary support cycle.

    The move comes as part of a broader policy package unveiled by PBOC Governor Pan Gongsheng and top financial regulators ahead of high-level trade talks in Geneva that have since led to a temporary truce between China and the US on tariffs.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1180; (P) 1.1234; (R1) 1.1296; More…

    Range trading continues in EUR/USD and intraday bias remains neutral. On the upside, decisive break of 1.1292 resistance should indicate that correction from 1.1572 has already completed after defending 38.2% retracement of 1.0176 to 1.1572 at 1.1039. Intraday bias will be turned back to the upside for retesting 1.1572 next. However, sustained break of 1.1039 will bring deeper decline to 61.8% retracement at 1.0709 next.

    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
    01:15 CNY 1-Y Loan Prime Rate 3.00% 3.00% 3.10%
    04:30 CNY 5-Y Loan Prime Rate 3.50% 3.50% 3.60%
    04:30 AUD RBA Interest Rate Decision 3.85% 3.85% 4.10%
    06:00 EUR Germany PPI M/M Apr -0.60% -0.30% -0.70%
    06:00 EUR Germany PPI Y/Y Apr -0.90% -0.60% -0.20%
    08:00 EUR Eurozone Current Account (EUR) Mar 50.9B 35.9B 34.3B
    12:30 CAD CPI M/M Apr -0.10% -0.10% 0.30%
    12:30 CAD CPI Y/Y Apr 1.70% 1.60% 2.30%
    12:30 CAD CPI Median Y/Y Apr 3.20% 2.90% 2.90%
    12:30 CAD CPI Trimmed Y/Y Apr 3.10% 2.80% 2.80%
    12:30 CAD CPI Common Y/Y Apr 2.50% 2.30% 2.30%

     



    Source link

  • Dollar Strengthens on Trade Deal, But Details Keep Risk Sentiment Tame

    Dollar Strengthens on Trade Deal, But Details Keep Risk Sentiment Tame


    Market reaction to the much-anticipated US-UK trade agreement was cautiously positive, though not particularly enthusiastic. While major US equity indices closed higher overnight, DOW, S&P 500, and NASDAQ all gave back early gains to finish near their opening levels, suggesting that the initial optimism faded as details of the deal emerged. The muted tone suggests that while the deal provided a headline boost, its content lacked the depth to drive a more sustained risk rally.

    The trade agreement itself, though billed as comprehensive, turned out to be more of a framework than a finalized deal. No formal documents were signed during the Oval Office event, and US President Donald Trump admitted that “final details are being written up,” promising a conclusive announcement in the coming weeks. Crucially, the 10% blanket tariff on UK imports will remain in place, setting a potential precedent that future US trade agreements—whether with the EU, ASEAN, or Canada—may not revert to pre-tariff norms. This signals a structural shift in global trade architecture where tariffs are normalized, not reversed.

    Despite the lack of concrete outcomes, Sterling has remained resilient and is currently the second strongest major currency so far this week, trailing only Dollar. Japanese Yen holds third place, while Kiwi, Loonie, and Euro sit at the bottom of the performance chart. Aussie and Swiss Franc are trading near the middle.

    Attention is now shifting to Canada, where April employment data will be released later today. After a surprise job contraction in March, markets are looking for a modest 4.1k rebound in hiring. Unemployment rate is expected to edge up to 6.8%. With inflation risks rising and growth facing external pressure, both from tariffs, BoC is being pulled in opposite directions. Whether it prioritizes stabilizing inflation or supporting the labor market will depend heavily on how data trends evolve in the coming months.

    Technically, USD/CAD’s break of 1.3903 resistance confirms short term bottoming at 1.3749, on bullish convergence condition in 4H MACD, just ahead of 1.3727 fibonacci level. Further rise should be seen to 1.4150 cluster resistance (38.2% retracement of 1.4791 to 1.3749 at 1.4147). Reaction from there would decide whether fall from 1.4791 is a three-wave corrective move, or a five-wave impulse.

    In Asia, at the time of writing, Nikkei is up 1.60%. Hong Kong HSI is up 0.24%. China Shanghai SSE is down -0.14%. Singapore Strait Times is up 0.73%. Japan 10-year JGB yield is up 0.034 at 1.359. Overnight, DOW rose 0.62%. S&P 500 rose 0.58%. NASDAQ rose 1.07%. 10-year yield jumped 0.0987 to 4.373.

    Japan wage growth slows while Real incomes shrink, but spending rebounds

    Japan’s wage data for March showed a softening trend. Nominal total cash earnings rose 2.1% yoy, below expectations of 2.4% yoy and down from February’s 2.7% yoy. This marked the 39th consecutive month of nominal wage growth, but the pace is clearly losing momentum.

    More concerning was the continued decline in inflation-adjusted real wages, which fell -2.1% yoy, down for a third straight month, highlighting the squeeze on household purchasing power as consumer prices remained elevated at 4.2% yoy, particularly for food staples like rice.

    Base salaries (regular pay) grew 1.3% yoy, unchanged from February, suggesting underlying wage trends remain stable but not accelerating. However, overtime pay, often viewed as a proxy for labor demand, fell -1.1% yoy, marking its first decline since September and the sharpest drop since April last year.

    Despite the income pressures, household spending surprised to the upside. It rose 2.1% yoy, far exceeding the expected 0.2% yoy and marking the first increase in two months. On a seasonally adjusted month-on-month basis, spending climbed 0.4%. The increase was largely driven by higher electricity bills and rising education-related expenses.

    China’s exports surge 8.1% yoy in April, ASEAN shipments jump 20.8% yoy, US slide -21% yoy

    China’s exports surged 8.1% yoy to USD 315.7B in April, far exceeding expectations of 1.9% yoy. However, the headline strength masks key shifts in trading patterns.

    Exports to the US tumbled by -21% yoy, a sharp reversal from March’s 9.1% yoy gain, reflecting the drag from elevated tariffs. In contrast, shipments to the ASEAN bloc jumped 20.8% yoy, with Vietnam, often seen as a transshipment route for Chinese goods, seeing a 22.5% yoy rise.

    Yet, with the US now eyeing a steep 46% tariff on Vietnamese imports and imposing a 10% baseline levy, this channel for China could soon come under pressure.

    Elsewhere, exports to the European Union also improved, rising 8.3% yoy.

    Imports dipped just -0.2% yoy, a much smaller contraction than the expected -5.9% yoy. As a result, trade surplus narrowed from USD 102.6B to USD 96.2B, above the expected USD 94.3B.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1181; (P) 1.1259; (R1) 1.1305; More…

    EUR/USD’s corrective fall from 1.1572 resumed by breaking through 1.1265 and intraday bias is back on the downside. Deeper fall would be seen to 38.2% retracement of 1.0176 to 1.1572 at 1.1039. But strong support should be seen there to bring rebound. On the upside, break of 1.1380 will suggest that the correction has completed, and bring retest of 1.1572.

    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 1.0808) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Mar 2.10% 2.40% 2.70%
    23:30 JPY Household Spending Y/Y Mar 2.10% 0.20% -0.50%
    03:00 CNY Trade Balance (USD) Apr 96.2B 94.3B 102.6B
    05:00 JPY Leading Economic Index Mar P 107.7 107.4 107.9
    12:30 CAD Net Change in Employment Apr 4.1K -32.6K
    12:30 CAD Unemployment Rate Apr 6.80% 6.70%

     



    Source link

  • Yen Slides as BoJ Slashes Growth Outlook; Investor Resilience Faces ISM Test

    Yen Slides as BoJ Slashes Growth Outlook; Investor Resilience Faces ISM Test


    Yen weakened broadly today following the BoJ’s decision to leave interest rates unchanged, while significantly downgrading its growth projections for the current fiscal year. Inflation outlook was also softened, with risks of undershooting the 2% target increased, albeit slightly.

    This backdrop suggests that while BoJ remains on a slow tightening path, policymakers may take a more cautious approach in the near term. The prospect of a rate hike in June now appears less likely unless global trade negotiations between the US and its partners make meaningful progress.

