Tag: Canada

  • 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.



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  • Dollar Rebounds as NFP and Wages Beat Forecasts, Tariff Impact Yet to Materialize

    Dollar Rebounds as NFP and Wages Beat Forecasts, Tariff Impact Yet to Materialize


    Dollar staged a firm comeback today following slightly better-than-expected non-farm payroll figures, with job growth at 139k and wage growth coming in strong at 0.4% mom. While not a blowout report, the data was enough to alleviate immediate concerns of a sharp labor market slowdown. Stock futures also advanced, suggesting that investors are reassessing the near-term risks from tariffs and focusing instead on the resilience in headline economic indicators.

    Despite ongoing caution over the economic toll of US trade policy, particularly with the expiration of the 90-day tariff truce looming in July, the effects haven’t yet registered decisively in labor markets. In fact, the stronger-than-expected wage growth might reinforce some Fed officials’ inflation concerns, supporting the market consensus that the next rate cut, if any, is unlikely before September.

    Outside of the US, Loonie is also showing strength, underpinned by solid domestic jobs data. Aussie and Kiwi are mildly firmer too, buoyed by broader risk appetite. Meanwhile, safe havens are under pressure, with Yen and Swiss Franc the weakest of the day as investors rotate into higher-yielding and risk-correlated assets. Euro and Sterling are softer, but holding within familiar ranges.

    In Europe, at the time of writing, FTSE is up 0.10%. DAX is down -0.15%. CAC is up 0.14%. UK 10-year yield is up 0.03 at 4.656. Germany 10-year yield is down -0.11 at 2.573. Earlier in Asia, Nikkei rose 0.50%. Hong Kong HSI fell -0.48%. China Shanghai SSE rose 0.04%. Japan 10-year JGB yield fell -0.002 to 1.459.

    US NFP grows 139k in May, unemployment rate steady at 4.2%

    US non-farm payroll employment rose 139k in May, above expectation of 130k. That’s slightly below average monthly gain of 149k over the prior 12 months.

    Unemployment rate was unchanged at 4.2%, matched expectations. Participation rate fell from 62.6% to 62.4%.

    Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Over the past 12 months, average hourly earnings have increased by 3.9% yoy.

    Canada’s employment grow 8.8k in May, unemployment rate rises to 7%

    Canada’s employment grew 8.8k in May, better than expectation of -11.9k fall. Growth in full-time employment (+58k; +0.3%) was offset by a decline in part-time work (-49k; -1.3%).

    Unemployment rate rose from 6.9% to 7.0%, matched expectations. Employment rate held steady at 60.8%.

    Average hourly wages among employees increased 3.4% you, same as in April.

    ECB officials signal pause yesterday’s rate cut, emphasize flexibility

    One day after ECB delivered its eighth rate cut in this easing cycle, a coordinated message emerged from several Governing Council members: ECB is not committing to further immediate action.

    Latvian central banker Martins Kazaks was particularly blunt, stating that markets should not expect a rate cut at every meeting. He emphasized the value of preserving “policy space”.

    “We don’t get much data between now and the July meeting so it may well be the case that we pause,” Kazaks said. “But uncertainty remains very high, the political situation may change every day. So forward guidance isn’t your friend in these circumstances.”

    Greek central bank chief Yannis Stournaras echoed this sentiment, calling ECB’s work on inflation “nearly done,” while warning that further cuts would require growth to fall short of current forecasts.

    Estonian Governor Madis Muller also struck a cautious tone, suggesting the rate-cutting cycle may be “almost finished,” but acknowledged that visibility is limited. All three policymakers stressed that decisions ahead would remain data-driven, and that it was too early to rule out any scenario.

    French Governor François Villeroy de Galhau and Lithuania’s Gediminas Šimkus declared victory over inflation. However, both underlined the importance of maintaining flexibility in the face of mounting global uncertainty. Villeroy also reassured that “We have tools to react if there’s deflation.”

    Eurozone retail sales inch up 0.1% mom April, mixed national trends

    Eurozone retail sales rose just 0.1% mom in April, falling short of expectations for a 0.2% mom rise. Modest gains in food, drink, and tobacco sales (+0.5%) and a solid rebound in automotive fuel purchases (+1.3%) were offset by a -0.3% decline in non-food product sales.

    Across the EU, retail sales rose a more robust 0.7% mom, but the underlying data painted a sharply divided picture. Poland led with a remarkable 7.5% surge, followed by Slovakia and Sweden at 2.4%. In contrast, Germany—the region’s largest economy—saw a -1.1% drop, dragging on the overall Eurozone figure.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1401; (P) 1.1448; (R1) 1.1491; More…

    Intraday bias in EUR/USD is turned neutral with current retreat. While another rise might be seen, strong resistance could emerge from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1356 support will indicate that the corrective pattern from 1.1572 might have started 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 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Overall Household Spending Y/Y Apr -0.10% 1.50% 2.10%
    05:00 JPY Leading Economic Index Apr P 103.4 104 104.1 108.1
    06:00 EUR Germany Industrial Production M/M Apr -1.40% -0.90% 3.00% 2.30%
    06:00 EUR Germany Trade Balance (EUR) Apr 14.6B 20.2B 21.1B
    07:00 CHF Foreign Currency Reserves (CHF) May 704B 703B
    09:00 EUR GDP Q/Q Q1 F 0.60% 0.40% 0.30%
    09:00 EUR Eurozone Employment Change Q/Q Q1 F 0.20% 0.30% 0.30%
    09:00 EUR Eurozone Retail Sales M/M Apr 0.10% 0.20% -0.10% 0.40%
    12:30 CAD Net Change in Employment May 8.8K -11.9K 7.4K
    12:30 CAD Unemployment Rate May 7.00% 7.00% 6.90%
    12:30 USD Nonfarm Payrolls May 139K 130K 177K 147K
    12:30 USD Unemployment Rate May 4.20% 4.20% 4.20%
    12:30 USD Average Hourly Earnings M/M May 0.40% 0.30% 0.20%

     



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  • Markets Unshaken by Weak US Data, Await Guidance from ECB

    Markets Unshaken by Weak US Data, Await Guidance from ECB


    The US markets remain remarkably steady overnight despite a string of soft US economic releases overnight. Disappointing job and services data failed to trigger any meaningful selloff in equities, while Dollar edged slightly lower. Market pricing for Fed policy remains broadly unchanged, with a 96% chance of a hold at the upcoming meeting and a 70% probability for no change in July. Still, Friday’s non-farm payrolls report looms as a potential catalyst for repricing should the labor market disappoint more sharply than expected.

    On the trade front, tensions are simmering as the US formally doubled its tariffs on imported steel and aluminum. Canada is now openly preparing retaliatory measures should ongoing negotiations with Washington break down. Prime Minister Mark Carney told lawmakers that Canada is engaged in “intensive negotiations” but is also preparing reprisal tariffs in parallel.

    Meanwhile, EU-US trade talks appear to be moving in a more constructive direction. After a meeting in Paris, EU negotiator Maros Sefcovic and US Trade Representative Jamieson Greer described the discussions as productive and advancing “at pace.” Sefcovic noted the talks are now “very concrete,” and Greer echoed that sentiment, signaling genuine willingness from both sides to achieve a reciprocal agreement.

    Attention now turns to ECB’s policy decision later today. A 25 bps rate cut is fully priced in, with the real focus on whether President Lagarde signals a pause for July. Given the subdued market response to recent central bank events and the current range-bound conditions, it remains to be seen whether today’s meeting will break the stalemate .

    In weekly performance terms, Dollar is currently the worst performer, followed by Swiss Franc and Loonie. At the other end of the spectrum, Kiwi leads gains, with the Aussie and Sterling also modestly firmer. Euro and Ten are trading in the middle of the pack. Yet, almost all major pairs and crosses remain trapped within last week’s ranges.

    In Asia, at the time of writing, Nikkei is down -0.53%. Hong Kong HSI is up 0.60%. China Shanghai SSE is up 0.08%. Singapore Strait Times is up 0.10%. Japan 10-year JGB yield is down -0.039 at 1.466. Overnight, DOW fell -0.22%. S&P 500 rose 0.01%. NASDAQ rose 0.32%. 10-year yield fell -0.095 to 4.365.

    Looking ahead, German factory orders, UK PMI construction and Eurozone PPI will be released in European session, but the main event is defintely ECB rate decision and press conference. Later in the data, Canada will release trade balance and Ivey PMI. US will release jobless claims and trade balance.

    ECB to cut, focus on Lagarde’s signal for a July pause

    ECB is set to lower its deposit rate by 25 bps to 2.00% today, marking the eighth cut of this easing cycle and bringing policy deep into neutral territory. With inflation falling back below the 2% target in May, the case for further easing is clear in the near term. However, the main focus will be on President Christine Lagarde’s forward guidance, particularly whether she signals a July pause in rate cuts, and the ECB’s updated economic projections.

