Tag: EUR

  • Risk-On Sentiment Regains Control as Data Downplays Severity of Tariff Shock

    Risk-On Sentiment Regains Control as Data Downplays Severity of Tariff Shock


    Global risk sentiment continued to improve last week, with major equity indices staging robust rallies as investor anxiety over the fallout from tariffs eased. The solid US non-farm payroll data was a key turning point, reassuring markets that the early economic impact of the trade shock was not as damaging as initially feared. Added to that, there were signs of progress on multiple trade negotiation fronts, including a potential thaw in US-China relations.

    In the currency markets, Aussie was the top performer, buoyed not only by improving risk appetite but also by stronger-than-expected inflation data, which suggests the RBA’s easing path may remain gradual. Loonie followed as second benefiting from political stability after the Canadian elections. Swiss Franc ranked third.

    On the other hand, Yen fell the most, under pressure from a dovish BoJ that downgraded its growth outlook. Euro was the second weakest performer, reversing some of its earlier strength despite a sharper-than-expected acceleration in core inflation. Sterling also lagged as third worst. Dollar and New Zealand Dollar ended the week in the middle of the pack.

    US Stocks Erase April Losses as Payrolls Soothe Growth Fears, Fed Cut Odds Fall

    The US markets have decisively moved past the turmoil sparked by the reciprocal tariff announcements in April. Investor confidence has fully recovered, especially in equities with both S&P 500 and NASDAQ reversed all losses from April. S&P 500 even notched a remarkable nine consecutive days of gains, its longest winning streak since 2004. DOW is also on track to complete a full reversal.

    Sentiment had wavered briefly after Q1 GDP showed an unexpected contraction. However, those concerns were largely alleviated by April’s non-farm payroll report, which showed solid job creation and stable unemployment. The data suggests that while trade disruptions remain a concern, the labor market is resilient and the broader economy is still on strong footing. This has helped markets conclude that the immediate economic damage from the tariff standoff is more modest than feared.

    Looking ahead, the 90-day tariff truce, set to expire in early July, becomes the next major milestone for investors. There are tentative signs of progress on trade negotiations, including fresh signals from China that it may be open to returning to the table. While expectations for a zero-tariff outcome remain low, the fear of escalation to a worst-case scenario has clearly eased. Markets appear to be pricing in a more constructive path, even if slow-moving and politically complex.

    At the same time, expectations for Fed policy are undergoing a recalibration. With the labor market holding firm and inflation still persistent, the urgency for another rate cut has diminished. Fed fund futures are now pricing just a 35% chance of a cut in June — down sharply from 63% a week ago and nearly 80% at the start of April. Importantly, this moderation in rate cut bets is being absorbed without negative market reaction, signaling that investors are comfortable with Fed remaining on hold for longer.

    Technically, S&P 500’s rally from the 4835.04 low is seen as the second leg in the medium-term pattern from 6147.43 record high. Further upside is favored in the near term as long as 5433.24 support holds. But significant resistance around 6147.43 to bring the third leg of the pattern.

    In the bigger picture, the long term up trend remains intact. S&P 500 is well supported by long term rising channel, and managed to defend 4818.62 resistance turned support (2022 high).

    An upside breakout is possible during the second half of the year. But that would depend on two key elements: the resolution of trade uncertainty and continued economic resilience.

    If July’s truce deadline passes without escalation — or better yet, with concrete de-escalation — and economic data remains firm, then a new record would be on the horizon.

    Yields Rise on Risk-On Flow, But Dollar Fails to Ride the Wave

    US 10-year Treasury yield staged a rally rebound on Friday, in tandem with equities. Unlike previous yield spikes driven by capital flight, this surge appears rooted in a rotation out of safe-haven assets and into equities, as risk appetite returned.

    Technically, 10-year yield’s pull back from 4.592 has likely completed with three waves down to 4.124. Break of 4.407 resistance will solidify this bullish case. Rise from 3.886 could then be resuming through 4.592 resistance to 100% projection of 3.886 to 4.592 from 4.124 at 4.830.

    In contrast, Dollar has failed to capitalize on either yield strength or reduced recession anxiety. Expectations for Fed to keep interest rates elevated longer may provide some underlying support. But if risk sentiment continues to improve, demand for USD as a defensive play may continue to weaken, even as yield support holds.

    Technically, firm break of 100.27 resistance in Dollar Index will bring stronger rebound back to 55 D EMA (now at 102.51). But strong resistance should be seen from 38.2% retracement of 110.17 to 97.92 at 102.60 to limit upside.

    Bullish Case Continue to Build for AUD/JPY, with 94.94 Fibonacci Target in Insight

    AUD/JPY ended last week as the top winner and gained 1.56%, on a potent mix of risk-on sentiment and changes in monetary policy outlooks.

    Aussie’s strength was reinforced by Q1 inflation data from Australia. On the one hand, the trimmed mean CPI returned to RBA’s 2–3% target range for the first time since 2021, cementing expectations of a May rate cut. However, stronger than expected headline CPI reading, and renewed goods inflation pressures points to a cautious and gradual easing path, rather than an aggressive cycle.

    In contrast, Yen suffered after BoJ left rates unchanged and sharply downgraded its growth forecast for fiscal 2025, slashing it by more than half. Additionally, core inflation projections were revised lower, raising the risk of falling short of the 2% target again. The downgrade has pushed back expectations of any near-term rate hikes. A June move now looks off the table.