    Elsewhere, Wall Street showed surprising resilience overnight. After initially tumbling on the back of an unexpected Q1 contraction in US GDP, DOW and S&P 500 managed to close in positive territory, while NASDAQ was little changed. Fed rate expectations were also little changed, with markets still pricing in a 97% chance of a hold in May and a 66% chance of a rate cut in June.

    Investor sentiment, while shaken, has not broken—at least not yet. Attention now shifts to the upcoming ISM manufacturing survey today and tomorrow’s US non-farm payroll report.

    In the currency markets, Yen is the day’s weakest performer so far, weighed down by BoJ’s dovish lean. Sterling and Euro are also under pressure. On the other side, Kiwi leads gains, followed by Loonie and Aussie. Dollar and Swiss Franc are trading in the middle.

    Technically, EUR/USD’s correction from 1.1572 short term top is resuming through 1.1306 support. Deeper fall is now in favor to 100% projection of 1.1572 to 1.1306 from 1.1424 at 1.1158. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to complete the pullback.

    In Asia, at the time of writing, Nikkei is up 0.93%. Japan 10-year JGB yield is down -0.038 at 1.277. Hong Kong, China and Singapore are on holiday. Overnight, DOW rose 0.35%. S&P 500 rose 0.15%. NASDAQ fell -0.09%. 10-year yield rose 0.004 to 4.177.

    Looking ahead, Swiss retail sales and UK PMI maufacturing final will be released in European sesison. Later in the day, US will publish ISM manufacturing and jobless claims.

    BoJ holds rates, slashes growth outlook on trade headwinds

    BoJ kept its benchmark interest rate unchanged at 0.50% today, by unanimous vote, in line with expectations. However, it struck a cautious tone on the economic outlook by sharply cutting its growth forecasts.

    The central bank now projects Japan’s real GDP to grow just 0.5% in fiscal 2025, down from the 1.1% forecast in January, and 0.7% in fiscal 2026 (downgraded from 1.0%). Growth is expected to recover to 1.0% in fiscal 2027, assuming stabilization in global conditions.

    In its statement, BoJ acknowledged that “Japan’s economic growth is likely to moderate” as global trade and policy uncertainty weigh on external demand and corporate profitability. Still, the bank expects activity to reaccelerate once overseas economies resume “a moderate growth path.”

    On inflation, BoJ maintained that price pressures are broadly on course toward the 2% target, but revised its CPI core forecast down from 2.4% to 2.2% for fiscal 2025, and from 2.0% to 1.7% for fiscal 2026.

    BoJ raised its projection for the core-core CPI from 2.1% to 2.3% for fiscal 2025, reflecting persistent domestic inflation pressures. However, this is followed by a downgrade from 2.1% to 1.8% in 2026 before stabilizing at 2.0% in 2027.

    Japan’s PMI manufacturing finalized at 48.7, slump persists amid trade uncertainty

    Japan’s manufacturing sector remained in contractionary territory in April, with the final PMI reading at 48.7, up slightly from March’s 48.4. While the deterioration in business conditions marked the tenth consecutive month of decline, it remained modest.

    However, underlying components revealed more concerning trends, with sharper drops in new orders and exports, highlighting persistent demand-side weakness.

    According to S&P Global, firms responded by scaling back purchasing and adjusting inventories, while overall sentiment worsened.

    Business confidence around future output fell to its lowest since mid-2020, as companies expressed caution amid ongoing global trade tensions and muted demand. Without a significant turnaround in both domestic and external demand, “firms are likely to struggle to see a recovery in conditions”.

    BoC minutes: Dual uncertainties cloud policy path

    BoC’s summary of deliberations from its April meeting revealed a divided Governing Council, as members weighed the case for another rate cut against the need for more clarity.

    While some policymakers pushed for an immediate cut, citing a weakening domestic economy and subdued near-term inflation, others argued in favor of holding steady at 2.75% to better assess the evolving trade environment, especially with US tariffs in flux.

    All members acknowledged the unusually high level of uncertainty. They agreed to be “less forward-looking than usual,” signaling a preference for data-dependence over proactive policy signaling.

    The Council framed the current risks in two layers: the unpredictable path of U.S. trade policy, and the unknown economic impact of tariffs—including potential fiscal responses to soften the blow.

    With no clear resolution on either front, the BoC leaned toward caution, holding policy steady at 2.75% while signaling a readiness to adjust as needed.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 142.42; (P) 142.81; (R1) 143.45; More…

    USD/JPY’s rebound from 139.87 short term bottom resumed by breaking through 144.02 today. Intraday bias is back on the upside for 100% projection of 139.87 to 144.02 from 141.96 at 146.11. But still, near term outlook will stay bearish as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds. On the downside, firm break of 141.96 will argue that the rebound has completed as a corrective move. Retest of 139.87 should then be seen next in this case.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    JPY BoJ Interest Rate Decision 0.50% 0.50%
    00:30 JPY Manufacturing PMI Apr F 48.7 48.5 48.5
    01:30 AUD Import Price Index Q/Q Q1 3.30% 0.30% 0.20%
    01:30 AUD Trade Balance (AUD) Mar 6.90B 3.10B 2.97B 2.85B
    05:00 JPY Consumer Confidence Index Apr 31.2 34 34.1
    06:30 CHF Real Retail Sales Y/Y Mar 1.90% 1.60%
    08:30 GBP M4 Money Supply M/M Mar 0.20% 0.20%
    08:30 GBP Mortgage Approvals Mar 65K 65K
    08:30 GBP Manufacturing PMI Apr F 44 44
    11:30 USD Challenger Job Cuts Y/Y Apr 204.80%
    12:30 USD Initial Jobless Claims (Apr 25) 221K 222K
    13:30 CAD Manufacturing PMI Apr 46.3
    13:45 USD Manufacturing PMI Apr F 50.7 50.7
    14:00 USD ISM Manufacturing PMI Apr 47.9 49
    14:00 USD ISM Manufacturing Prices Paid Apr 70.2 69.4
    14:00 USD ISM Manufacturing Employment Apr 44.7
    14:00 USD Construction Spending M/M Mar 0.30% 0.70%
    14:30 USD Natural Gas Storage 111B 88B

     



    Source link

  • Strong China Data Fails to Buoy Risk Sentiment; BoC Stuck Between Cutting and Holding

    Strong China Data Fails to Buoy Risk Sentiment; BoC Stuck Between Cutting and Holding


    Risk sentiment turned a bit subdued in Asia today. Markets are broadly soft, continuing to digest the sharp tariff-driven selloff seen earlier this month. Even China’s stronger-than-expected Q1 data, including a 5.4% GDP growth print and robust industrial and retail figures, failed to provide much lift. Market participants appear skeptical, viewing the numbers as a front-loading of activity ahead of the full brunt of US and China tariffs , which are already reaching decoupling levels. The real test for China’s resilience will come in the months ahead as trade disruptions deepen.

    In the currency markets, Dollar is broadly weaker once again, giving back recent recovery as sentiment fluctuates. Aussie and Loonie are also underperforming. On the other hand, Swiss Franc has returned to the top of the board, followed by Euro and Yen, as investors rotate back into safer havens. Sterling and Kiwi are holding steady in the middle.

    BoC rate decision later today is a major focal point, and markets are evenly split on the outcome. Yesterday’s softer-than-expected inflation data reinforced the view that February’s CPI spike was likely transitory, giving BoC room to cut rates from 2.75% to 2.50%. With US tariffs weighing on global demand and sentiment, a preemptive move to cushion the Canadian economy would be defensible.

    However, some argue BoC may prefer to hold for now, especially to assess the medium-term inflationary effects of tariffs. While headline CPI is easing, trade-related supply disruptions and currency depreciation could generate renewed price pressures in the months ahead. Balancing these competing risks will be no easy task, and with the policy rate already cut sharply from its 5.00% peak, the central bank has room to wait for greater clarity.