    The case for caution is clear. The Eurozone faces a highly uncertain backdrop with multiple crosscurrents. Trade war remain front and center, with US President Donald Trump’s tariff agenda weighing heavily on confidence and investment. Retaliatory moves from the EU could compound the hit to activity. At the same time, the surprised surge in Euro risks exerting additional downward pressure on inflation. Amid this uncertainty, ECB is expected to lower both its 2025 growth and inflation forecasts, acknowledging the softening outlook.

    At the same time, medium-term fundamentals could provide some support. The EU’s major rearmament plans and Germany’s fiscal pivot to expansion are likely to bolster investment and domestic demand over time. That said, these structural measures will take time to feed through.

    A July pause would allow policymakers to evaluate how these domestic tailwinds and external headwinds ultimately shape the outlook, particularly as geopolitical and policy unpredictability continues to cloud the picture.

    Technically, EUR/CHF’s near term price actions from 0.9445 are more likely than not a triangle consolidation pattern. That is, rise from 0.9218 is in favor to resume, even as a corrective move. Break of 0.9389 minor resistance will be a bullish sign and further break of 0.9419 should sent EUR/CHF through 0.9445 resistance.

    Japan’s real wages fall -1.8% yoy in April, down for the fourth month

    Real wages in Japan fell by -1.8% yoy in April, marking the fourth consecutive month of decline as persistent inflation continued to erode household purchasing power.

    While nominal wages rose 2.3% yoy, slightly below the expected 2.6%, gains were outpaced by a still-elevated consumer inflation rate of 4.1%, driven by rising food and energy costs. The inflation metric used by the labor ministry has remained near 4% for five straight months, keeping real income in negative territory.

    On the positive side, base salaries rose 2.2% yoy, the fastest increase in four months and well above March’s 1.4% yoy gain. This also marked the 42nd consecutive month of growth in regular pay. Overtime pay rebounded with a modest 0.8% yoy rise, while special payments grew 4.1% yoy.

    China’s Caixin PMI composite falls to 49.6, contracts for first time since 2022

    China’s Caixin PMI Services rose modestly from 50.7 to 51.1 in May, aligning with expectations. However, the gain in services was not enough to offset the drag from manufacturing, as PMI Composite slipped into contraction at 49.6, its first reading below 50 since December 2022.

    Wang Zhe of Caixin Insight Group noted that the manufacturing slump was weighing heavily on the overall market, with new export orders remaining “sluggish” across both goods and services. Although input costs rose slightly, firms were unable to pass these on to customers, with selling prices continuing to fall and compressing profit margins.

    Caixin flagged “unfavorable factors remain relatively prevalent”, with growing external trade uncertainty and “noticeable weakening” in macro indicators at the start of Q2. The “significantly intensified”downward pressure raises the urgency for further targeted policy support.

    Fed’s Beige Book: General tone slightly pessimistic and uncertain

    Fed’s Beige Book report paints a picture of slowing US economy marked by pervasive caution and subdued sentiment.

    Economic activity was reported to have “declined slightly” overall, with half of the twelve Districts seeing slight to moderate declines, while three reported no change and three noted slight growth. The general tone remains “slightly pessimistic and uncertain,” echoing the previous report, as elevated policy and economic uncertainty continues to weigh on both business and household decision-making.

    Consumer spending trends were mixed, with most Districts reporting little change or modest declines. However, in some cases, spending picked up on goods expected to be affected by tariffs—suggesting front-loading behavior amid trade concerns. Employment levels were largely stable, while price pressures persisted, rising at a moderate pace.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3645; (P) 1.3688; (R1) 1.3724; More…

    USD/CAD’s decline from 1.4791 is still in progress and intraday bias stays on the downside. Next target is 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. Firm break there will pave the way to 100% projection at 1.3349. On the upside, outlook will stay bearish as long as 1.3860 resistance holds, in case of recovery.

    In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. 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
    23:30 JPY Labor Cash Earnings Y/Y Apr 2.30% 2.60% 2.30%
    01:30 AUD Trade Balance (AUD) Apr 5.41B 6.05B 6.90B 6.89B
    01:45 CNY Caixin Services PMI May 51.1 51.1 50.7
    05:45 CHF Unemployment Rate May 2.80% 2.80%
    06:00 EUR Germany Factory Orders M/M Apr -1.10% 3.60%
    08:30 GBP Construction PMI May 47.2 46.6
    11:30 USD Challenger Job Cuts Y/Y May 62.70%
    12:15 EUR ECB Deposit Rate 2.00% 2.25%
    12:30 CAD Trade Balance (CAD) Apr 0.2B -0.5B
    12:30 USD Initial Jobless Claims (May 30) 235K 240K
    12:30 USD Trade Balance (USD) Apr -117.2B -140.5B
    12:30 USD Nonfarm Productivity Q1 -0.80% -0.80%
    12:30 USD Unit Labor Costs Q1 5.70% 5.70%
    12:45 EUR ECB Press Conference
    14:00 CAD Ivey PMI May 48.3 47.9
    14:30 USD Natural Gas Storage 111B 101B

     



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  • 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

     



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  • 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%

     



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

    Trade Rhetoric Sours Sentiment Again as US-China Tensions Resurface


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

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

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

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

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

    US core PCE inflation cools to 2.5%, income surges

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

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

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

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

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

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

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

    ECB’s Panetta signals diminished room for further rate cuts

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

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

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

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

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

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

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

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

    Swiss KOF rises to 98.5, but growth outlook remains subdued

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    USD/CHF Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Markets Rattled as Trump Threatens 50% Tariffs on EU, Dollar Tumbles

    Markets Rattled as Trump Threatens 50% Tariffs on EU, Dollar Tumbles


    Global financial markets are thrown back into turmoil today after US President Donald Trump reignited trade tensions by announcing he would recommend a sweeping 50% tariff on EU imports starting June 1. In a pointed social media post, Trump accused the EU of stonewalling negotiations, declaring that discussions were “going nowhere.” The announcement came on the heels of another threat, this time directed at Apple, with Trump warning of at least a 25% tariff if the company doesn’t relocate iPhone production to the US.

    The market reaction was swift and severe. DOW futures plunged over 500 points, and European equities were battered as traders rushed to reprice geopolitical risk. The shock move revives fears of a new phase in the trade war, one with potentially deeper and more systemic consequences than the US-China dispute, especially given Europe’s central role in global supply chains and transatlantic investment flows.

    Currency markets mirrored the chaos. While Euro was understandably under pressure from the tariff news, Dollar was hit even harder, staying at the bottom of the performance board for the day. Traders appear to be weighing the long-term implications of such a dramatic trade escalation on US economy.

    Safe haven demand surged, with Yen leading gains. Kiwi and Swiss Franc are following. Sterling held up relatively well thanks to robust retail sales data. Aussie remained relatively steady, though vulnerable to shifts in global risk sentiment.

    In Europe, at the time of writing, FTSE is down -0.95%. DAX is down 2.11%. CAC is down -2.33%. UK 10-year yield is down -0.044 at 4.712. Germany 10-year yield is down -0.079 at 2.567. Earlier in Asia, Nikkei rose 0.47%. Hong Kong HSI rose 0.24%. China Shanghai SSE fell -0.94%. Singapore Strait Times rose 0.06%. Japan 10-year JGB yield fell -0.013 to 1.549.

    Canada retail sales rise 0.8% mom on autos, underlying momentum weakens

    Canada’s retail sales rose by 0.8% mom in March, surpassing expectations of a 0.6% gain. Motor vehicle and parts dealers drove the advance with a strong 4.8% mom rebound. The first quarter posted a solid 1.2% gain in total retail activity, extending the streak of quarterly increases to four.

    However, the underlying trend was less encouraging. Retail sales excluding autos plunged -0.7% mom, far worse than the expected -0.1% mom decline.

    StatCan’s advance estimate points to a modest 0.5% rebound in April.

    ECB’s Lane sees wages easing, cautions on persistent global shocks

    ECB Chief Economist Philip Lane expressed confidence that services inflation will continue to moderate, citing subdued outcomes in recent wage agreements.

    Speaking at a lecture, Lane noted that the current wage settlements for 2025 are already “quite low,” with those for 2026 appearing even more restrained. That suggested easing cost pressures in the services sector, a key driver of core inflation.

    However, Lane tempered optimism by pointing to the persistent volatility in the global economic environment. He highlighted large recent swings in exchange rates and energy prices, attributing them to structural shifts in the global trading system.

    ECB’s Rehn and Stournaras back June rate cut

    ECB Governing Council members Olli Rehn and Yannis Stournaras signaled support for a rate cut in June, provided that incoming data confirms the current trend of stabilizing inflation and moderate growth. Rehn stressed the importance of maintaining a data-dependent approach amid a backdrop of “pervasive uncertainty” stemming from geopolitical tensions and global trade conflicts.