    Technically, the developments continue to affirm the case that corrective fall from 109.36 (2024 high) has completed with three waves down to 86.03.

    Further rally should be seen in the near term as long as 90.57 support holds, to 38.2% retracement of 109.36 to 86.03 at 94.94. Sustained break there will pave the way to 61.8% retracement at 100.44.

    However, rejection by 94.94 fibonacci resistance, followed by break of 90.57 support, will dampen this bullish view and bring retest of 86.03.

    EUR/USD Weekly Outlook

    EUR/USD gyrated lower last week but recovered after hitting 1.1265. Initial bias remains neutral this week first. 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 1.0776) 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 1.1300) 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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  • Markets Cheer Solid NFP, Tariff Fallout Appears Milder Than Feared

    Markets Cheer Solid NFP, Tariff Fallout Appears Milder Than Feared


    Risk assets are rallying to end the week as investors take comfort in the stronger-than-expected US non-farm payroll report. The data helped to offset recession concerns after surprise Q1 GDP contraction. While the GDP miss raised alarms, it was largely attributed to a surge in imports ahead of the April tariff changes, rather than a fundamental decline in domestic activity. Supporting that narrative, both the ISM Manufacturing survey and today labor data suggest that the early effects of tariff uncertainty may be more muted than initially feared.

    Adding to the relief, there are tentative signs that trade negotiations, even with China, are inching forward. Beijing has acknowledged the possibility of returning to the table, though it reiterated that all unilateral US tariffs must be lifted. This narrative of progress, however incremental, has helped support equities and risk-sensitive assets.

    In the currency markets, pro-risk currencies like the Aussie and Kiwi are outperforming today on improved global sentiment. Meanwhile, Dollar is under mild while Sterling and Loonie are also lagging. Euro finds modest support after a surprising acceleration in core inflation.

    In Europe, at the time of writing, FTSE is up 0.94%. DAX is up 2.06%. CAC is up 1.83%. UK 10-year yield is down -0.049 at 4.449. Germany 10-year yield is up 0.049 at 2.496. Earlier in Asia, Nikkei rose 1.04%. Hong Kong HSI rose 1.74%. Singapore Strait Times rose 0.33%. China was on holiday. Japan 10-year JGB yield fell -0.013 to 1.262.

    US NFP grows 177k in April, wage gains losing momentum

    The US labor market delivered another month of solid job creation in April, with non-farm payrolls rising by 177k, beating forecast of 130k. However, the initial blowout March figure was revised down from 228k to 185k, tempering some of the headline strength.

    Still, both readings came in above the 12-month average monthly gain of 152k, signaling continued resilience.

    Unemployment rate held steady at 4.2%, in line with expectations, while labor force participation ticked up slightly to 62.6%.

    Yet, wage pressures appear to be softening. Average hourly earnings rose just 0.2% mom, below the 0.3% mom forecast, bringing the year-over-year growth rate to 3.8%.

    Eurozone core CPI jumps to 2.7% as services inflation accelerates

    Eurozone headline CPI held steady at 2.2% yoy in April, slightly above expectations of 2.1% yoy. CPI core, which excludes energy, food, alcohol & tobacco, surged sharply from 2.4% yoy to 2.7% yoy, surpassing the forecast of 2.5%.

    The acceleration in services inflation to 3.9% from 3.5% drove much of the upside surprise, highlighting persistent domestic price pressures. Meanwhile, energy prices fell more steeply at -3.5%, and non-energy industrial goods inflation was stable at 0.6%.

    Eurozone PMI manufacturing finalized at 49.0, at risk if Chinese exports divert toward Europe

    Eurozone manufacturing sector showed further signs of stabilization in April, with PMI Manufacturing Index finalized at 49.0, its highest reading in 32 months. Output growth was a standout, reaching a 37-month high at 51.5, reflecting a modest but encouraging improvement in activity.

    Country-level data revealed a mixed picture, with Greece (53.2) and Ireland (53.0) leading the expansion, while Spain (48.1) and Austria (46.6) lagged behind. Notably, Germany (48.4) and France (48.2), two core economies, continued to show.

    According to Cyrus de la Rubia at Hamburg Commercial Bank, the stabilization is somewhat unexpected given recent shocks, but optimism is holding up, aided by prospects of ECB rate cuts and the announced increase in EU defense spending.

    Still, challenges remain. While manufacturers expanded margins in April, thanks to falling input costs and faster price hikes, this may not be sustainable. The risk of Chinese goods being redirected to Europe due to US tariffs could intensify competitive pressures, particularly on price.

    Australian retail sales grow 0.3% mom in March, but volumes flat in Q1

    Australian retail sales rose by 0.3% mom in March to AUD 37.28 billion, slightly below expectations of 0.4% growth.

    According to the ABS, food-related spending, particularly in supermarkets and grocery stores, was the main contributor to the uptick, with food and miscellaneous retailing both rising 0.7%. Clothing-related sales also edged higher, but household goods retailing was flat.