    Gold, meanwhile, continues to benefit from the uncertain backdrop, with prices pushing to new all-time highs. Technically, D MACD suggests that the up trend is still in upside acceleration phase. Near term outlook will stay bullish as long as 3167.60 resistance turned support holds. The question is whether overbought condition would cap upside at 161.8% projection of 2293.45 to 2789.92 from 2584.24 at 3387.52. Or Gold would just shoot through the roof.

    In Asia, at the time of writing, Nikkei is down -1.36%. Hong Kong HSI is down -2.46%. China Shanghai SSE is down -0.63%. Singapore Strait Times is up 0.15%. Japan 10-year JGB yield is down -0.052 at 1.323. Overnight, DOW fell -0.38%. S&P 500 fell -0.17%. NASDAQ fell -0.05%. 10-year yield fell -0.041 to 4.323.

    BoJ’s Ueda: US tariffs nearing bad scenario, policy response may be needed

    BoJ Governor Kazuo Ueda warned that US President Donald Trump’s escalating tariff policies have “moved closer towards the bad scenario” anticipated by the central bank.

    “We will scrutinise without pre-conception the extent to which US tariffs could hurt the economy,” he said in an interview with Sankei newspaper.

    “A policy response may become necessary. We will make an appropriate decision in accordance with changes in developments,” he added.

    Nevertheless, Ueda reiterated that BoJ will continue to raise interest rates “at an appropriate pace” as long as economic and price conditions align with its projections.

    On inflation, Ueda said domestic food price pressures are expected to ease. He sees real wages turning positive and continuing to rise into the second half of the year, supporting consumption and price stability.

    Still, he warned of dual risks: persistent inflation driven by global supply shocks, or a consumption drag caused by the rising cost of living.

    Australia Westpac leading index falls as tariff shock starting to weigh

    Australia’s Westpac Leading Index slipped from 0.9% to 0.6% in March. Westpac noted that the index has only just begun to reflect the escalating disruptions caused by US President Donald Trump’s reciprocal tariff announcement on April 2.

    While the immediate impact on Australia is seen as limited and manageable for now, “some further softening in the growth pulse looks likely in the months ahead”.

    Westpac has revised down its growth forecast for Australia in 2025 to 1.9% from 2.2%, citing the accumulating downside risks.

    Looking ahead to RBA’s May 19–20 meeting, Westpac expects the deteriorating global backdrop and clearer signs of inflation cooling will prompt a 25bps rate cut.

    Moreover, the tone of the meeting is likely to pivot more decisively “away from lingering questions about inflation to downside risks to growth.” Such a shift would lay the groundwork for additional policy easing in the second half of the year.

    China Q1 GDP tops forecasts with 5.4% growth

    China’s economy started the year on a stronger footing, with GDP expanding by 5.4% yoy in Q1, surpassing market expectations of 5.1%. On a quarterly basis, growth slowed to 1.2% from 1.6% in Q4.

    March’s activity indicators were broadly upbeat. Industrial production surged by 7.7% yoy, well above the 5.6% yoy forecast. Retail sales climbed 5.9%, also ahead of expectations of 5.1% yoy.

    Fixed asset investment increased 4.2% year-to-date, modestly exceeding projections. However, persistent weakness in the property sector continues to weigh on the recovery narrative. Property investment fell -9.9% in Q1, slightly worse than the -9.8% decline recorded over the first two months of the year. Private sector investment—a key gauge of business confidence—rose only 0.4%.

    Looking ahead

    UK CPI and Eurozone CPI final are the main features in European session. Later in the day, US will release retail sales, industrial production and NAHB housing index. BoC rate deision will also be a major focus.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3882; (P) 1.3930; (R1) 1.4010; More…

    Intraday bias in USD/CAD remains neutral and more consolidations could be seen above 1.3827. While stronger recovery cannot be ruled out, outlook will stay bearish as long as 1.4150 support turned resistance holds. On the downside, break of 1.3827 will resume the fall from 1.4791 to 100% projection of 1.4791 to 1.4150 from 1.4414 at 1.3773.

    In the bigger picture, the break of 1.3976 resistance turned support (2022 high) and 55 W EMA (now at 1.3983) indicates that a medium term top is already in place at 1.4791. Fall from there would either be a correction to rise from 1.2005, or trend reversal. In either case, firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Machinery Orders M/M Feb 4.30% 1.10% -3.50%
    01:00 AUD Westpac Leading Index M/M Mar -0.10% 0.06%
    02:00 CNY GDP Y/Y Q1 5.40% 5.10% 5.40%
    02:00 CNY Industrial Production Y/Y Mar 7.70% 5.60% 5.90%
    02:00 CNY Retail Sales Y/Y Mar 5.90% 4.10% 4.00%
    02:00 CNY Fixed Asset Investment YTD Y/Y Mar 4.20% 4.10% 4.10%
    06:00 GBP CPI M/M Mar 0.40% 0.40%
    06:00 GBP CPI Y/Y Mar 2.70% 2.80%
    06:00 GBP Core CPI Y/Y Mar 3.40% 3.50%
    06:00 GBP RPI M/M Mar 0.40% 0.60%
    06:00 GBP RPI Y/Y Mar 3.20% 3.40%
    08:00 EUR Eurozone Current Account (EUR) Feb 37.3B 35.4B
    09:00 EUR Eurozone CPI Y/Y Mar F 2.20% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y Mar F 2.40% 2.40%
    12:30 USD Retail Sales M/M Mar 1.30% 0.20%
    12:30 USD Retail Sales ex Autos M/M Mar 0.40% 0.30%
    13:15 USD Industrial Production M/M Mar -0.30% 0.70%
    13:15 USD Capacity Utilization Mar 77.90% 78.20%
    13:45 CAD BoC Interest Rate Decision 2.75% 2.75%
    14:30 USD Crude Oil Inventories 0.4M 2.6M

     



    Source link

  • Canadian Dollar struggles near 1.40 amid soft inflation and trade uncertainty

    Canadian Dollar struggles near 1.40 amid soft inflation and trade uncertainty


    • USD/CAD trades near the 1.4000 area after bouncing from mid-1.38s earlier this week.
    • Softer Canadian inflation and Powell’s tariff warnings pressure the Canadian Dollar outlook.
    • Key resistance stands at 1.4060; technical backdrop skews bearish despite recent rebound.

    USD/CAD hovered near the 1.4000 zone on Tuesday, consolidating after recovering from earlier lows around the 1.3850 region. The Canadian Dollar failed to gain traction despite a cooler-than-expected inflation report for March, while traders brace for the Bank of Canada’s policy decision. Meanwhile, the US Dollar attempted a mild rebound after days of losses tied to ongoing trade tensions with China.

    Canada’s inflation rate slowed to 2.3% annually in March, below expectations and down from 2.6% previously. Month-over-month, CPI rose just 0.3%, missing the 0.7% forecast. The data has slightly softened market expectations that the BoC will hold rates steady at 2.75% in its first policy meeting since June. Markets will closely watch Governor Macklem’s tone, especially as uncertainty rises over how Trump’s aggressive tariff policy may ripple into Canada’s economic outlook.

    On the US side, the Greenback faces persistent pressure from global investors as Trump’s tariff escalation continues to undermine confidence. According to Commerzbank analysts, the complexity and unpredictability of current US trade policy are raising inflation risks while damaging trust among global trading partners. Fed Chair Powell echoed these concerns, warning that the inflationary effects of tariffs could be stronger and more prolonged than initially expected. He added that it’s too early to determine the right path for interest rates and that the Fed is in no rush to act.

    Technically, USD/CAD shows bearish signals overall, even with a modest gain on the day. The pair trades near the top of its daily range between 1.3850 and 1.3980. The Relative Strength Index sits near 37 in neutral territory, while the MACD prints a sell signal. Despite some mixed signals from momentum indicators, moving averages reinforce the downside outlook: the 20-, 100-, and 200-day SMAs, along with the 10-day EMA, all suggest further weakness ahead. Support rests at 1.3827, while resistance levels are located at 1.4002, 1.4060, and 1.4063.