    Speaking in an interview with Kathimerini, Rehn noted that “if incoming data and macroeconomic analysis confirm the current outlook for stabilizing inflation and somewhat subdued growth, the appropriate response in June would be to continue monetary easing and lower interest rates.”

    However, he cautioned against making any assumptions beyond June. “let’s stay on the path of data-driven decision-making at every meeting, especially as we find ourselves under the clouds of pervasive uncertainty due to geopolitics and trade wars,” he emphasized.

    Stournaras echoed the view of a June cut, but suggested the ECB may pause thereafter to reassess. “I believe we will reduce interest rates one more time in June and then I see a pause,” he said.

    UK retail sales beat expectations with 1.2% mom growth, strongest annual gain since 2022

    UK retail sales volumes jumped by 1.2% mom in April, significantly above the expected 0.3% mom gain. This marks the fourth consecutive monthly increase, with volumes now at their highest level since July 2022. Food store sales led the rise with a sharp 3.9% rebound, attributed largely to favorable weather conditions, offsetting declines seen in February and March.

    On a broader basis, sales volumes grew 1.8% over the three months to April compared to the prior three-month period, the strongest gain since July 2021. Year-on-year, volumes rose 2.6%, the largest increase since March 2022.

    Sticky inflation persist as Japan’s core CPI climbs to 3.5%

    Japan’s inflation pressures remained elevated in April, with the core CPI (excluding fresh food) rising from 3.2% yoy to 3.5% yoy, beating expectations of 3.4% yoy and marking the highest level since January 2023. This keeps core inflation above the BoJ’s 2% target for over three years.

    Core-core CPI, which excludes both food and energy, also ticked up from 2.9% yoy to 3.0% yoy, suggesting broader underlying price momentum. Headline CPI held steady at 3.6% yoy.

    There were notable upward drivers in inflation. Energy prices surged 9.3% yoy, up from March’s 6.6% yoy. Food prices (excluding fresh items) jumped 7.0% yoy, up from 6.2% yoy. In particular, rice prices soared by 98.4% yoy, a seventh consecutive record high, reflecting persistent supply shortages.

    However, services inflation, closely watched by BoJ as a wage-sensitive component, edged slightly lower to 1.3% from 1.4%, tempering some of the hawkish signals.

    NZ retail sales rise 0.8% qoq in Q1, but ex-auto growth modest

    New Zealand retail sales volumes rose a stronger-than-expected 0.8% qoq in Q1 to NZD 25B, offering a positive surprise relative to market expectations of flat growth.

    According to Stats NZ, 10 of the 15 major retail industries saw increased activity, led by a 3.1% jump in motor vehicle and parts retailing and a 3.7% rise in pharmaceutical and other store-based sales. Clothing and accessories also saw a healthy 3.2% gain.

    Despite the upbeat headline, underlying momentum appears less robust when excluding the volatile auto sector. Core retail sales rose just 0.4% qoq, sharply missing expectations of a 1.5% qoq rise.

    Economic indicators spokesperson Michelle Feyen noted that growth was “modest” and broad-based.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1242; (P) 1.1294; (R1) 1.1331; More…

    Intraday bias in EUR/USD is back on the upside with breach of 1.1362 temporary top. As noted before, correction from 1.1572 could have completed at 1.1064 already. Further rise should be seen to retest 1.1572 first. Firm break there will resume larger up trend. Next near term target will be 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. However, below 1.1255 minor support will dampen this view and turn intraday bias neutral again.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Retail Sales Q/Q Q1 0.80% 0.00% 0.90% 1.00%
    22:45 NZD Retail Sales ex Autos Q/Q Q1 0.40% 1.50% 1.40%
    23:01 GBP GfK Consumer Confidence May -20 -22 -23
    23:30 JPY National CPI Y/Y Apr 3.60% 3.60%
    23:30 JPY National CPI Core Y/Y Apr 3.50% 3.40% 3.20%
    23:30 JPY National CPI Core-Core Y/Y Apr 3.00% 2.90%
    06:00 EUR Germany GDP Q/Q Q1 F 0.40% 0.20% 0.20%
    06:00 GBP Retail Sales M/M Apr 1.20% 0.30% 0.40% 0.10%
    12:30 CAD Retail Sales M/M Mar 0.80% 0.60% -0.40%
    12:30 CAD Retail Sales ex Autos M/M Mar -0.70% -0.10% 0.50%
    14:00 USD New Home Sales M/M Apr 696K 724K

     



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  • 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%

     



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  • Risk Mood Softens as Moody’s US Downgrade and Mixed China Data Dent Confidence

    Risk Mood Softens as Moody’s US Downgrade and Mixed China Data Dent Confidence


    Global markets kicked off the week with a mild risk-off tone, driven by renewed concerns over US creditworthiness and mixed economic data out of China. Moody’s downgrade of the U.S. sovereign rating from Aaa to Aa1 late last Friday has cast a shadow over investor sentiment. Meanwhile, China’s latest data highlighted a fragile recovery with industrial output holding up but retail sales and investment disappointing. Still, losses in Asian equities have been relatively contained so far, suggesting caution more than panic.

    The more notable market movement is in US futures, where the DOW is down over 200 points in early trade. However, since US cash markets are yet to reopen, the true extent of investor reaction remains to be seen. Currency markets are relatively quiet, with Dollar trading on the soft side, but there’s no sign of a broad-based selloff. Nearly all major currency pairs and crosses are hovering within Friday’s ranges.

    Trade policy developments will continue dominate this week’s narrative. In a Sunday interview, US Treasury Secretary Scott Bessent reiterated the administration’s readiness to reinstate reciprocal tariffs at the April 2 rate on countries that fail to negotiate “in good faith.” However, he offered little clarity on what qualifies as “good faith” or when decisions might be announced.

    Bessent noted that the US is currently focused on its 18 most important trading relationships, and letters will be sent out to those nations deemed to be stalling or resisting negotiations. The threat of reactivating the more extreme tariff brackets imposed in April looms large and could provoke renewed volatility.

    On the economic calendar, RBA’s expected rate cut will headline central bank action. Meanwhile, inflation data from Canada, the UK, and Japan will offer fresh insight into price dynamics amid global tariff pressures. Retail sales from the UK, Canada, and New Zealand will help gauge consumer resilience. ECB’s meeting accounts may shed light on the internal debate ahead of its anticipated June rate cut.

    Technically, Bitcoin reversed quickly after initial surge earlier today. Upside momentum is also unconvincing as seen in D MACD. Break of 100692 support should confirm rejection by 109571 higher. Deeper pullback should at least be seen to 55 D EMA (now at 94361), with risk of near term bearish reversal.

    In Asia, Nikkei fell -0.73%. Hong Kong HSI is down -0.02%. China Shanghai SSE is up 0.02%. Singapore Strait Times is down -0.25%. Japan 10-year JGB yield is up 0.03 at 1.485.

    BoJ’s Uchida notes strain on consumers as food and import costs climb

    BoJ Deputy Governor Shinichi Uchida noted in parliamentary remarks that recent inflation has been driven primarily by higher import and food costs, particularly staples like rice.

    He acknowledged the burden on households, saying the price increases are “having a negative impact on people’s livelihood and consumption”. The bank remains prepared to continue raising rates if its current forecast holds.

    However, Uchida stressed the “extremely high uncertainty” around global trade policies and their economic consequences. Given these risks, he emphasized that the BoJ would assess whether the economy and inflation align with projections before taking further steps.

    China’s retail sales growth slows to 5.1% in April, misses expectations

    China’s economic data for April revealed a patchy recovery, with retail sales rising by 5.1% yoy, falling short of the 6.0% yoy forecast and slowing from March’s 5.9% yoy. Stripping out automobiles, consumer goods sales rose 5.6% yoy.

    National Bureau of Statistics spokesperson Fu Linghui remained upbeat, saying that consumption momentum continues to build and will remain a key driver of economic growth.

    On the production side, industrial output grew by 6.1% yoy, exceeding expectations of 5.7% yoy but decelerating from March’s robust 7.7% expansion. Meanwhile, fixed asset investment came in at 4.0% year-to-date, below the expected 4.4%.

    NZ BNZ services slips to 48.5, sector remains under pressure

    New Zealand’s services sector showed further signs of strain in April, with the BusinessNZ Performance of Services Index dipping from 48.9 to 48.5, well below the long-term average of 53.0.

    Key components of the survey highlighted persistent weakness: activity/sales was stagnant at 47.3. Employment slipped back into contraction territory at 48.2. New orders showed only marginal improvement, rising from 50.8 to 50.9.

    BNZ Senior Economist Doug Steel noted the PSI paints a more sobering picture than broader recovery narratives might suggest, highlighting that New Zealand’s services sector is underperforming relative to key global peers.