    However, the broader trend is subdued, with retail sales volumes—adjusted for inflation—essentially flat over Q1. ABS Head of Business Statistics Robert Ewing noted that the lack of growth reflects weaker household appetite for discretionary goods, following a boost in spending late last year due to heavy promotions.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1257; (P) 1.1299; (R1) 1.1332; More…

    Intraday bias in EUR/USD is turned neutral with current recovery. On the downside, below 1.1265 will resume the correction from 1.1572 short term top. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to complete the correction. On the upside, break of 1.1424 will bring retest of 1.1572 high 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 1.0792) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Building Permits M/M Mar 9.60% 0.70% 0.80%
    23:50 JPY Monetary Base Y/Y Apr -4.80% -2.00% -3.10%
    23:30 JPY Unemployment Rate Mar 2.50% 2.40% 2.40%
    01:30 AUD Retail Sales M/M Mar 0.30% 0.40% 0.20% 0.80%
    01:30 AUD PPI Q/Q Q1 0.90% 0.80% 0.80%
    01:30 AUD PPI Y/Y Q1 3.70% 3.70%
    07:30 CHF Manufacturing PMI Apr 45.8 48.7 48.9
    07:50 EUR France Manufacturing PMI Apr F 48.7 48.2 48.2
    07:55 EUR Germany Manufacturing PMI Apr F 48.4 48 48
    08:00 EUR Eurozone Manufacturing PMI Apr F 49 48.7 48.7
    09:00 EUR ECB Economic Bulletin
    09:00 EUR Eurozone Unemployment Rate Mar 6.20% 6.10% 6.10%
    09:00 EUR Eurozone CPI Y/Y Apr P 2.20% 2.10% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y Apr P 2.70% 2.50% 2.40%
    12:30 USD Nonfarm Payrolls Apr 177K 130K 228K 185K
    12:30 USD Unemployment Rate Apr 4.20% 4.20% 4.20%
    12:30 USD Average Hourly Earnings M/M Apr 0.20% 0.30% 0.30%
    14:00 USD Factory Orders M/M Mar 4.20% 0.60%

     



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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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  • Aussie Inflation Set to Cement RBA May Cut; Month-End Calm Prevails

    Aussie Inflation Set to Cement RBA May Cut; Month-End Calm Prevails


    The forex markets are generally holding steady today, with all major pairs and crosses bounded within yesterday’s range. While month-end lull is at play, caution is also dominating sentiment as traders prepare for a heavy barrage of economic data scheduled from Wednesday through Friday. Key reports include US GDP and non-farm payrolls, along with Eurozone GDP and CPI flash estimates.

    Also, in the upcoming Asian session, Australia’s Q1 inflation report will be a major highlight. Focus will be on whether the closely watched trimmed mean CPI falls back within the RBA’s 2-3% target range for the first time since 2021. If realized, this would solidify expectations for a 25bps rate cut in May, a view that has become the base case for three of Australia’s big four banks.

    Some speculation persists about the possibility of a larger 50bps cut by RBA, especially given mounting trade risks. But many analysts argue that such a move would risk sending an unnecessary panic signal to markets. Still, any deep downside surprise in tomorrow’s inflation data could quickly shift those odds.

    Technically, EUR/AUD’s price actions from 1.8554 are seen as a triangle consolidation pattern. Break of 1.8014 resistance will argue that the pattern has completed, and larger rally from 1.5963 is ready to resume through 1.8554 high. However, firm break of 38.2% retracement of 1.5963 to 1.8854 at 1.7750 will dampen this view, and indicate that deeper correction is underway.

    Overall for the week so far, Yen is staying as the strongest on, followed by Sterling, and then Swiss Franc. Kiwi is the worst, followed by Dollar, and then Loonie. Euro and Aussie are positioning in the middle.

    In Europe, at the time of writing, FTSE is up 0.12%. DAX is up 0.56%. CAC is down -0.26%. UK 10-year yield is down -0.026 at 4.487. Germany 10-year yield is down -0.027 at 2.502. Earlier in Asia, Japan was on holiday. Hong Kong HSI rose 0.16%. China Shanghai SSE fell -0.05%. Singapore Strait Times fell -0.17%.

    ECB consumer survey shows inflation expectations ticking higher

    ECB’s Consumer Expectations Survey for March showed that consumers are raising their inflation views in a relatively measured manner rather than in a panic. Overall, the results present a slight inflationary concern on one side, but still subdued growth prospects on the other.

    Median expectations for inflation over the next 12 months rose by 0.3% to 2.9%, the highest level since April 2024.

    Looking further ahead, expectations for inflation three years out edged up by 0.1% to 2.5%, also hitting a one-year high.

    Newly introduced five-year inflation expectations remained stable at 2.1%, suggesting longer-term expectations remain relatively anchored.

    Uncertainty about the inflation outlook remained at its lowest level since January 2022.

    On the broader economic front, the survey indicated that consumers’ income growth expectations stayed unchanged at a modest 1.0% over the next year, while expected nominal spending growth edged down to 3.4%.

    Economic growth expectations remained weak, steady at -1.2% for the next 12 months.

    ECB’s Cipollone warns trade fragmentation could severely hit global and Eurozone growth

    ECB Executive Board member Piero Cipollone warned today that the recent surge in trade policy uncertainty poses a material risk to Eurozone growth. In a speech, he highlighted internal ECB research suggesting that rising uncertainty could trim Eurozone business investment by -1.1% in the first year, while real GDP growth could fall by about -0.2% in 2025-26.

    Financial market volatility, elevated due to the global trade tensions, could further drag on growth. ECB staff estimate that the observed increase in volatility alone could shave an additional -0.2% off Eurozone GDP in 2025.