    USD/CAD technical analysis



    Source link

  • Euro Softens on ZEW Shock, Loonie Dips on CPI, Kiwi Leads

    Euro Softens on ZEW Shock, Loonie Dips on CPI, Kiwi Leads


    Euro is trading on the softer side in relatively quiet markets today, weighed down by a fresh round of weak economic data. The sharp plunge in German and Eurozone ZEW economic sentiment, triggered largely by mounting uncertainty over US trade policy, has deepened concerns about the region’s growth outlook. Adding to the dovish tone, ECB’s latest bank lending survey revealed that credit standards tightened and corporate loan demand weakened further in Q1, even before the tariff-driven turmoil of early April. Together, these developments strengthen the case for another ECB rate cut when the Governing Council meets this Thursday.

    Canadian Dollar is also under some pressure following the latest CPI data, which showed headline inflation slowing more than expected. Core measures, including trimmed and common CPI, also came in softer than forecast. The figures mark a welcome reversal from February’s surprise inflation spike and give BoC added flexibility to stay on hold at its policy meeting tomorrow. However, having already lowered rates from a peak of 5.00% to the current 2.75%, BoC may opt to preserve remaining policy ammunition while assessing the broader impact of US tariffs.

    Overall in the currency markets, the New Zealand and Australian Dollars are leading gains for today, buoyed by stabilization in risk sentiment. Sterling is also firmer, as mixed UK labour market data is unlikely to derail BoE’s slow and steady approach to policy normalization. On the weaker end, the Swiss Franc is underperforming the most, followed by Loonie and Euro. Dollar and Yen are trading closer to the middle of the pack.

    Technically, NZD/USD’s strong break of 0.5852 resistance this week firstly confirms short term bottoming at 0.5484. More importantly, the break of 55 W EMA also suggests that a medium term bottom was formed, just ahead of 0.5467 key support (2020 low). Rise from 0.5484 could now be heading back to 38.2% retracement of 0.7463 to 0.5484 at 0.6240, even as a corrective bounce.

    In Europe, at the time of writing, FTSE is up 0.88%. DAX is up 0.98%. CAC is up 0.23%. UK 10-year yield is down -0.004 at 4.662. Germany 10-year yield is up 0.037 at 2.548. Earlier in Asia, Nikkei rose 0.84%. Hong Kong HSI rose 0.23%. China Shanghai SSE rose 0.15%. Singapore Strait Times rose 2.14%. Japan 10-year JGB yield rose 0.035 to 1.376.

    Canada’s CPI slows to 2.6%, CPI common down to 2.3%

    Canada’s headline inflation cooled more than expected in March, with the annual CPI rate easing to 2.3% yoy from 2.6% yoy, below consensus forecasts for no change. The deceleration was largely driven by falling prices in travel-related services and gasoline. On a monthly basis, CPI rose 0.3% mom, undershooting expectations of a 0.7% mom increase.

    Core inflation metrics also pointed to moderation. CPI median held steady at 2.9% yoy, in line with expectations. But the trimmed mean slipped to 2.8% yoy from 2.9% yoy, and the common core fell to 2.3% yoy from 2.5% yoy, both coming in below forecast.

    German ZEW collapses to -14 as trade uncertainty rattles outlook

    Investor confidence in Germany took a sharp turn for the worse in April, with ZEW Economic Sentiment Index plummeting from 51.6 to -14, its steepest decline since the onset of the Russia-Ukraine war in 2022.

    The drop came in well below expectations of 10.6 and reflects mounting concerns over US trade policy, which ZEW President Achim Wambach described as marked by “erratic changes.” The Current Situation Index, however, showed a modest improvement, rising from -87.6 to -81.2, slightly better than forecast.

    Eurozone also saw a significant deterioration in investor sentiment, with ZEW expectations gauge falling from 19.8 to -18.5, missing the anticipated 14.2 reading. Current Situation Index dropped by -5.7 points to -50.9.

    According to ZEW, sectors most vulnerable to trade disruptions—such as autos, chemicals, and engineering—are now under renewed pressure, despite recent signs of stabilization. The growing unpredictability in global trade dynamics is weighing heavily on future expectations, dampening optimism across the bloc.

    Despite the worsening sentiment, financial market participants do not foresee a renewed surge in inflation. This perception, ZEW notes, gives ECB some room to continue its easing cycle in an effort to support growth.

    Eurozone industrial output surges in 1.1% mom in Feb, driven by consumer and capital goods

    Eurozone industrial production posted a stronger-than-expected gain of 1.1% mom in February, well above the 0.1% mom forecast. The increase was largely driven by a 2.8% jump in non-durable consumer goods and a solid 0.8% rise in capital goods output. Intermediate goods also rose modestly by 0.3%, while energy production and durable consumer goods declined by -0.2% -and 0.3%, respectively.

    Across the broader EU, industrial production rose 1.0% on the month, with Ireland (+10.8%), Belgium (+7.4%), and Luxembourg (+6.3%) leading the gains. Meanwhile, Croatia (-3.9%), Greece (-3.6%), and Romania (-2.1%) recorded the steepest declines.

    UK payolled employment falls -78k, wage growth slows

    UK payrolled employment falling -by 78k in March, down 0.3% mom. Median monthly pay growth also moderated to 4.8% yoy from 5.5% yoy, pointing to easing wage pressures. Meanwhile, claimant count rose by 18.7k, less than the expected 30.3k increase.

    In the three months to February, unemployment rate held steady at 4.4%, in line with expectations. Wage growth came in slightly below forecasts across the board. Average earnings including bonuses rising 5.6% yoy (unchanged from the previous month) and those excluding bonuses up 5.9%, a touch softer than the anticipated 6.0% yoy.

    RBA Minutes: Next rate move not predetermined, China’s tariff response a key variable

    The minutes from RBA’s March 31–April 1 meeting revealed emphasized that it was “not yet possible to determine the timing of the next move in interest rates.” The Board emphasized the importance that the “next decision was not predetermined”.

    Members agreed that the May meeting would offer a more “opportune time” for reassessment, as it would coincide with updated data on inflation, wages, employment, and global tariff developments, as well as a revised set of economic forecasts.

    RBA highlighted that the economic outlook could be significantly shaped by how Chinese authorities respond to global tariff developments. Meanwhile, RBA acknowledged that risks to the outlook exist on both sides.

    On one hand, global trade uncertainties and softening demand may pose disinflationary pressures, while on the other, risks such as supply chain disruptions and currency depreciation could fuel inflation.

    RBA opted to keep the cash rate unchanged at 4.10% at the meeting.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1289; (P) 1.1357; (R1) 1.1418; More…

    EUR/USD dips mildly today as consolidation continues below 1.1472. Deeper pull back might be seen but downside should be contained by 1.1145 resistance turned support to bring another rally. On the upside, break of 1.1472 will target 161.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1694.

    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 1.0745) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD RBA Meeting Minutes
    06:00 GBP Claimant Count Change Mar 18.7K 30.3K 44.2K 16.5K
    06:00 GBP ILO Unemployment Rate (3M) Feb 4.40% 4.40% 4.40%
    06:00 GBP Average Earnings Including Bonus 3M/Y Feb 5.60% 5.70% 5.80% 5.60%
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Feb 5.90% 6.00% 5.90% 5.80%
    09:00 EUR Germany ZEW Economic Sentiment Apr -14 10.6 51.6
    09:00 EUR Germany ZEW Current Situation Apr -81.2 -86 -87.6
    09:00 EUR Eurozone ZEW Economic Sentiment Apr -18.5 14.2 39.8
    09:00 EUR Eurozone Industrial Production M/M Feb 1.10% 0.10% 0.80%
    12:15 CAD Housing Starts Y/Y Mar 214K 238K 229K 221K
    12:30 CAD Manufacturing Sales M/M Feb 0.20% -0.20% 1.70% 1.60%
    12:30 CAD CPI M/M Mar 0.30% 0.70% 1.10%
    12:30 CAD CPI Y/Y Mar 2.30% 2.60% 2.60%
    12:30 CAD CPI Median Y/Y Mar 2.90% 2.90% 2.90%
    12:30 CAD CPI Trimmed Y/Y Mar 2.80% 2.90% 2.90%
    12:30 CAD CPI Common Y/Y Mar 2.30% 2.40% 2.50%
    12:30 USD Empire State Manufacturing Index Apr -8.1 -14.8 -20
    12:30 USD Import Price Index M/M Mar -0.10% 0.10% 0.40% 0.20%

     



    Source link

  • Markets Catch Breath After Tariff Chaos; Focus Turns to BoC, ECB and Economic Data

    Markets Catch Breath After Tariff Chaos; Focus Turns to BoC, ECB and Economic Data


    Financial markets opened the week on a relatively steady footing in Asia, offering investors a brief respite after last week’s extreme volatility driven by US tariff chaos. Major stock indexes are trading higher, though gains appear more a product of technical consolidation than renewed optimism.