    ECB’s Lagarde attributes Euro strength to waning confidence in US policy amid uncertainty

    ECB President Christine Lagarde has described the Euro’s recent appreciation against Dollar as “counter-intuitive,” but ultimately a reflection of growing global unease over US political and economic direction.

    In an interview with La Tribune Dimanche, Lagarde said that parts of the financial markets appear to be “losing confidence” in the US, due to economic and financial chaos during the first 100 days of President Donald Trump’s term.

    By contrast, Lagarde highlighted Europe’s comparative stability, both economic and institutional, as a key driver behind the Euro’s unexpected strength.

    “Uncertainty is a constant [in the US],” she noted, while Europe is being recognized as “a stable economic and political region with a solid currency and an independent central bank.”

    That divergence in perceived reliability, she argues, has led markets to favor the Euro even in a climate where risk aversion would normally boost Dollar.

    RBA rate cut, inflation data from Canada, UK and Japan to highlight the week

    RBA is widely expected to deliver a 25 bps rate cut, bringing the cash rate down to 3.85%. While all of Australia’s big four banks agree on the need for further easing, there’s some divergence on the pace. NAB stands out with a bolder forecast, projecting a larger 50bps reduction.

    Looking ahead, ANZ anticipates two more cuts in July and August to bring the cash rate to 3.35% by then. Commonwealth Bank shares a similar view but sees the final cut coming in November. NAB expects a more dovish sequence, projecting three further cuts by year-end, followed by one more in early 2026. Westpac also forecasts two cuts in H2 2025.

    Yet, with global tariff negotiations still unresolved, particularly regarding China, Australia’s economic outlook remains highly fluid, leaving room for policy recalibration in the months ahead.

    On the data front, inflation will dominate. Canada, the UK, and Japan are all set to release April CPI figures.

    In Canada, headline inflation could be significantly distorted by the recent removal of the consumer carbon tax on energy products. As a result, attention will shift to the ex-energy components, which could offer clearer guidance for the BoC. Economists generally expect another rate cut in June, provided the CPI report shows subdued underlying pressures, especially as tariff effects begin to bite.

    In the UK, inflation is projected to rebound above 3%, largely due to previously flagged increases in energy prices and regulated items like water bills. BoE has already accounted for this temporary surge, so a surprise in either direction is unlikely to alter its current pace of easing, generally one 25bps cut per quarter.

    Japan’s CPI will also attract attention after Q1 GDP revealed a deeper-than-expected contraction, causing markets to dial back BoJ rate hike bets. Even if core inflation picks up again in April, BoJ is likely to remain on hold for now, especially given the dual headwinds of weak growth and global trade uncertainty. However, an upside surprise could test BoJ’s tolerance.

    Beyond inflation, retail sales from the UK, Canada, and New Zealand will provide insight into consumer resilience in face of tariff threats. Germany’s Ifo Business Climate and a batch of Chinese data, including retail sales, industrial production, and fixed asset investment, will also be in focus. Additionally, ECB will publish the minutes of its latest policy meeting, offering more clues on the anticipated June rate cut.

    Here are some highlights for the week:

    • Monday: New Zealand BNZ services, PPI; China industrial production, retail sales, fixed asset investment; Japan tertiary industry index; Eurozone CPI final.
    • Tuesday: China rate decision; RBA rate decision; Germany PPI; Eurozone current account; Canada CPI.
    • Wednesday: New Zealand trade balance; Japan trade balance; UK CPI; Canada new housing price index.
    • Thursday: Australia PMIs; Japan PMIs, machine orders; Eurozone PMIs, ECB accounts; Germany Ifo business climate; UK PMIs; Canada IPPI and RMPI; US jobless claims, PMIs, existing home sales.
    • Friday: New Zealand retail sales; Japan CPI; UK retail sales; Germany GDP final; Canada retail sales; US new home sales.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6382; (P) 0.6409; (R1) 0.6430; More…

    Intraday bias in AUD/USD remains neutral as range trading continues. Further rise is in favor as long as 0.6356 support holds. One the upside, break of 0.6511 will resume the rise from 0.5913 and target 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6356 will bring deeper pullback to 38.2% retracement of 0.5913 to 0.6511 at 0.6283 first.

    In the bigger picture, as long as 55 W EMA (now at 0.6438) holds, down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PSI Apr 48.5 49.1 48.9
    22:45 NZD PPI Input Q/Q Q1 2.90% 0.20% -0.90%
    22:45 NZD PPI Output Q/Q Q1 2.10% 0.10% -0.10%
    23:01 GBP Rightmove House Price Index M/M May 0.60% 1.40%
    02:00 CNY Industrial Production Y/Y Apr 6.10% 5.70% 7.70%
    02:00 CNY Retail Sales Y/Y Apr 5.10% 6.00% 5.90%
    02:00 CNY Fixed Asset Investment YTD Y/Y Apr 4.00% 4.40% 4.20%
    04:30 JPY Tertiary Industry Index M/M Mar -0.30% -0.20% 0.00% 0.50%
    09:00 EUR Eurozone CPI Y/Y Apr F 2.20% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y Apr F 2.70% 2.70%

     



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  • Markets Turn Cautious Again Ahead of US-China Talks in Switzerland

    Markets Turn Cautious Again Ahead of US-China Talks in Switzerland


    The forex markets are quiet today, with major pairs largely consolidating after yesterday’s modest directional movement. Dollar and British Pound remain the strongest performers overall, bolstered earlier in the week by the announcement of the US-UK trade agreement. However, both currencies are now struggling to extend their momentum. Canadian Dollar continues to lag after today’s mixed employment report. European equities are trading slightly higher, and US futures are also edging up, but the broader market mood is subdued.

    Attention is now shifting to the upcoming meeting between US and Chinese trade representatives in Switzerland this weekend. Caution is in the air after President Trump suggested in a social media post that tariffs on Chinese goods could be cut from 145% to 80%—a comment that sparked tentative optimism. While some economists are hopeful for at least partial tariff relief, expectations remain low for any immediate breakthrough.

    History tempers optimism. The last major US-China trade deal took two years of negotiations following the initial tariff escalation in 2018, and that process was marked by repeated false starts and reversals. As such, the meeting in Switzerland is widely viewed as a tentative first step rather than a venue for concrete outcomes. Any signals of goodwill or further dialogue would be welcome, but markets are unlikely to price in significant progress until more substance materializes.

    For the week so far, Dollar remains the top performer, followed by Sterling and Yen. On the weaker end, Kiwi has underperformed, trailed by Loonie and Aussie. Euro and Swiss Franc sit in the middle.

    In Europe, at the time of writing, FTSE is up 0.34%. DAX is up 0.74%. CAC is up 0.86%. UK 10-year yield is up 0.024 at 4.576. Germany 10-year yield is up 0.031 at 2.573. Earlier in Asia, Nikkei rose 1.56%. Hong Kong HSI rose 0.40%. China Shanghai SSE fell -0.30%. Singapore Strait Times rose 0.73%. Japan 10-year JGB yield rose 0.029 to 1.354.

    Canada’s jobs grow 7.4k, unemployment rate jumps to 6.9%

    Canada’s labor market posted a modest gain of 7.4k jobs in April, slightly above expectations of 4.1k, following a sharp loss of -33k positions in March and a flat February. While the headline number suggests some stabilization, broader labor indicators point to underlying weakness.

    Unemployment rate rose from 6.7% to 6.9%, above expectations, and is now back at its November 2024 level, the highest since January 2017 excluding the pandemic years.

    The employment rate slipped another 0.1 percentage points to 60.8%, matching a recent low seen in October 2024.

    Wage growth also showed signs of easing, with average hourly earnings increasing 3.4% yoy, down from 3.6% yoy in March. Meanwhile, total hours worked rose by 0.4% mom and 0.9% yoy.

    Fed’s Barr: Tariffs to push inflation higher, job losses also a major concern

    In a speech today, Fed Governor Michael Barr acknowledged that the US economy began the current quarter from a “relatively strong position,” describing overall conditions as “resilient.” However, he cautioned that this solid foundation is being increasingly overshadowed by rising trade policy uncertainty, particularly from the recent wave of tariffs.

    Barr expected “tariffs to lead to higher inflation” in the US and “lower growth” starting later this year. He explained that the new tariffs—unprecedented in size and scope in the modern era—could disrupt global supply chains and exert lasting upward pressure on prices. At the same time, he is “equally concerned” that the resulting economic drag could lead to job losses.

    Despite these risks, he emphasized that monetary policy is in a “good position” to adjust as needed once the full effects of the tariffs become clearer.

    Fed’s Kugler: Labor market stable, likely near maximum employment

    In a speech today, Fed Governor Adriana Kugler described the U.S. labor market as “stable,” noting that key indicators such as the unemployment rate, currently at 4.2%, have remained within a narrow and consistent range.