    Cipollone emphasized that over the medium term, tariffs will have an “unambiguously recessionary effect” across both economies imposing and receiving restrictions, and noted that the ability of exchange rates to “absorb tariff shocks” appears to have diminished.

    ECB’s analysis of fragmentation scenarios paints an even bleaker picture. In a mild East-West decoupling, global output could drop by nearly -2%. In a severe decoupling where trade between blocs halts entirely, global output could plunge by up to -9%.

    Trade-dependent economies would bear the heaviest losses, with the EU facing a GDP decline of between -2.4% and -9.5% depending on the severity. Notably, the US itself could suffer a near -11% contraction in the most extreme case if it “imposed additional trade restrictions against western and neutral economies”.

    While the growth impact of trade fragmentation is clear, the inflationary effects remain less certain. For the Eurozone, recessionary forces, stronger real interest rates, and Euro appreciation could generate a “disinflationary: trend in the near to medium term.

    German Gfk consumer sentiment rises to -20.6, domestic political stability offsets trade concerns

    Germany’s GfK Consumer Sentiment Index for May rose from -24.3 to -20.6 and outperforming expectations for a decline to -26.0.

    In April, key underlying indicators also showed encouraging signs. Income expectations rose sharply for a second straight month, climbing 7.4 points to 4.3, their highest level since October 2024. Economic expectations increased modestly for a third consecutive month. Willingness to save fell, while willingness to buy improved slightly.

    Rolf Bürkl, consumer expert at NIM, noted that US President Donald Trump’s aggressive tariff announcements in early April have “not yet had lasting impacts on consumer sentiment” in Germany.

    Instead, German consumers appear more reassured by the domestic political backdrop, particularly the successful conclusion of coalition negotiations and the imminent formation of a new government. The easing of political uncertainty has helped mitigate potential negative effects from external trade tensions.

    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.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8159; (P) 0.8239; (R1) 0.8280; More….

    No change in USD/CHF’s outlook and intraday bias remains neutral. On the upside, above 0.8333 will resume the rebound from 0.8038 short term bottom. But 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 0.8783) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Shop Price Index Y/Y Apr -0.10% -0.20% -0.40%
    06:00 EUR Germany GfK Consumer Sentiment May -20.6 -26 -24.5 -24.3
    08:00 EUR Eurozone M3 Money Supply Y/Y Mar 3.60% 4.00% 4.00% 3.90%
    09:00 EUR Eurozone Economic Sentiment Apr 93.6 94.5 95.2 95
    09:00 EUR Eurozone Industrial Confidence Apr -11.2 -10.7 -10.6 -10.7
    09:00 EUR Eurozone Services Sentiment Apr 1.4 2.4 2.2
    09:00 EUR Eurozone Consumer Confidence Apr F -16.7 -16.7 -16.7
    12:30 USD Goods Trade Balance (USD) Mar P -162.0B -146.3B -147.9B
    12:30 USD Wholesale Inventories Mar P 0.50% 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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  • Global Risk Sentiment Brightens, But Caution Lingers Around US Assets

    Global Risk Sentiment Brightens, But Caution Lingers Around US Assets


    Global risk sentiment showed further improvement last week, with stock markets around the world posting impressive gains. Although headlines continued to focus on the confusing state of U.S.-China trade tensions, there was quiet but notable progress on multiple trade fronts, including US talks with Japan, South Korea and India.

    US equities rebounded alongside the global rally even though they still lack the decisive momentum needed to confirm that a durable bottom has been established. European markets, on the other hand, painted a far more encouraging picture.

    The strength of the rebound in European equities suggests that the worst of the April selloff may already be behind us. Moreover, there is a growing sense that the sharpest phase of the tariff crisis has passed, and that incremental improvements could take root from here.

    The shift in sentiment was clearly reflected in the currency markets too. Kiwi ended the week as the strongest performer, followed by Aussie and Sterling. All three currencies benefited from the rebound in risk appetite, with investors rotating out of safe-haven assets and into higher-yielding or growth-linked currencies. On the other end, the safe-haven trio—Swiss Franc, Yen, and Euro—underperformed, as investors rotated away from defensive assets amid easing fears. Dollar and Loonie finished in the middle of the pack.

    While the equity rally suggests a return of broader risk appetite, investor interest in US assets has yet to fully recover. This is likely due to ongoing concerns over U.S. policy consistency and the uncertain path for trade negotiations. Until clearer signals emerge from Washington and stronger technical confirmations develop in US stock markets, Dollar may continue to lag behind the recovery seen elsewhere.

    Markets Rally on Trade Progress, But Major Hurdles with China and EU Remain

    Global stock markets extended their strong rally last week. There seems to be growing optimism that the worst phase of the tariff crisis may be behind us, at least for now. Trade negotiations appear to be picking up momentum across several fronts, offering hope for partial resolutions. Recent economic data, particularly PMI surveys from the Eurozone and the US, suggest that businesses have been bracing well for uncertainty, cushioning the blow from trade tensions.