    In currency markets, most major pairs and crosses are contained within Friday’s range. The exception is some Kiwi pairs, which have moved with a bit more momentum. For now, it appears that volatility has pulled back from the extremes seen over the past two weeks, giving investors a brief window of breathing space.

    Nevertheless, confusion around U.S. tariff policy continues to muddy the waters. Reports emerged over the weekend that key Chinese exports such as smartphones and computers would not be subject to the full 145% tariff hike. Instead, they would face a 20% rate. However, U.S. President Donald Trump quickly reignited uncertainty by stating he would announce a separate tariff on semiconductors next week, alongside a new national security probe targeting the chip sector. This piecemeal, ad hoc rollout is making it difficult for markets to price in risk or clarity.

    On the diplomatic front, Chinese President Xi Jinping’s visit to Vietnam signals a strategic push to shore up regional supply chains as China faces growing trade isolation from the US. Xi’s trip, which also includes stops in Cambodia and Malaysia, highlights Beijing’s urgency in hedging against further decoupling with the US. Meanwhile, Vietnam is caught in the middle — a beneficiary of supply chain shifts, but also under scrutiny from Washington, facing a potential 46% US tariff if it fails to enforce tighter rules of origin.

    Looking ahead, the spotlight will shift BoC and ECB rate decisions, both facing the delicate balancing act of responding to weakening growth and potential inflationary shocks from tariffs. Meanwhile, a heavy slate of data—including US retail sales, Germany’s ZEW survey, UK employment and CPI, New Zealand’s inflation report, and China’s Q1 GDP—will provide further clues on the economic fallout of the trade conflict.

    Technically, EUR/CAD’s late break of 1.5856 resistance last week indicates medium term up trend resumption. Near term outlook will now stay bullish as long as 1.5402 support holds. Next target is 61.8% projection of 1.4740 to 1.5856 from 1.5402 at 1.6092. That would be close to 1.6151 key long term resistance (2018 high).

    In Asia, at the time of writing, Nikkei is up 1.91%. Hong Kong HSI is up 2.43%. China Shanghai SSE is up 0.70%. Singapore Strait Times is up 1.54%. Japan 10-year JGB yield is down -0.012 at 1.334.

    BoJ’s Ueda: US tariffs add downside risks to Japan through various channels

    BoJ Governor Kazuo Ueda warned today that the recently imposed U.S. tariffs are likely to exert “downward pressure” on both the global and Japanese economies through “various channels.”

    While he did not specify the transmission mechanisms, the remarks reflect growing concerns that escalating trade tensions could weigh on exports, dampen corporate sentiment, disrupt supply chains, as well as trigger volatility in the financial markets including currencies.

    Ueda reiterated BoJ’s commitment to achieving its 2% inflation target sustainably, noting that monetary policy would be guided appropriately based on evolving economic, price, and financial developments. He emphasized that the central bank will maintain a data-dependent approach and continue to scrutinize conditions “without any pre-conception”.

    NZ BNZ services rises to 49.1, subdued despite hints of stabilization

    New Zealand’s services sector remained in contraction in March, with the BusinessNZ Performance of Services Index inching up slightly to 49.1 from 49.0. This marks another month below the long-run average of 53.0 highlighting the ongoing weakness.

    While the headline improvement was minimal, underlying components showed a mixed picture—activity/sales dropped from 49.1 to 47.4. But new orders/business climbed from 49.5 to 50.8, the highest since February 2024, suggesting some pickup in future demand. Employment rose from 49.1 to 50.2, ending a 15-month streak of contraction, and offering early signs that firms may be regaining confidence in hiring.

    The share of negative comments from survey participants fell slightly to 56.7%, with ongoing concerns about high interest rates, inflation, weak consumer sentiment, and broader economic uncertainty. Businesses also cited external pressures such as global tariffs and rising input costs.

    China’s export surge 12.4% yoy in Mar, imports down -4.3% yoy

    China’s exports jumped an impressive 12.4% yoy to USD 313.9B in March, significantly beating expectations of 4.4% yoy and marking a sharp acceleration from the 2.3% yoy growth recorded in January-February.

    Particularly notable was the 9.18% yoy rise in shipments to the US, likely due to front-loading ahead of tariff tensions. Exports to ASEAN also strengthened with 11.6% yoy growth , with double-digit growth to major partners like Thailand (27.8% yoy) and Vietnam (18.9% yoy).

    However, Vietnam, a key intermediary in China’s export supply chain, is now under pressure to tighten controls on the origin of goods and materials. According to a ministry document, authorities in Hanoi are urging companies to clamp down on origin fraud to avoid punitive US tariffs, highlighting growing scrutiny on Chinese goods routed through third countries.

    Meanwhile, the strength in exports contrasted with a -4.3% yoy decline in imports, resulting in a larger-than-expected trade surplus of USD 102.6B.

    Fed’s Kashkari: Markets searching for “new normal” amid trade policy uncertainty

    Minneapolis Fed President Neel Kashkari acknowledged over the weekend that global investors are grappling with deep uncertainty surrounding the direction of US trade and fiscal policy. Speaking on CBS’s Face the Nation, Kashkari said the bond market’s recent volatility reflects an effort to “determine what is the new normal in America,” particularly regarding long-term Treasury yields.

    He emphasized that Fed has “zero ability” to influence that end point, which he said is shaped entirely by trade negotiations and fiscal decisions coming out of Washington.

    Kashkari underlined that tariffs are inherently inflationary, but the key question is whether their effect on prices will be temporary or more sustained. “Tariffs push up prices and push down economic activity,” he noted, describing it as a difficult scenario in which Fed’s tools are limited. The central bank’s role, he added, is “to make sure that it’s only a one time adjustment in prices and nothing longer term than that.”

    He also made clear that monetary policy alone cannot undo the economic drag from a trade war. As the market digests new rounds of tariffs, retaliation, and policy reversals, Kashkari said, “we’re going to have to watch and see.”

    “We can just keep inflation from getting out of hand,” he added.

    Tariff Shockwaves Test BoC and ECB Resolve

    Markets head into the holiday-shortened week with anticipation as a string of key central bank decisions including BoC and ECB, as well as critical economic data are featured.

    BoC meeting is shaping up to be one of the most uncertain in the past two years. Markets are split, with investors pricing in roughly a 60% chance that BoC will pause its easing cycle this week. After cutting rates again in March, the central bank emphasized that it would “proceed carefully with any further changes” due the growing complexity in the economic outlook.

    The key dilemma for BoC is whether they prioritize tackling inflation risks from tariff pass-through or opt for a preemptive cut to support growth. If the BoC tilts toward the latter, it could deliver a pre-emptive 25 bps rate cut to continue its path toward a less restrictive 2.50% rate.

    The decisive factor could be the March CPI data, released a day ahead of the policy announcement. If the report confirms that February’s surprise spike in both headline and core inflation was indeed transitory, BoC would have sufficient cover to proceed with another rate cut. Otherwise, a hold is the more cautious move.