    She highlighted that temporary layoffs have returned to pre-pandemic levels, and both job vacancies and quit rates have plateaued, indicating a moderation in labor market churn.

    Kugler further stated that the economy is likely “close to maximum employment,” referencing model-based estimates of the natural rate of unemployment (u*) that align with the current 4.2% level.

    BoE’s Bailey highlights asymmetric risks: Demand weakness warrants sharper monetary response

    In a speech following BoE’s Monetary Policy Report released yesterday, Governor Andrew Bailey elaborated on the two alternative scenarios laid out alongside the baseline forecast.

    The first scenario envisions that heightened global and domestic uncertainty could suppress UK demand more than currently expected, “easing inflationary pressures”.

    In contrast, the second scenario assumes that recent energy price increases could trigger renewed second-round effects in domestic prices, with tighter supply conditions “increasing inflationary pressures”.

    Bailey emphasized that these scenarios are not simply stylized upside or downside risks to inflation but are meant to illustrate the underlying mechanisms that could shift the inflation path.

    He stressed, “it matters whether inflation differs from the baseline because of demand or supply”. And, the size of the required monetary policy response might be different.

    From a monetary policy standpoint, Bailey explained that a demand-driven downside scenario would likely warrant a stronger policy response than a supply-driven upside shock. That’s “simply because there is more of a trade-off to balance when inflation and activity move in different directions,” he added.

    ECB’s Simkus and Rehn warn of growth risks

    Comments from ECB Governing Council members today reinforced expectations for a rate cut in June, while also highlighting growing concern over the deteriorating macro environment.

    Lithuania’s Gediminas Šimkus acknowledged that geopolitical developments since the start of the year have been negative for the economy, adding that inflation is now under “downward pressure”. He noted that June projections “may be a little bit worse” and warned of the risk the central bank will undershoot its inflation target.

    He also pointed to the risk of China re-routing goods to Europe in response to rising US trade barriers—a trend that could weigh on European industry and import prices.

    Šimkus indicated that a June rate cut is needed but remained non-committal on the pace of further easing, saying it’s still unclear whether the next move after June would come in July or September.

    Separately, Finland’s Olli Rehn struck a similar tone, citing pervasive uncertainty and reaffirming that the Governing Council will retain “full freedom of action” to meet its price stability mandate.

    While Rehn noted that progress has been made in bringing inflation toward the 2% target, he cautioned that global trade tensions pose a meaningful downside risk to growth.

    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 Mid-Day Outlook

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

    Intraday bias in EUR/USD remains mildly on the downside for the moment. Corrective fall from 1.1572 is still in progress 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 7.4K 4.1K -32.6K
    12:30 CAD Unemployment Rate Apr 6.90% 6.80% 6.70%

     



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  • 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%

     



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  • Thaw in US-China Tensions With Geneva Talk Scheduled, But Markets Stay Guarded Before FOMC

    Thaw in US-China Tensions With Geneva Talk Scheduled, But Markets Stay Guarded Before FOMC


    Positive developments out of Asia offered some encouragement to global investors today, though market responses remained muted. China unveiled a wide-ranging stimulus package, cutting both its seven-day reverse repo rate and the reserve requirement ratio to inject liquidity to stabilize the economy. In parallel, officials from the US and China announced plans to hold a key meeting in Geneva this Saturday, in what could mark the first serious effort to thaw trade relations since US President Donald Trump’s latest round of steep tariffs.

    Despite these encouraging headlines, equity markets across Asia posted only modest gains. Currency markets showed slightly more reaction, with Kiwi outperforming after Q1 unemployment rate came in steady. Aussie and Loonie also posted small gains. Dollar is holding firmer ahead of Fed’s decision later today. Meanwhile, Yen softened, paring gains from earlier in the week. Euro is staying on the softer side. Political risk in Europe remains elevated even after Germany’s new chancellor Friedrich Merz finally secured parliamentary backing. Swiss Franc is positioning in the middle along Sterling.

    On the trade front, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet China’s top economic planner He Lifeng in Switzerland, with both sides signalling willingness to engage. Bessent stated that current tariff levels, reaching as high as 145% on Chinese imports, amount to “an embargo.” He reiterated that the US seeks “fair trade, not decoupling.” China’s official statement echoed this sentiment, saying the re-engagement decision balances “global expectations,” “China’s interests,” and the needs of “US industry and consumers.”

    Canadian Prime Minister Mark Carney met with Trump overnight in what he termed a “constructive” first step toward reshaping North American trade relations. Meanwhile, the UK and India announced a new agreement that will see most goods traded become tariff-free within a decade, marking a notable milestone for the Starmer government.

    Technically, immediate focus in NZD/USD is on 0.6028 resistance. Firm break there will resume rise from 0.5484. Next target is 61.8% projection of 0.5484 to 0.6028 from 0.5892 at 0.6228. Rejection by 0.6028 will extend the consolidation pattern from there with another falling leg. But downside should be contained by 38.2% retracement of 0.5484 to 0.6028 at 0.5820 in this case.

    In Asia, at the time of writing, Nikkei is up 0.06%. Hong Kong HSI is up 0.49%. China Shanghai SSE is up 0.64%. Singapore Strait Times is up 0.07%. Japan 10-year JGB yield is up 0.016 at 1.278. Overnight, DOW fell -0.95%. S&P 500 fell -0.77%. NASDAQ fell -0.87%. 10-year yield fell -0.035 to 4.308.

    Looking ahead,Germany factory orders, France trade balance, Swiss foreign curreny reserves, UK PMI construction and Eurozone retail sales will be released in European session. Later in the day, main focus in on FOMC rate decision and press conference.

    Fed to holds fire as markets look to July for next cut

    Fed is widely expected to leave its benchmark interest rate unchanged at 4.25–4.50% today. With no update to its economic projections or dot plot this time, attention will turn squarely to the post-meeting statement and Chair Jerome Powell’s press conference.

    The prevailing message is likely to be one of patience, as policymakers face mounting uncertainties tied to the unresolved tariff war and its eventual economic impact.

    Central to Fed’s wait-and-see approach is the need for clarity on two fronts: whether US President Donald Trump’s reciprocal tariffs are fully enacted, and how inflation expectations evolve in response. These factors, especially in light of ongoing geopolitical and trade risks, argue against any near-term policy moves.

    As such, June is seen as too soon for a shift, with the expected to remain on hold until more definitive clarity emerge, probably not until the tariff ceasefire expires in early July.

    Market pricing reflects this outlook top. Fed funds futures assign just a 32% chance of a cut in June, but expectations firm up thereafter, with roughly 75% probability of three 25 bps cuts by year-end, bringing rates down to 3.50–3.75%.

    Japan’s PMI composite finalized at 51.2, input inflation jumps to 2-year high

    Japan’s private sector returned to expansion in April, as the final PMI Composite rose to 51.2 from March’s 48.9. The improvement was driven entirely by the services sector, with its PMI climbing to 52.4, while manufacturing remained in contraction.

    According to S&P Global’s Annabel Fiddes, stronger services activity helped offset the drag from factories, where new orders fell sharply in response to the global tariff environment.

    While services firms reported stronger demand, confidence among both services and manufacturing sectors deteriorated. Businesses expressed concern about the broader global outlook and the negative implications of recent US tariff moves on growth potential.

    Adding to the pressure, input price inflation accelerated to a two-year high, prompting firms to raise selling prices to protect margins.

    NZ employment grow 0.1% in Q1, wages growth cool

    New Zealand’s employment grew just 0.1% qoq as expected, while the unemployment rate held steady at 5.1%, better than forecast of 5.3%.

    However, the quality of employment deteriorated, with a notable shift from full-time to part-time roles. Over the year, full-time employment dropped by -45k while part-time roles increased by 25k.

    Participation rate edged down to 70.8% and the employment rate slipped to 67.2%, both suggesting a gradual loss in labor market momentum.

    Wage growth also moderated, with the labour cost index rising 2.9% annually, down from 3.3% in the previous quarter.

    PBoC unleashes broad-based monetary easing including rate and RRR cuts

    China’s central bank has announced a sweeping set of monetary policy measures to support its economy, starting with a 10bps cut in the seven-day reverse repo rate to 1.40%, effective May 8. In a more aggressive move, the PBoC will also slash the reserve requirement ratio by 50bps, releasing approximately CNY 1T into the banking system.

    The new package is structured into three categories: quantitative, price-based, and structural tools. The quantitative arm focuses on long-term liquidity via the RRR cut. The price-based measures involve lowering benchmark and structural policy rates. The structural component aims to channel credit into strategic areas such as technological innovation, consumption, and inclusive finance.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1306; (P) 1.1344; (R1) 1.1407; More…

    Intraday bias in EUR/USD remains neutral for the moment as range trading continues above 1.1265. On the downside, below 1.1265 will resume the corrective fall from 1.1572 short term top. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039. On the upside, break of 1.1424 will suggest that the correction has completed and bring retest of 1.1572 high.