    In an interview with Time magazine on Friday, US President Donald Trump said he expects “many” trade deals to fall into place over the next three to four weeks. Positive signals are emerging from several bilateral channels too. Japan’s Economy Minister Ryosei Akazawa is set to visit Washington this week for a second round of talks. US Treasury Secretary Scott Bessent has hinted that a US-South Korea trade deal could be finalized as early as next week. US and India are reported to have agreed on the terms for a bilateral deal covering trade in goods, services, and critical sectors like e-commerce and minerals. Switzerland also announced it was among a group of 15 countries given “somewhat preferential treatment” in tariff talks, with Swiss President Karin Keller-Sutter indicating that the 90-day truce could be extended for active negotiating partners.

    However, not all fronts are moving smoothly. Despite initial discussions, talks between the US and the EU have yet to yield tangible compromises. Progress remains slow, even in setting a basic framework for formal negotiations. The slow movement with Europe highlights that achieving broad global de-escalation is far from guaranteed.

    Meanwhile, the situation with China remains the murkiest. Rumors continue to swirl about informal discussions, but no clear confirmation has been provided by either side. Trump insists that some communication with Beijing is ongoing, while Chinese officials deny that any talks are happening. Although there were earlier hopes for de-escalation, Trump has reiterated that tariffs on China will remain in place unless “they give us something substantial.”

    Without a clear breakthrough or even a defined negotiation channel, US-China trade tensions remain a major overhang for global markets, tempering some of the broader optimism.

    European Strength Offers Hope, Caution Persists for US Indexes

    While US stocks have staged a strong rebound recently, the technical backdrop remains somewhat unconvincing. The recovery lacks decisive confirmation, particularly in DOW. In contrast, the outperformance seen in European markets is offering hope that the worst of the market correction could already be behind us. Particularly in the UK and Germany, technical signals suggest that early April’s steep selloff may have been a medium-term shakeout rather than the start of a long-term bearish trend.

    In the UK, FTSE ‘s breach of 55 D EMA (now at 8420.51) and break of 55 W EMA (now at 8260.66) suggest that corrective fall from 8900.82 has already completed at 7554.83. Price actions from 8908.82 is likely just a medium term consolidations pattern, rather than a long term bearish trend reversal. The range of the consolidations should be set between 38.2% retracement of 4898.79 to 8902.82 at 7376.99 and 8908.82.

    Nevertheless, for the near term, while further rise could be seen as long as 8166.53 support holds, FTSE should start to lose momentum above 55 D EMA.

    Germany’s DAX tells a similar story. The index’s corrective fall from the 23476.01 has likely completed at 18489.91. What we are seeing now is a medium-term consolidation rather than a full trend reversal. The range is set between 38.2% retracement of 8255.65 to 23476.01 at 17661.83 and 23476.01.

    For the near term, further rise is in favor as long as 21044.61 support hold. But DAX should lose momentum as it approaches 23476.01 high.

    Turning to the US, developments in Europe suggest that DOW may eventually find solid support from 38.2% retracement of 18213.65 to 45073.63 at 34813.12 to contain downside even in case of another fall, should another selloff occur. Still, firm break of 55 D EMA (now at 41361.53) is needed to indicate that fall from 45703.63 has completed. Or risk will remain on the downside for the near term.

    NASDAQ’s picture is a little bit more promising than DOW. Firm break of 55 D EMA (now at 17604.27) will indicate that fall from 2024.58 has completed at 14783.03, after defending 38.2% retracement of 6631.42 to 20204.58 at 15019.63. That should set the range for medium term consolidations for NASDAQ.

    Dollar Struggles Despite Risk Stabilization, Policy Uncertainty Remains a Drag

    While risk sentiment has shown signs of stabilizing in global markets, and even hints at a return of risk appetite, this does not necessarily imply a renewed interest in US assets. In particular, both the Dollar and US. Treasuries continue to face headwinds until investors see more policy consistency from the Trump administration. Markets remain wary of abrupt shifts in trade policy, tariff threats, and broader economic strategies, which cloud the overall investment climate for Dollar-based assets.

    Another important factor is the evolving US trade balance. Should the Trump administration succeed in narrowing the US trade deficit, there could be a meaningful structural impact on the demand for Dollar-denominated assets. A narrower deficit would mean fewer surplus Dollars circulating abroad to be recycled into US Treasuries and other assets, potentially pushing yields higher and softening the Dollar’s appeal at the same time, particularly if fiscal deficits remain large.

    Technically, Dollar Index’s recovery from 97.92 short term bottom is lacking decisive momentum. As long as 100.27 resistance holds, near term risk will remain on the downside for another fall through 97.92 sooner rather than later. Break of 97.92 will pave the way to 100% projection of 114.77 to 99.57 from 110.17 at 94.97 next.

    Nevertheless, firm break of 100.27 would set the stage for stronger rebound to 38.2% retracement of 110.17 to 97.92 at 102.60, even still as a corrective move.

    NZD/JPY Extends Rebound, Bullish Reversal Hinges on 87.35 Break

    NZD/JPY extended the rebound from 79.79 last week as risk sentiment continued to improve. The breach of falling trend line resistance is a tentative sign that fall from 92.45 has completed at 79.79. Further rise is now in favor as long as 83.88 support holds.

    On the upside, decisive break of 87.35 cluster resistance (38.2% retracement of 99.01 to 79.79 at 87.13) will argue that corrective decline from 99.01 has already completed too. Further rally should then be seen to 61.8% retracement at 91.66.

    However, rejection by 87.13/35 will keep near term outlook bearish. Break of 83.88 support will bring retest of 79.79, and possibly resumption of the down trend from 99.01 too.