    ECB is also in the spotlight. According to a Reuters poll, 61 of 71 economists expect a 25bps cut to the deposit rate, bringing it down to 2.25%. A further cut to 2.00% is widely anticipated for June. While ECB policymakers have largely avoided clear forward guidance amid the rapidly shifting trade environment, the general tone suggests a growing focus on downside risks to growth rather than inflation persistence.

    In Australia, minutes of RBA’s April meeting are expected to reiterate the central bank’s cautious tone and reluctance to commit to further easing just yet. However, labor market data later in the week could test RBA’s resolve. A weaker-than-expected jobs report would likely increase market bets that RBA will restart rate cuts in May. Ultimately though, Q1 CPI data due on April 30 remains the definitive piece of the policy puzzle.

    On the data front, U.S. retail sales will be a critical gauge of how much the tariff-induced uncertainty has dampened actual household spending. Meanwhile, Germany’s ZEW economic sentiment index should offer a timely look at how sharply European business confidence has been hit by the escalating trade war. Other key releases include UK employment figures and CPI data, New Zealand’s CPI, and China’s Q1 GDP.

    Here are some highlights for the week:

    • Monday: New Zealand BNZ services; China trade balance; Swiss PPI; Canada wholesale sales.
    • Tuesday: RBA minutes; UK employment; German ZEW economic sentiment; Eurozone industrial production; Canada CPI, manufacturing sales; US Empire state manufacturing, import prices.
    • Wednesday: Japan machine orders; China GDP, industrial production, retail sales, fixed asset investment; UK CPI; Eurozone CPI final; US retail sales, industrial production, NAHB housing index; BoC rate decision.
    • Thursday: New Zealand CPI; Australia employment; Japan trade balance; Swiss France balance; ECB rate decision; US jobless claims, Philly Fed survey, building permits and housing starts.
    • Friday: Japan CPI.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 142.16; (P) 143.44; (R1) 144.81; More…

    Intraday bias in USD/JPY remains on the downside for the moment. Current fall from 158.86 is in progress to 139.57 support. On the upside, above 144.18 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 151.20 resistance holds, in case of recovery.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PSI Mar 49.1 49.1 49
    03:00 CNY Trade Balance (USD) Mar 102.6B 74.3B 170.5B
    04:30 JPY Industrial Production M/M Feb F 2.30% 2.50% 2.50%
    06:30 CHF Producer and Import Prices M/M Mar 0.20% 0.30%
    06:30 CHF Producer and Import Prices Y/Y Mar -0.10%
    12:30 CAD Wholesale Sales M/M Feb 0.40% 1.20%

     



    Source link

  • CAD holds range but USD undertone is softening – Scotiabank

    CAD holds range but USD undertone is softening – Scotiabank


    There was a little confusion around the temporary roll-back of US tariffs yesterday. Canada was not included in the round of reciprocal tariffs announced on Liberation Day but Treasury Secretary Scott Bessent said the 10% baseline tariff applied to both Canada and Mexico, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

    CAD gains modestly on the day

    “It turns out that was incorrect, a reflection of how confused policymaking is right now. Other tariffs, of course, remain in place. The CAD has weathered all the recent uncertainty relatively well, despite headwinds from higher market volatility and weaker commodities. Narrowed spreads are providing some support for the CAD and helping nudge our fair value estimate a little lower.”

    “Spot is trading below today’s updated estimated equilibrium though (1.4128) and the USD’s undervaluation may firm up support for USDCAD in the 1.40/1.41 range. The USD is heading for a fourth weekly loss versus the CAD and a weekly close under 1.4107 (50% retracement of the Sep/Feb USD rally) would suggest more downside pressure building on spot.”

    “As it is, there is a clearer strengthening of USD-bearish trend momentum on the intraday and daily charts which suggests the USD is at risk of retesting last week’s low at 1.4025/30 and making a run at 1.3945 (61.8% retracement support). Note the 200-day MA sits at 1.4005.”



    Source link

  • Auto Tariff Hits Wall Street, But Currencies Shrug Off the Drip Feed

    Auto Tariff Hits Wall Street, But Currencies Shrug Off the Drip Feed


    The steady drip of tariff news from US President Donald Trump continued overnight, pushing US equities lower and weighing on risk sentiment globally. The tech-heavy NASDAQ led the decline with a drop of over 2%, while broader US indexes also closed in the red. In Asia, Japan’s Nikkei and South Korea’s Kospi followed with notable declines—particularly in auto stocks—while other regional bourses stayed relatively steady, suggesting selective impact.

    Despite the equity selloff, currency markets have shown muted reactions so far. Major FX pairs and crosses are treading water, largely trapped within yesterday’s ranges. This suggests that while traders are alert to the evolving trade policy, many are experiencing tariff fatigue and are reluctant to reposition aggressively before next week’s pivotal developments.

    The latest tariff news centers around a 25% duty on imported cars and light trucks “not made in the United States,” scheduled to take effect on April 3. However, the rollout comes with key exemptions. Automotive parts compliant with USMCA are spared, and all other auto parts imports are exempt until May 3 to allow time for administrative clarity. It’s a classic case of shock softened by implementation ambiguity.

    The centerpiece remains April 2, which Trump has dubbed “liberation day” and “the big one,” when reciprocal tariffs will be formally announced. However, in a shift of tone, Trump now says the measures will be “very lenient,” and “less than the tariff they’ve been charging (the US) for decades,” hinting at a softer-than-expected rollout. That may explain the relatively calm tone in FX markets despite the ongoing trade drama.

    In terms of currency performance this week, Canadian Dollar is leading the charge along with commodity currencies. Aussie and Kiwi follow, while traditional safe havens like Yen and Dollar are under pressure. Euro joins them as one of the weakest, while Sterling and Swiss Franc are in the middle of the pack.

    Technically, the selloff in NASDAQ overnight is just continuation of the near-term consolidation pattern from the 17238.23 low. Another bounce toward 38.2% retracement of 2024.58 to 17238.23 at 18371.38 remains possible. But strong resistance at the 55 D EMA (now at 18688.06) should cap upside. The larger correction from the 20204.58 peak is still expected to resume eventually, with a break below 17238.23 at a later stage.

    In Asia, at the time of writing, Nikkei is down -0.97%. Hong Kong HSI is up 0.79%. China Shanghai SSE is up 0.23%. Singapore Strait Times is up 0.41%. Japan 10-year JGB yield is up 0.006 at 1.593, approaching 1.6% mark. Overnight, DOW fell -0.31%. S&P 500 fell -1.12%. NASDAQ fell -2.04%. 10-year yield rose 0.031 to 4.338.

    Fed’s Musalem: Persistent tariff inflation could delay cuts or force hikes

    St. Louis Fed President Alberto Musalem warned that while the initial effects of import tariffs may be short-lived, their broader inflationary impact could linger. He stressed concern that underlying inflation may be influenced more persistently than expected, and if so, Fed might have to consider a tighter policy stance.

    Although this isn’t his baseline scenario, Musalem emphasized that the Fed must remain vigilant to second-round effects from tariffs.

    He noted that if inflation stays above the 2% target and the economy remains strong, the current “modestly restrictive” monetary stance would need to be maintained longer.

    More significantly, “If the labor market remains resilient and the second-round effects from tariffs become evident, or if medium- to longer-term inflation expectations begin to increase actual inflation or its persistence, then modestly restrictive policy will be appropriate for longer or a more restrictive policy may need to be considered,” he said.

    BoC minutes: Rate cut driven by tariff threats, signals no guidance amid uncertainty

    BoC’s March 12 Summary of Deliberations revealed that the decision to cut the policy rate by 25 bps to 2.75% was driven primarily by “tariff threats and elevated uncertainty”.

    Governing Council members acknowledged that, under normal circumstances, holding the rate at 3% would have been appropriate. However, the impact of steel and aluminum tariffs, additional tariff threats, and the unpredictable stance of the US administration had begun to materially affect business and consumer decisions. This was “significantly weakening the near-term outlook”.

    Looking ahead, BoC emphasized the complexity of the situation and the fluid nature of trade tensions. “It would not be appropriate to provide guidance on the future path for the policy interest rate,” the minutes noted.