    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
    22:45 NZD Employment Change Q1 0.10% 0.10% -0.10% -0.20%
    22:45 NZD Unemployment Rate Q1 5.10% 5.30% 5.10%
    22:45 NZD Labour Cost Index Q/Q Q1 0.40% 0.50% 0.60%
    00:30 JPY Services PMI Apr F 52.4 52.2 50
    06:00 EUR Germany Factory Orders M/M Mar 1.10% 0.00%
    07:00 CHF Foreign Currency Reserves (CHF) Apr 726B
    08:30 GBP Construction PMI Apr 46 46.4
    09:00 EUR Eurozone Retail Sales M/M Mar -0.10% 0.30%
    14:30 USD Crude Oil Inventories -1.7M -2.7M
    18:00 USD Fed Interest Rate Decision 4.50% 4.50%
    18:30 USD FOMC Press Conference

     



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  • Dollar and Loonie Soft Ahead of Carney-Trump Meeting

    Dollar and Loonie Soft Ahead of Carney-Trump Meeting


    Dollar remains on the soft side today, although losses are so far limited. Currency market activity is subdued as traders remain cautious ahead of the upcoming FOMC rate decision. While no policy changes are expected from the Fed tomorrow, markets are watching closely for any forward guidance. Notably, expectations for a June rate cut have continued to fade, with implied probabilities falling below 30%, reflecting the resilience of recent economic data, particularly on jobs.

    However, the bigger driver of sentiment remains progress, or the lack thereof, on the trade front. Canadian Prime Minister Mark Carney is scheduled to meet President Donald Trump in Washington on Tuesday — the first face-to-face since Carney’s April 28 election victory. Trade and security are set to top the agenda. Canada is expected to bring proposals linked to energy and critical minerals, hoping to secure relief from US tariffs. Still, Carney has emphasized that substance will take precedence over speed.

    Meanwhile, US Treasury Secretary Scott Bessent hinted on Monday that deals with some trading partners were “very close,” echoing Trump’s remarks over the weekend. Yet no concrete agreements have been announced. A Bloomberg report suggested India is willing to offer zero tariffs on selected goods, but details remain sparse. Overall, market optimism over trade progress exists but is tempered by repeated delays and lack of formal announcements.

    So far this week, Dollar is the weakest performer, though still above last week’s lows. Loonie is also under pressure as markets await Carney’s Washington visit. Euro is lagging as well. Yen leads the gainers, followed by Kiwi and Swiss Franc. Sterling and Aussie are holding in the middle of the pack.

    Technically’s EUR/CAD’s decline from 1.5959 is currently seen as part of a corrective pattern to the rally from 1.4483. Deeper fall is expected as long as 1.5816 resistance holds, to 55 D EMA (now at 1.5505) and possibly below. But strong support should be seen from 1.5402 cluster support (38.2% retracement of 1.4483 to 1.5959 at 1.5395) to contain downside.

    In Asia, Japan is still on holiday, Hong Kong HSI is up 0.62%. China Shanghai SSE is up 0.93%. Singapore Strait Times is up 0.20%. Overnight, DOW fell -0.24%. S&P 500 fell -0.64%. NASDAQ fell -0.74%. 10-year yield rose 0.021 to 4.343.

    Looking ahead, Swiss unemployment rate, France industrial production, Eurozone PMI services final and PPI, and UK PMI services final will be released in European session. Later in the day, Canada and US will publish trade balance.

    Gold breaks higher, eyes on 3500 and beyond

    Gold’s extended rebound and break of 3352.97 resistance argues that correction from 3449.79 has already completed at 3201.70. Further rise is now expected to 3499.79 and then 61.8% projection of 2956.61 to 3449.70 from 3201.70 at 3537.38. Decisive break of 3537.38 could prompt upside acceleration towards 100% projection at 3744.88. However, break of 55 4H EMA (now at 3287.46) will resume the corrective fall from 3499.79 with another downleg.

    In the bigger picture, the long term up trend remains intact and there is no sign of loss of momentum in W MACD, despite overbought condition in W RSI. Next medium term target remains at 261.8% projection of 1160.17 to 2074.84 from 1614.60 at 4009.20, which is close to 4000 psychological level.

    China’s Caixin PMI composite falls to 51.1, tariff impact to deepen in Q2–Q3

    China’s Caixin PMI Services dropped to 50.7 in April, down from 51.9 and missing expectations of 51.7. PMI Composite also slipped from 51.8 to 51.1, signaling weaker momentum across both manufacturing and services.

    According to Caixin’s Wang Zhe, the expansion in supply and demand has decelerated amid growing trade friction. Export-driven sectors remain under particular pressure, while job losses and muted pricing power continue to squeeze business margins. The employment component of the composite index also contracted.

    Perhaps most concerning, expectations for future activity plunged to the lowest levels on record, reflecting rising uncertainty among firms. “The ripple effects of the ongoing China-US tariff standoff will gradually be felt in the second and third quarter”, Wang added.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8200; (P) 0.8237; (R1) 0.8261; More….

    USD/CHF is still bounded in range below 0.8333 and intraday bias stays neutral at this point. On the upside, above 0.8333 will resume the rebound from 0.8038. However, upside should be limited by 38.2% retracement of 0.9200 to 0.8038 at 0.8482. On the downside, below 0.8196 minor support will bring retest of 0.8038. Firm break there will resume larger down trend.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8763) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD Building Permits M/M Mar -8.80% -1.70% -0.30% -0.20%
    01:45 CNY Caixin Services PMI Apr 50.7 51.7 51.9
    06:45 EUR France Industrial Output M/M Mar 0.40% 0.70%
    07:50 EUR France Services PMI Apr F 46.8 46.8
    07:55 EUR Germany Services PMI Apr F 48.8 48.8
    08:00 EUR Eurozone Services PMI Apr F 49.7 49.7
    08:30 GBP Services PMI Apr F 48.9 48.9
    09:00 EUR Eurozone PPI M/M Mar -1.10% 0.20%
    09:00 EUR Eurozone PPI Y/Y Mar 2% 3%
    12:30 CAD Trade Balance (CAD) Mar -1.7B -1.5B
    12:30 USD Trade Balance (USD) Mar -124.7B -122.7B
    14:00 CAD Ivey PMI Apr 51.2 51.3

     



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  • USD/CAD steadies near 1.3800, downside appears due to a weaker US Dollar

    USD/CAD steadies near 1.3800, downside appears due to a weaker US Dollar


    • USD/CAD could face downside pressure as the US Dollar weakens, possibly due to rising trade tensions.
    • President Donald Trump’s proposal to impose a 100% tariff on foreign-made films has heightened fears of renewed protectionist policies.
    • The Canadian Dollar is rebounding in line with other G10 currencies, supported by fading recession concerns.

    USD/CAD is holding steady around the 1.3800 level during Monday’s Asian session, following a decline in the previous trading day. Upside momentum for the pair may be capped as the US Dollar (USD) faces pressure, potentially due to renewed trade tensions. President Donald Trump announced plans to instruct the US Trade Representative and Commerce Department to initiate a 100% tariff on foreign-made films.

    The US Dollar Index (DXY), which tracks the Greenback against six major currencies, is on the back foot for the second straight day, trading near 99.70 at the time of writing. Market participants will turn their focus to the upcoming US ISM Services PMI data for further clues on the economic outlook.

    President Trump confirmed he has no intention of replacing Federal Reserve Chair Jerome Powell before his term expires in May 2026. Despite calling Powell “a total stiff,” Trump reiterated his view that interest rates should eventually be cut.

    On the labor front, the April Nonfarm Payrolls (NFP) report surprised to the upside, with 177,000 jobs added versus expectations of 130,000. This followed a revised increase of 185,000 in March. The unemployment rate held steady at 4.2%, while average hourly earnings grew 3.8% year-over-year, in line with the previous month.

    Meanwhile, the Canadian Dollar (CAD) found support alongside other G10 currencies amid easing recession concerns. Canada’s GDP showed modest growth in March, despite falling commodity prices and fears surrounding a potential trade dispute with the US. The resilience in economic data has helped bolster sentiment toward the CAD.

    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.



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  • 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

     



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  • Risk Sentiment Sours on US GDP Contraction, Recession Fears Mount

    Risk Sentiment Sours on US GDP Contraction, Recession Fears Mount


    Risk sentiment soured as US session commenced after data showed the economy unexpectedly contracted in the first quarter. Although the decline was heavily influenced by a surge in imports, which mechanically subtract from GDP calculations, the result still serves as a stark reminder that economic momentum was already faltering even before the full impact of President Donald Trump’s reciprocal tariffs in April

    The weak GDP print has reignited recession fears, and a downturn may have already begun. This narrative is also supported by poor ADP employment report. Attention now turns squarely to Friday’s non-farm payroll data. A meaningful uptick in the unemployment rate or significant weakness in job creation would ring alarm bells for the administration, investors, and Fed alike. W

    In currency markets, the initial reaction has seen a mild shift toward Dollar, which is currently the strongest performer of the day, followed by the Loonie and Swiss Franc. On the other side, Yen, Sterling, and Kiwi are underperforming. However, these rankings remain fluid and may change quickly depending on how risk sentiment evolves in the coming sessions.