    EUR/CHF Weekly Outlook

    EUR/CHF’s stronger than expected rebound last week suggests that fall from 0.9660 has already completed at 0.9218, ahead of 0.9204 low. Rebound from 0.9218 is either a corrective move, or the third leg of the pattern from 0.9204. In either case, further rally is expected this week as long as 0.9336 support holds, towards 0.9660. However, break of 0.9336 will bring retest of 0.9204/18 support zone.

    In the bigger picture, prior rejection by long-term falling channel resistance (now at 0.9555) retains medium term bearishness. That is, down trend from 1.2004 (2018 high) is still in progress. Firm break of 0.9204 (2024 low) will confirm resumption. This will remain the favored case as long as 0.9660 resistance holds.

    In the long term picture, overall long term down trend is still in force in EUR/CHF. Outlook will continue to stay bearish as long as 55 M EMA (now at 0.9962) holds.



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  • Fragile Calm Returns to Markets as Focus Shifts to Fed Remarks

    Fragile Calm Returns to Markets as Focus Shifts to Fed Remarks


    Global markets saw a modest pause in volatility today as risk sentiment stabilized following yesterday’s US selloff. US futures are pointing to a mild recovery, helping to calm nerves in early trading. Meanwhile, US 10-year Treasury yield dipped slightly but remains elevated around 4.4%, reflecting persistent investor caution. Gold also retreated marginally after coming within striking distance of the 3500 mark earlier in the session, as the appetite for safe havens eased slightly.

    Despite today’s calm, market sentiment remains on a knife edge. The political backdrop in the US continues to cast a long shadow over financial markets, with fears about Fed’s independence following recent attacks by US President Donald Trump. Any further comments from US officials questioning Fed’s autonomy could quickly reignite volatility. For now, the market is watching closely for signals from a lineup of Fed speakers scheduled for the US session, who are expected to reinforce the central bank’s institutional independence and data-driven approach.

    On the trade front, optimism remains scarce. The ongoing 90-day truce on US reciprocal tariffs has so far yielded little tangible progress, with talks reportedly stalling even among close allies like Japan. Uncertainty over what happens when the truce expires continues to weigh on global confidence, limiting the potential for any sustained rebound in risk assets.

    In the currency markets, Loonie is underperforming for the week so far, followed by Dollar and Aussie. Yen leads on the stronger side, followed by Kiwi and Euro. Sterling and the Swiss Franc are positioning themselves in the middle of the pack.

    Looking ahead, attention will quickly shift to tomorrow’s global flash PMI releases, which will provide a crucial read on business activity, prices and sentiment across major economies. These surveys will be particularly important in gauging the fallout from recent tariff shocks and in setting the tone for monetary policy discussions in the weeks ahead.

    Technically, CAD/JPY’s fall from 111.55 is now trying to resume through 101.36 support. The key level to watch is 61.8% projection of 110.45 to 101.36 from 105.85 at 100.23. There is prospect of a bounce from there to complete the five wave sequence from 111.55. However, firm break there should bring downside acceleration to 100% projection at 96.76 next.

    In Europe, at the time of writing, FTSE is up 0.27%. DAX is down -0.46%. CAC is down -0.31%. UK 10-year yield is up 0.012 at 4.582. Germany 10-year yield is down -0.014 at 2.459. Earlier in Asia, Nikkei fell -0.17%. Hong Kong HSI rose 0.78%. China Shanghai SSE rose 0.25%. Singapore Strait Times rose 0.96%. Japan 10-year JGB yield rose 0.022 to 1.311.

    ECB Survey: Inflation expectations tick higher, growth outlook softens

    ECB’s latest Survey of Professional Forecasters for Q2 showed a modest upward revision to inflation expectations, signaling persistent price pressures across the Eurozone.

    Headline HICP inflation is now expected to average 2.2% in 2025, before easing to 2.0% in both 2026 and 2027. These figures reflect a 0.1% upward revision for 2025 and 2026. Figures for 2027 was left unchanged.

    Core inflation, which excludes energy and food, was also revised slightly higher across all horizons, now projected at 2.3% (prior 2.2%) in 2025 and 2.1% (prior 2.0%) for both 2026 and 2027.

    Long-term expectations for headline inflation remain anchored at 2.0%, with core inflation expectations edging up from 1.9% to 2.0%.

    On the growth front, the outlook was revised slightly lower for the near term. Real GDP is expected to expand by 0.9% in 2025 and 1.2% in 2026—both down -0.1% from the prior survey—before picking up to 1.4% in 2027. Longer-term growth expectations remain unchanged at 1.3%.

    ECB’s Kazimir sees rate near neutral, emphasize flexibility and agility

    Slovak ECB Governing Council member Peter Kazimir said in a blog post today that Eurozone inflation is approaching the 2% target and expressed confidence that it will be reached “within the next few months.”

    Following the recent rate cut, Kazimir suggested that ECB’s deposit rate at 2.25% is no longer restrictive and could now be considered close to neutral.

    Meanwhile, Kazimir cautioned that the economic backdrop remains highly volatile, with uncertainty continuing to dominate the outlook.

    “We are operating in a fast-shifting environment,” he said, pointing to escalating global trade tensions linked to US tariff policies as a key source of instability. He warned that this unpredictability “introduced significant ambiguity into the system, eroding confidence.”