    Looking ahead

    Eurozone M3 money supply is the only feature in European session. Later in the day, US will release Q1 GDP final, goods trade balance, jobless claims and pending home sales.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0729; (P) 1.0767; (R1) 1.0789; More…

    Outlook in EUR/USD is unchanged that strong support is expected from 38.2% retracement of 1.0358 to 1.0953 at 1.0726 to completion the correction from 1.0953. On the upside, break of 1.0857 will bring retest of 1.0953 first. Firm break there will resume larger rise from 1.0176. However, sustained break of 1.0726 will bring deeper correction to 55 D EMA (now at 1.0630).

    In the bigger picture, prior strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    09:00 EUR Eurozone M3 Money Supply Y/Y Feb 3.80% 3.60%
    12:30 USD Initial Jobless Claims (Mar 21) 225K 223K
    12:30 USD GDP Annualized Q4 F 2.30% 2.30%
    12:30 USD GDP Price Index Q4 F 2.40% 2.40%
    12:30 USD Goods Trade Balance (USD) Feb P -134.6B -155.6B
    12:30 USD Wholesale Inventories Feb P 0.70% 0.80%
    14:00 USD Pending Home Sales M/M Feb 0.90% -4.60%
    14:30 USD Natural Gas Storage 37B 9B

     



    Source link

  • CAD holds range but USD undertone is softening – Scotiabank

    Slides for third straight trading day


    • USD/CAD falls further to near 1.4250 amid strength in the Canadian Dollar.
    • Investors doubt that the BoC will continue reducing interest rates after the release of the hot CPI report for February.
    • The risk sentiment remains cautious as US President Trump is expected to announce significant tariffs on April 2.

    The USD/CAD pair extends its downside move for the third day in a row on Wednesday and slides to near 1.4250. The Loonie pair weakens as the Canadian Dollar (CAD) traders higher against its peers, except antipodeans.

    Canadian Dollar PRICE Today

    The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the British Pound.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.03% 0.30% 0.15% -0.20% -0.39% -0.48% 0.10%
    EUR 0.03%   0.33% 0.15% -0.17% -0.35% -0.45% 0.12%
    GBP -0.30% -0.33%   -0.14% -0.49% -0.67% -0.78% -0.17%
    JPY -0.15% -0.15% 0.14%   -0.34% -0.55% -0.63% -0.04%
    CAD 0.20% 0.17% 0.49% 0.34%   -0.16% -0.28% 0.32%
    AUD 0.39% 0.35% 0.67% 0.55% 0.16%   -0.10% 0.50%
    NZD 0.48% 0.45% 0.78% 0.63% 0.28% 0.10%   0.59%
    CHF -0.10% -0.12% 0.17% 0.04% -0.32% -0.50% -0.59%  

    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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

    The CAD rises as investors hope that the Bank of Canada (BoC) could adopt a neutral monetary policy stance after remaining significantly dovish since June 2024. These expectations have stemmed from February’s Consumer Price Index (CPI) report, which showed that inflation accelerated at a faster-than-expected pace.

    However, the faith of the Loonie is tied to United States (US) President Donald Trump’s tariff agenda. Trump is poised to announce a slew of tariffs for his trading partners on April 2.

    Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, struggles to break above the immediate resistance of 104.50, which is the highest level in almost three weeks. Going forward, investors will focus on the US Personal Consumption Expenditure Price Index (PCE) data for February, which will be released on Friday. The inflation data will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

    USD/CAD holds above the 100-period Exponential Moving Average (EMA), which is around 1.4226, suggesting that the overall trend is bullish.

    The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating a sideways trend.

    Going forward, an upside move would emerge above the March 10 high of 1.4470, which will open the door toward the psychological resistance of 1.4500 and the January 30 high of 1.4595.

    On the contrary, a breakdown below the February 14 low of 1.4151 by the pair would expose it to the December 9 low of 1.4094, followed by the December 6 low of 1.4020.

    USD/CAD daily chart

    Canadian Dollar FAQs

    The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

    The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     



    Source link

  • Loonie Softens on Retail Sales Miss, But BoC Inflation Focus Limits Losses

    Loonie Softens on Retail Sales Miss, But BoC Inflation Focus Limits Losses


    Canadian Dollar weakened modestly in early US session following disappointing retail sales data. January’s figures showed a larger-than-contraction, and more importantly, an advance estimate points to another drop in February. This suggests consumer spending might be in a weakening trend, raising fresh concerns about Canada’s economic momentum heading into Q2.

    However, the selloff in the Loonie has been relatively limited so far. BoC Governor Tiff Macklem’s comments from Thursday may have offered some cushion. Macklem warned against allowing initial price spikes from tariffs to morph into broader inflationary pressures, highlighting the need for vigilance in monetary policy. This has fueled market speculation that BoC may pause its rate cutting cycle in April to better assess tariff impacts and inflation risks.

    Meanwhile, Euro is coming under some pressure along with Germany’s DAX index, despite a historic win for the country’s fiscal policy. Germany’s Bundesrat passed a major spending package aimed at reviving growth and bolstering defense. However, traders seem to be locking in profits after weeks of rallying on anticipation of this very outcome, suggesting the news may have been fully priced in.

    For the week so far, Swiss Franc is now the top performer, followed by Kiwi and then Loonie. Aussie lags at the bottom, trailed by Euro and Yen. Dollar and Pound are stuck in the middle of the pack.

    Canadian retail sales down -0.6% mom in Jan, more contraction in Feb

    Canada’s retail sales dropped -0.6% mom to CAD 69.4B in January, marking a steeper-than-expected decline and signaling subdued consumer spending.

    The largest drag came from motor vehicle and parts dealers, while overall sales fell in three of nine subsectors.

    Core retail sales, which strip out gasoline and auto-related purchases, also slipped -0.2%.

    Adding to the concern, Statistics Canada’s advance estimate suggests retail sales fell another -0.4% in February.

    Japan’s CPI core slows less than expected to 3% in Feb

    Japan’s core consumer inflation eased for the first time in four months in February, but less than market expectations. While the data strengthens the case for another BoJ rate hike at the April 30–May 1 meeting, policymakers may still choose to wait until July to better assess the impact of US tariff escalation and broader global financial market risks.

    CPI core (excluding fresh food) slowed from 3.2% yoy to 3.0% yoy, slightly above expectations of 2.9%. The moderation was partly due to the resumption of government subsidies on utility bills. Despite this, core inflation has stayed above BoJ’s 2% target since April 2022.

    More significantly, core-core CPI (excluding food and energy) rose from 2.5% yoy to 2.6% yoy, marking the fastest pace since March 2024. This continued strength in underlying inflation, even as services inflation softened slightly from 1.4% yoy to 1.3% yoy, reflects steady pass-through of higher labor costs.

    Meanwhile, headline CPI slowed from 4.0% yoy to 3.7% yoy.

    New Zealand posts NZD 510m trade surplus as exports surge across key markets

    New Zealand posted a surprise trade surplus of NZD 510m in February, defying expectations of a NZD -235m deficit.

    Goods exports jumped 16% yoy to NZD 6.7B, led by strong demand from key trading partners including China, Australia, and the EU. Notably, exports to China surged by 16% yoy, while shipments to Australia and the EU rose by 17% yoy and 37% yoy, respectively. The only major decline was seen in exports to the US, which slipped by -5.5% yoy.