    Technically, a focus is now on AUD/USD. Break of 0.6343 support, following broader risk aversion, will confirm short term topping at 0.6448. Deeper decline should then be seen to 38.2% retracement of 0.5913 to 0.6448 at 0.6244. Further break there will target 61.8% retracement at 0.6117.

    In Europe, at the time of writing, FTSE is down -0.28%. DAX is down -0.37%. CAC is down -0.19%. UK 10-year yield is down -0.035 at 4.446. Germany 10-year yield is down -0.04 at 2.459. Earlier in Asia, Nikkei rose 0.57%. Hong Kong HSI rose 0.51%. China Shanghai SSE fell -0.23%. Singapore Strait Times rose 0.72%. Japan 10-year JGB yield closed flat at 1.315.

    US GDP shrinks -0.3% annualized in Q1, price pressures building up

    The US economy unexpectedly contracted in the Q1, with GDP shrinking at an annualized rate of -0.3%, marking the first decline since Q2 2022 and falling well short of expectations for modest 0.4% growth.

    The surprise contraction was driven by a surge in imports and a pullback in government spending, which more than offset gains in investment, consumer spending, and exports.

    Compounding the disappointing headline figure, inflation pressures showed renewed strength. The GDP price index jumped to 3.7% yoy, significantly above the 3.1% yoy forecast and accelerating from 2.3% yoy in Q4.

    US ADP jobs rise just 62k in Apr, well below expectations

    US ADP private sector employment rose by just 62k in April, sharply missing expectations of a 130k increase and marking a notable slowdown in hiring.

    Gains were split between goods-producing industries, which added 26k jobs, and service-providing sectors, which contributed 34k. By establishment size, medium-sized firms led with 40k new jobs, while small and large businesses added 11k and 12k, respectively.

    Pay trends were mixed. Job-stayers saw wage growth slow slightly to 4.5% yoy. Job-changers experienced an uptick in pay increases from 6.7% yoy to 6.9% yoy.

    ADP Chief Economist Nela Richardson described the tone as one of “unease,” as employers balance strong economic signals against growing uncertainty tied to fiscal policy and consumer sentiment.

    Canada’s GDP contracts -0.2% mom in Feb, weakness broad-based across sectors

    Canada’s economy unexpectedly shrank by -0.2% mom in February, missing expectations of flat growth, as a broad-based downturn weighed on output.

    Goods-producing sectors led the decline with a -0.6% mom drop, particularly from mining, quarrying, and oil and gas extraction, as well as construction.

    Sservices sector also edged lower by -0.1% mom, dragged down by transportation, warehousing, and real estate

    12 out of 20 industrial sectors posting declines.

    Looking ahead, preliminary data suggests a modest rebound of 0.1% mom in March, led by gains in mining, retail trade, and transportation.

    Eurozone GDP beats expectation of 0.4% qoq growth, EU up 0.3% qoq

    Eurozone GDP expanded by 0.4% qoq in Q1, doubling market expectations of 0.2% and signaling a stronger-than-anticipated start to the year. Across the broader EU, GDP rose by 0.3% qoq.

    On a year-on-year basis, seasonally adjusted GDP grew 1.2% in the Eurozone and 1.4% in the EU, matching growth rates from the previous quarter.

    Ireland led the regional performance with a sharp 3.2% quarterly increase, followed by Spain and Lithuania with 0.6% growth. Hungary was the only member state to post a quarterly contraction, down -0.2%.

    Swiss KOF falls to 97.1, outlook considerably subdued

    The Swiss KOF Economic Barometer slumped to 97.1 in April, down sharply from 103.9 and well below the expected 102.0, marking its first drop below the medium-term average this year.

    The KOF Swiss Economic Institute noted that the outlook for the Swiss economy is now “considerably subdued,” as broad-based weakness weighed on the indicator.

    According to KOF, the sharp deterioration was primarily driven by a significant setback in manufacturing sentiment, with additional pressure seen across the hospitality and broader services sectors. Financial and insurance services were the only areas showing relative stability.

    Australia’s trimmed mean CPI returns to RBA’s target band, services inflation eases further

    Australia’s headline CPI was unchanged at 2.4% yoy in Q1, above expectations of a slight decline to 2.2% yoy. On a quarterly basis, CPI rose 0.9% qoq, also exceeding forecast of 0.8% qoq.

    The closely watched trimmed mean CPI, a core inflation gauge, slowed from 3.3% yoy to 2.9% yoy , falling back within RBA’s 2–3% target range for the first time since 2021, in line with market expectations. However, the quarterly increase of 0.7% qoq was a touch higher than the anticipated 0.6% qoq.

    Annual goods inflation accelerated from 0.8% yoy to 1.3% yoy, driven by a notable rebound in electricity prices. Services inflation eased from 4.3% yoy to 3.7% yoy, its lowest since mid-2022, amid broad-based moderation in rent and insurance costs.

    NZ ANZ business confidence falls to 49.3, inflation expectations steady

    New Zealand’s ANZ Business Confidence fell sharply in April, dropping from 57.5 to 49.3. The own activity outlook also edged lower from 48.6 to 47.7.

    ANZ noted the decline may reflect growing apprehension over the global economic outlook, particularly uncertainty stemming from the escalating US-China trade war and broader policy unpredictability from the US administration.

    Cost expectations three months ahead surged from 74.1 to 77.9, the highest level since September 2023. This contrasts with a slight dip in pricing intentions, which eased from 51.3 to 49.4. Inflation expectations one year out remained largely steady at 2.65%.

    Japan’s industrial output slides -1.1% mom on auto weakness

    Japan’s industrial production fell by -1.1% mom in March, significantly worse than the anticipated -0.7% mom decline.

    According to the Ministry of Economy, Trade and Industry, the sharp drop was led by a -5.9% mom fall in motor vehicle output. Notably, regular passenger car production slipped -4.1% mom due to weaker export demand, while small vehicle output plunged -23.2% mom, reflecting disruptions in auto parts supply chains.

    The slump in production comes against the backdrop of rising trade tensions, with US President Donald Trump imposing a 25% tariff on car and truck imports and a sweeping 24% tariff on all Japanese goods, later temporarily reduced to 10%.

    Japanese manufacturers surveyed by METI project a recovery ahead, with output expected to rise 1.3% mom in April and 3.9% mom in May. But ministry officials remain cautious. “The environment surrounding production remains highly uncertain,” a METI representative warned, adding that manufacturers are clearly worried about the impact of US tariffs, though no changes to production plans have been formally announced yet.

    Also released, retail sales rose 3.1% yoy in March, below expectations of 3.6%. Still, the result marks the 37th consecutive month of gains, indicating that domestic consumption has yet to show significant signs of stress.

    China’s factory activity slumps on trade conflicts, optimism near record lows

    China’s factory activity slumped sharply in April as official NBS Manufacturing PMI dropped from 50.5 to 49.0, its lowest level since December 2023 and below expectations of 49.9. Non-manufacturing PMI also weakened from 50.8 to 50.4.

    The decline points to early signs of strain from escalating trade tensions, with NBS citing “sharp changes in the external environment” as a key driver.

    Private-sector data painted a similarly cautious picture. Caixin Manufacturing PMI dropped to 50.4, its lowest in three months and just narrowly remaining in expansion.

    Caixin’s Senior Economist Wang Zhe noted that while production and demand grew modestly, the pace has slowed and forward-looking optimism weakened significantly—plunging to the third-lowest level ever recorded. Trade-related uncertainty was a key concern for firms, weighing heavily on sentiment despite hopes for more policy support.

    The April PMIs point to early-stage fallout from the China-US tariff standoff. Businesses are already reporting shrinking employment, delayed logistics, and inventory drawdowns. With both consumer and business confidence faltering, the government faces growing pressure to deploy stimulus measures. Unless domestic demand recovers and external risks subside, China’s economy could face more headwinds in Q2 and beyond.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1362; (P) 1.1394; (R1) 1.1418; More…

    EUR/USD is still bounded in tight range and intraday bias stays neutral. On the downside, break of 1.1306 will extend the correction from 1.1572. But strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to contain downside. On the upside, break of 1.1572 will resume larger up trend.