    Looking ahead to the June meeting, Kazimir emphasized that any decision will depend on incoming data, revised economic forecasts, and a comprehensive risk assessment. His comments reinforce the central bank’s commitment to “flexibility and agility.”

    BoE’s Greene: US tariffs more of a disinflationary risk for the UK

    BoE Monetary Policy Committee member Megan Greene stated today that the US tariffs pose “more of a disinflationary risk than an inflationary risk” for the UK.

    However, she emphasized that domestic factors also remain a concern, particularly the UK’s limited supply capacity, which continues to drive underlying inflationary pressures.

    Greene highlighted that this supply-side constraint is a key reason behind her cautious stance on interest rate cuts.

    Addressing questions on central bank independence amid political scrutiny of the Fed, Greene emphasized the importance of maintaining institutional credibility.

    “Credibility is the currency of central banks,” she said, adding that independence is a critical component of that credibility.

    New Zealand posts surprise NZD 970m trade surplus as exports surge 19%

    New Zealand recorded stronger-than-expected trade surplus of NZD 970m in March, far exceeding forecasts of NZD 80m. The surprise was driven by a robust 19% yoy increase in goods exports, which rose by NZD 1.2B to NZD 7.6B. Imports also grew, up 12% yoy to NZD 6.6B.

    Export performance was particularly strong across key trading partners. Shipments to China rose by NZD 371m (23% yoy), while exports to the US and the EU grew by 22% yoy and 51% yoy respectively. Exports to Japan also increased 11% yoy, although shipments to Australia dipped slightly, down -0.47% yoy.

    On the import side, the largest increases came from the US, with a 48% yoy jump worth NZD 243m. This was followed by China and the EU, which posted 14% yoy and 19% yoy gains respectively. Imports from South Korea bucked the trend, falling -12% yoy.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1414; (P) 1.1494; (R1) 1.1592; More…

    Further rally is expected in EUR/USD as long as 1.1357 support holds. Current rise from 1.0176 should target 161.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1694 next. Nevertheless, considering bearish divergence condition in 4H MACD, break of 1.1357 should indicate short term topping. Intraday bias will be turned back to the downside for deeper pullback.

    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 1.0776) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Trade Balance (NZD) Mar 970M 80M 510M 392M
    12:30 CAD Industrial Product Price M/M Mar 0.50% 0.30% 0.40%
    12:30 CAD Raw Material Price Index M/M Mar -1.00% 0.00% 0.30%
    14:00 EUR Eurozone Consumer Confidence Apr P -15 -15

     



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  • Dollar Slumps as Fed Independence in Question; Euro and Gold Surge on Haven Demand

    Dollar Slumps as Fed Independence in Question; Euro and Gold Surge on Haven Demand


    Dollar weakened broadly in thin holiday trading today, dragged down by mounting concerns over the independence of the Federal Reserve. Investor anxiety escalated after White House economic adviser Kevin Hassett indicated that US President Donald Trump is continuing to explore whether he can remove Fed Chair Jerome Powell. While the legal basis for such a move is untested and unclear, the mere suggestion of political interference in the central bank’s policy process has significantly undermined market confidence.

    This brewing conflict comes amid already heightened uncertainty surrounding US trade policy. Trump’s aggressive use of tariffs, most recently through sweeping reciprocal levies, has put the Fed in a difficult position. Officials including Powell have repeatedly warned that tariffs could simultaneously fuel inflation and suppress economic growth, increasing the risk of stagflation. A sudden crystallization of the threat to Fed independence would not only worsen market volatility but also raise tail risks, potentially triggering a broader loss of faith in US assets.

    Powell, for his part, has firmly defended the Fed’s independence. In remarks last week, he asserted, “We’re never going to be influenced by any political pressure… Our independence is a matter of law.” He also reminded that Fed governors “are not removable except for cause,” and emphasized the long, fixed terms that protect against political meddling. While the “cause” does not typically include policy disagreements, the intensifying standoff with the White House has cast a long shadow over US institutions. Ad for now, the markets appear to be voting with their feet—out of the Dollar and into alternatives.

    Euro has emerged as the biggest gainer in today’s subdued session, extending recent strength as investors seek refuge in the most liquid and viable alternative to Dollar. With its deep capital markets, relative political stability, and credible central bank, Euro is increasingly seen as a safer store of value amid the implosion of confidence in US governance. Other safe havens like the Japanese Yen and Swiss Franc are also holding firm, but it is Euro and Gold that are leading the charge.

    Gold prices have surged to fresh record highs, fueled by a flight to safety and fears of policy instability. Technically, Gold is still in upside acceleration as suggested in D MACD. Despite overbought condition, there is no sign of topping yet. Decisive break of 161.8% projection of 2293.45 to 2789.92 from 2584.24 at 3387.52 will pave the way to 200% projection at 3577.18 next. Outlook will stay bullish as long as 3167.60 resistance turned support holds, in case of retreat.

    China holds benchmark lending rates steady

    China kept its benchmark lending rates unchanged for the sixth consecutive month today. One-year loan prime rate was held at 3.1% and the five-year LPR steady at 3.6%.

    Subdued domestic inflation and growing global trade headwind, particularly the latest wave of tariff threats from the US, argue in favor of further policy easing However, PBoC appears reluctant to move ahead of Fed.