    Goods imports edged up a modest 2.1% yoy to NZD 6.2B, with notable volatility in country-level data. Imports from the US spiked 41% yoy, while those from South Korea plunged -57% yoy. Imports from Australia (-9.3% yoy) and the EU (-3.3% yoy)also declined. Despite the pickup from the US and China (3.8% yoy), subdued import figures from other regions helped tilt the trade balance into surplus.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 148.32; (P) 148.64; (R1) 149.10; More…

    Intraday bias in USD/JPY remains neutral and outlook is unchanged. Corrective pattern from 146.52 might extend. But in case of stronger recovery, upside should be limited by 150.92 support turned resistance. On the downside, firm break of 148.17 support will bring retest of 146.52 first. Sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will resume the fall from 158.86 to 139.57 support.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Trade Balance (NZD) Feb 510M -235M -486M -544M
    23:50 JPY National CPI Y/Y Feb 3.70% 4%
    23:50 JPY National CPI Core Y/Y Feb 3.00% 2.90% 3.20%
    23:50 JPY National CPI Core-Core Y/Y Feb 2.60% 2.50%
    00:01 GBP GfK Consumer Confidence Mar -19 -21 -20
    07:00 GBP Public Sector Net Borrowing (GBP) Feb 10.7B -10.9B -15.4B -13.3B
    09:00 EUR Eurozone Current Account (EUR) Jan 35.4B 38.4B
    12:30 CAD New Housing Price Index M/M Feb 0.10% 0.00% -0.10%
    12:30 CAD Retail Sales M/M Jan -0.60% -0.40% 2.50% 2.60%
    12:30 CAD Retail Sales ex Autos M/M Jan 0.20% -0.10% 2.70% 2.90%
    15:00 EUR Eurozone Consumer Confidence Mar P -13 -14

     



    Source link

  • Dollar Recovery Remains Fragile While Bitcoin Struggles for Traction

    Dollar Recovery Remains Fragile While Bitcoin Struggles for Traction


    Dollar continues to grapple with reversing its recent bearish trend, but momentum behind the rebound remains tentative at best. The greenback has received modest support from Fed’s stance, with policymakers emphasizing there’s no urgency to resume rate cuts. This, combined with a general reassessment of earlier bearish bets, has helped slow the pace of decline in Dollar, even as sentiment remains cautious.

    One of the key themes driving recent market behavior has been the ongoing trade war narrative. Despite rising concerns about a recession in the US triggered by escalating tariffs, those fears have yet to materialize in hard data. Even Fed Chair Jerome Powell maintained a relatively balanced tone in this week’s FOMC press conference, holding back from sounding overly pessimistic. Traders may now be stepping back from aggressive short positions, waiting for more clarity—particularly around the reciprocal tariffs due in early April.

    Looking across the currency markets, Yen is the worst performer so far this week, gaining little traction even after stronger-than-expected inflation data from Japan. Aussie follows, pressured by disappointing jobs data, while the Euro is beginning to consolidate gains following renewed optimism over the EU’s large-scale fiscal expansion plans. On the flip side, the Canadian Dollar surprisingly leads, despite Canada’s exposure to US tariffs, with Swiss Franc and Kiwi following Dollar and Sterling are relatively mixed, occupying the middle of the pack.

    Meanwhile, Bitcoin’s recovery is showing signs of fatigue after hitting 87462 earlier in the week. President Donald Trump’s bold declaration that the US will become the global “undisputed Bitcoin superpower” at a recent crypto conference failed to spark meaningful market response. Despite the rhetoric, traders seem more focused on underlying technical and macroeconomic factors than political promises.

    Nevertheless, technically, Bitcoin is still holding firmly above 73812 cluster support (38.2% retracement of 15452 to 109571 at 73617. The choppy decline from 109571 is viewed as a correction only. Firm break of 55 D EMA (now at 89980) will argue that the pullback has already completed, and bring stronger rebound back to retest 109571 high.

    In Asia, Nikkei fell -0.20%. Hong Kong HSI is down -2.06%. China Shanghai SSE is down -1.29%. Singapore Strait Times is down -0.08%. Japan 10-year JGB yield fell -0.004 to 1.527. Overnight, DOW fell -0.03%. S&P 500 fell -0.22%. NASDAQ fell -0.33%. 10-year yield fell -0.023 to 4.233.

    Japan’s CPI core slows less than expected to 3% in Feb

    Japan’s core consumer inflation eased for the first time in four months in February, but less than market expectations. While the data strengthens the case for another BoJ rate hike at the April 30–May 1 meeting, policymakers may still choose to wait until July to better assess the impact of US tariff escalation and broader global financial market risks.

    CPI core (excluding fresh food) slowed from 3.2% yoy to 3.0% yoy, slightly above expectations of 2.9%. The moderation was partly due to the resumption of government subsidies on utility bills. Despite this, core inflation has stayed above BoJ’s 2% target since April 2022.

    More significantly, core-core CPI (excluding food and energy) rose from 2.5% yoy to 2.6% yoy, marking the fastest pace since March 2024. This continued strength in underlying inflation, even as services inflation softened slightly from 1.4% yoy to 1.3% yoy, reflects steady pass-through of higher labor costs.

    Meanwhile, headline CPI slowed from 4.0% yoy to 3.7% yoy.

    New Zealand posts NZD 510m trade surplus as exports surge across key markets

    New Zealand posted a surprise trade surplus of NZD 510m in February, defying expectations of a NZD -235m deficit.

    Goods exports jumped 16% yoy to NZD 6.7B, led by strong demand from key trading partners including China, Australia, and the EU. Notably, exports to China surged by 16% yoy, while shipments to Australia and the EU rose by 17% yoy and 37% yoy, respectively. The only major decline was seen in exports to the US, which slipped by -5.5% yoy.

    Goods imports edged up a modest 2.1% yoy to NZD 6.2B, with notable volatility in country-level data. Imports from the US spiked 41% yoy, while those from South Korea plunged -57% yoy. Imports from Australia (-9.3% yoy) and the EU (-3.3% yoy)also declined. Despite the pickup from the US and China (3.8% yoy), subdued import figures from other regions helped tilt the trade balance into surplus.

    BoC Governor: Crucial to Stop Initial Tariff Price Shocks from Becoming Generalized Inflation

    Bank of Canada Governor Tiff Macklem issued a stark warning on the economic consequences of prolonged US tariffs, emphasizing that broad-based and long-lasting trade barriers will depress Canadian exports, reduce overall output, and push consumer prices higher.

    In a speech overnight, Macklem noted that the unpredictability of US tariffs, marked by “constant policy reversals”, has injected significant uncertainty into the outlook for Canadian businesses and households.

    Macklem highlighted two major areas of concern: uncertainty about which tariffs will be imposed and for how long, and uncertainty about their economic impact.

    Already, the BoC has observed that businesses are cutting back investment and hiring, and many households are growing more cautious with spending. He warned that if broad-based tariffs remain in place, the result will be “less demand, less economic growth and higher inflation”.

    While monetary policy cannot prevent the initial rise in prices caused by tariffs, Macklem stressed that it must act to “prevent those initial, direct price increases from spreading”.

    “We must ensure that higher prices from tariffs do not become ongoing generalized inflation,” he emphasized.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4290; (P) 1.4346; (R1) 1.4379; More…

    Intraday bias in USD/CAD remains neutral as range trading continues. On the downside, break of 1.4238 support will argue that corrective pattern from 1.4791 has started the third leg already. Intraday bias will be back on the downside for 1.4150 support and below. On the upside, though, break of 1.4541 will resume the rebound from 1.4150, as the second leg of the pattern.

    In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Trade Balance (NZD) Feb 510M -235M -486M -544M
    23:50 JPY National CPI Y/Y Feb 3.70% 4%
    23:50 JPY National CPI Core Y/Y Feb 3.00% 2.90% 3.20%
    23:50 JPY National CPI Core-Core Y/Y Feb 2.60% 2.50%
    00:01 GBP GfK Consumer Confidence Mar -19 -21 -20
    07:00 GBP Public Sector Net Borrowing (GBP) Feb 10.7B -10.9B -15.4B -13.3B
    09:00 EUR Eurozone Current Account (EUR) Jan 38.4B
    12:30 CAD New Housing Price Index M/M Feb 0.00% -0.10%
    12:30 CAD Retail Sales M/M Jan -0.40% 2.50%
    12:30 CAD Retail Sales ex Autos M/M Jan -0.10% 2.70%
    15:00 EUR Eurozone Consumer Confidence Mar P -13 -14

     



    Source link