    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 1.0792) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Industrial Production M/M Mar P -1.10% -0.70% 2.30%
    23:50 JPY Retail Trade Y/Y Mar 3.10% 3.60% 1.40% 1.30%
    01:00 NZD ANZ Business Confidence Apr 49.3 57.5
    01:30 AUD Monthly CPI Y/Y Mar 2.40% 2.40%
    01:30 AUD CPI Q/Q Q1 0.90% 0.80% 0.20%
    01:30 AUD CPI Y/Y Q1 2.40% 2.20% 2.40%
    01:30 AUD RBA Trimmed Mean CPI Q/Q Q1 0.70% 0.60% 0.50%
    01:30 AUD RBA Trimmed Mean CPI Y/Y Q1 2.90% 2.90% 3.20% 3.30%
    01:30 CNY NBS Manufacturing PMI Apr 49 49.9 50.5
    01:30 CNY NBS Non-Manufacturing PMI Apr 50.4 50.7 50.8
    01:45 CNY Caixin Manufacturing PMI Apr 50.4 49.9 51.2
    05:00 JPY Housing Starts Y/Y Mar 39.10% 1.00% 2.40%
    05:30 EUR France GDP Q/Q Q1 P 0.10% 0.10% -0.10%
    06:00 EUR Germany Import Price Index M/M Mar -1.00% -0.70% 0.30%
    06:00 EUR Germany Retail Sales M/M Mar -0.20% -0.40% 0.80%
    07:00 CHF KOF Economic Barometer Apr 97.1 102 103.9
    07:55 EUR Germany Unemployment Change Mar 4K 15K 26K
    07:55 EUR Germany Unemployment Rate Mar 6.30% 6.30% 6.30%
    08:00 EUR Germany GDP Q/Q Q1 P 0.20% 0.20% -0.20%
    08:00 CHF UBS Economic Expectations Apr -51.6 -10.7
    09:00 EUR Eurozone GDP Q/Q Q1 P 0.40% 0.20% 0.20%
    12:00 EUR Germany CPI M/M Apr P 0.40% 0.30% 0.30%
    12:00 EUR Germany CPI Y/Y Apr P 2.10% 2.20%
    12:15 USD ADP Employment Change Apr 62K 130K 155K 147K
    12:30 CAD GDP M/M Feb -0.20% 0.00% 0.40%
    12:30 USD GDP Annualized Q1 P -0.30% 0.40% 2.40%
    12:30 USD GDP Price Index Q1 P 3.70% 3.10% 2.30%
    12:30 USD Employment Cost Index Q1 0.90% 0.90% 0.90%
    13:45 USD Chicago PMI Apr 45.9 47.6
    14:00 USD Personal Income M/M Mar 0.40% 0.80%
    14:00 USD Personal Spending Mar 0.60% 0.40%
    14:00 USD PCE Price Index M/M Mar 0% 0.30%
    14:00 USD PCE Price Index Y/Y Mar 2.20% 2.50%
    14:00 USD Core PCE Price Index M/M Mar 0.10% 0.40%
    14:00 USD Core PCE Price Index Y/Y Mar 2.60% 2.80%
    14:00 USD Pending Home Sales M/M Mar -0.30% 2%
    14:30 USD Crude Oil Inventories -0.6M 0.2M

     



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  • Markets Steady as Trade Headlines Stir Little Reaction

    Markets Steady as Trade Headlines Stir Little Reaction


    Global trading remains subdued, with Japanese markets closed for Showa holiday and investors showing little urgency to take new positions. Canadian dollar saw some choppiness following election results, where the ruling Liberal Party retained power but fell short of a parliamentary majority. Despite the initial volatility, Loonie remained largely range-bound. Broader price action across currency markets has been lackluster, with traders largely holding off on bold moves ahead of major economic data releases later in the week.

    Trade tensions continue to dominate headlines, though markets appear largely desensitized for now. Even news that the Trump administration is preparing to soften the impact of auto tariffs generated minimal reaction. According to reports, the White House plans to reduce the burden on domestic automakers by easing tariffs on imported parts and preventing overlapping duties on finished vehicles, particularly steel and aluminum. Refunds for tariffs already paid are also expected. A White House official confirmed the details, saying a formal announcement would come Tuesday.

    The geopolitical side of trade is also evolving. Foreign ministers from the BRICS countries met to discuss a coordinated response to the latest wave of US tariffs. China, having faced the most severe hit with 145% tariffs on its exports to the US, pushed for a more confrontational stance. However, the final communique is expected to strike a critical yet restrained tone, signaling frustration without escalating tensions further.

    Markets will keep an eye on today’s consumer sentiment releases from Germany and the US, although any impact may be fleeting. The next focus is on tomorrow’s releases of Eurozone and US GDP figures. With recession concerns resurfacing globally, these numbers could shape expectations for the next moves Fed and ECB.

    In terms of currency performance so far this week, Yen leads the pack, followed by Sterling and Swiss Franc. At the other end, Kiwi has reversed to become the weakest performer, trailed by Loonie and Dollar. Euro and Aussie are holding to middle ground.

    Technically, GBP/USD’s breach of 1.3433 (2024 high) suggests that up trend from 1.0351 (2022 low) is trying to resume. Sustained trading above 1.3433 will confirm this bullish case. Next near term target will be 61.8% projection of 1.2706 to 1.3422 from 1.3232 at 1.3674. However, break of 1.3232 support will indicate rejection from 1.3433, and bring deeper decline back to 55 D EMA (now at 1.2978) and possibly below.

    In Asia, Japan is on holiday. At the time of writing, Hong Kong HSI is up 0.11%. China Shanghai SSE is down -0.13%. Singapore Strait Times is up 0.20%. Overnight, DOW rose 0.28%. S&P 500 rose 0.06%. NASDAQ fell -0.10%. 10-year yield fell -0.050 to 4.216.

    RBA’s Kent highlights surge in FX volatility, stresses importance of market standards

    In a speech today, RBA Assistant Governor Christopher Kent noted that early April saw some of the most extreme movements outside of the global financial crisis. He highlighted that Australian Dollar fluctuated within a range of 4 US cents and at one point suffered a 4.5% daily decline against the greenback — an unusually large move.

    Kent also pointed out that broader measures of FX volatility, such as those derived from options markets, spiked to levels last seen during the pandemic, with liquidity conditions deteriorating noticeably.

    While market conditions have calmed somewhat in recent days, Kent emphasized that such episodes serve as a reminder of the crucial role played by the Foreign Exchange Global Code.

    He stressed that in periods of heightened uncertainty, the Code’s standardized practices and commitment to transparency help maintain trust between participants and ensure smoother market functioning even amid significant economic shocks.

    Canadian Dollar steady as Liberals projected to retain power, but lack majority

    Canadian Dollar remained steady following the country’s general election, with only a brief uptick in volatility as early results began to unfold. The ruling Liberal Party, led by Prime Minister Mark Carney, is projected to retain power. But the lack of clarity over whether they will secure a majority quickly tempered any bullish reaction in the Loonie.

    With the Liberals leading in 156 districts versus the Conservatives’ 145, the party still falls short of the 172 seats needed for a majority in the 343-seat House of Commons.

    Carney’s leadership, a former head of both BoC and BoE, is seen as a sign of stability for the country, offering some reassurance to investors. However, his tougher stance toward the US over tariffs suggests that trade relationship could face renewed challenges in the months ahead, with more difficult negotiations expected.

    Technically, USD/CAD is still extending the consolidations from 1.3780 short term bottom. Another bounce could be seen through 1.3903 minor resistance. But upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166). Fall from 1.4791 is expected to resume at a later stage.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6389; (P) 0.6412; (R1) 0.6456; More…

    Intraday bias in AUD/USD is back on the upside with breach of 0.6438. Rise from 0.5913 should be resuming for 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6343 support will confirm short term topping, and turn bias back to the downside for 55 D EMA (now at 0.6310) and below.

    In the bigger picture, as long as 55 W EMA (now at 0.6440) holds, the down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Shop Price Index Y/Y Apr -0.10% -0.20% -0.40%
    06:00 EUR Germany GfK Consumer Sentiment May -26 -24.5
    08:00 EUR Eurozone M3 Money Supply Y/Y Mar 4.00% 4.00%
    09:00 EUR Eurozone Economic Sentiment Apr 94.5 95.2
    09:00 EUR Eurozone Industrial Confidence Apr -10.7 -10.6
    09:00 EUR Eurozone Services Sentiment Apr 2.4
    09:00 EUR Eurozone Consumer Confidence Apr F -16.7 -16.7
    12:30 USD Goods Trade Balance (USD) Mar P -146.3B -147.9B
    12:30 USD Wholesale Inventories Mar P 0.70% 0.30%
    13:00 USD S&P/Case-Shiller Home Price Indices Y/Y Feb 4.80% 4.70%
    13:00 USD Housing Price Index M/M Feb 0.30% 0.20%
    14:00 USD Consumer Confidence Apr 87.1 92.9

     



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