    A premature rate cut could exacerbate downward pressure on the yuan, fueling capital outflows and financial instability.

    April PMIs to gauge global business fallout from tariffs

    The spotlight in the coming week will be on the flash PMI readings for April, covering major economies including Australia, Japan, the Eurozone, the UK, and the U.S. These surveys will serve as a timely barometer for assessing how global business conditions have responded to the surge in trade tensions following US President Donald Trump’s “Liberation Day” tariff announcement earlier this month.

    March PMIs had already reflected some of the early impact of trade policy uncertainty, particularly in North America. Notable takeaways included rising manufacturing input costs in the US and early signs of softening trade flows.

    The upcoming data will be critical in identifying how deeply those measures are now affecting business conditions. Analysts will be watching for deterioration in new orders, delivery times, and price components—key indicators of disrupted supply chains and cost pass-through.

    Beyond the PMIs, a series of supporting data will also shape market sentiment. US durable goods orders will be closely watched for signs of weakening beyond autos. Germany’s Ifo business climate and expectations index will give a read on sentiment in Europe’s largest economy. Additionally, retail sales data from both the UK and Canada could reflect how consumers are responding to expected price shifts and economic uncertainty.

    Here are some highlights for the week:

    • Monday: China loan prime rate decision.
    • Tuesday: Canada IPPI and RMPI; Eurozone consumer confidence.
    • Wednesday: Australia PMIs; JapanPMIs, tertiary industry index; Eurozone PMIs, trade balance; UK PMIs; US PMIs, new home sales, Fed’s Beige Book.
    • Thursday: Japan corporate service prices; Germany Ifo; US jobless claims, durable goods, existing home sales.
    • Friday: Japan Tokyo CPI; UK Gfk consumer sentiment, retail sales; Canada retail sales.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1314; (P) 1.1363; (R1) 1.1449; More…

    EUR/USD’s rally resumed by breaking through 1.1472 today and intraday bias is back on the upside. Current rise from 1.0176 should target 161.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1694 next. On the downside, below 1.1357 minor support will turn intraday bias neutral and bring consolidations again, before staging another rally.

    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 1.0776) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:00 CNY 1-Y Loan Prime Rate 3.10% 3.10% 3.10%
    01:00 CNY 5-Y Loan Prime Rate 3.60% 3.60% 3.60%
    14:00 USD Leading Indicator Apr -0.50% -0.30%

     



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  • No Reaction to ECB Cut as Markets Drift in Pre-Holiday Lull

    No Reaction to ECB Cut as Markets Drift in Pre-Holiday Lull


    Trading in the forex markets remain calm, with little reaction to ECB’s widely anticipated 25bps rate cut. The move to lower its deposit rate to 2.25% was fully priced in. The central bank acknowledged that Eurozone growth prospects have deteriorated due to escalating global trade tensions, but this has long been embedded in market expectations. The absence of any forward guidance or new policy direction helped reinforce the market’s muted tone.

    Indeed, the primary focus for investors remains the intensifying US trade war and its ripple effects on global economic sentiment. As markets break for the Easter weekend, investors are bracing for trade policy to return to center stage next week. The lack of clarity surrounding tariff policy and broader US trade strategy is increasingly weighing on corporate confidence. U.S. firms, in particular, are becoming more hesitant to invest or expand amid the shifting policy environment.

    A Reuters poll conducted between April 14–17 illustrates the rising unease. The probability of a US recession within the next 12 months surged to 45%, up sharply from 25% in March and marking the highest reading since December 2023. All 45 economists who responded to a related question said that tariffs have negatively affected business sentiment, with nearly half describing the impact as “very negative.”

    At the same time, economists are scaling up their inflation forecasts. Expectations for headline CPI, core CPI, PCE, and core PCE have all been revised higher, with all measures now projected to remain above Fed’s 2% target through at least 2027. A majority of economists—62 out of 101 surveyed—expect the Fed to hold its benchmark interest rate steady at 4.25%-4.50% until at least July.

    In terms of currency performance, Kiwi continues to lead the pack this week while Aussie and Sterling follow. At the other end, Swiss Franc is the weakest, trailed by the Euro and Loonie. Dollar and Yen are trading in the middle of the pack.

    In Europe at the time of writing, FTSE is down -0.38%. DAX is down -0.44%. CAC is down -0.74%. UK 10-year yield is down -0.03 at 4.579. Germany 10-year yield is down -0.03 at 2.482. Earlier in Asia, Nikkei rose 1.35%. Hong Kong HSI rose 1.61%. China Shanghai SSE rose 0.13%. Singapore Strait Times rose 1.58%. Japan 10-year JGB yield rose 0.015 to 1.312.

    US initial jobless claims fall to 215k, vs exp 224k

    US initial jobless claims fell -9k to 215k in the week ending April 12, below expectation of 224k. Four-week moving average of initial claims fell -2.5k to 221k.

    Continuing claims rose 41k to 1885k in the week ending April 5. Four-week moving average of continuing claims rose 1k to 1867k.

    ECB cuts rates to 2.25%, drops “restrictive” language amid mounting uncertainty

    ECB cut its deposit rate by 25 bps points to 2.25% as widely expected, but the more notable shift came in the tone of its accompanying statement. ECB completely removed the reference to its policy stance being “restrictive,” a phrase that had previously signaled a bias toward further monetary easing.

    This change suggests policymakers believe the easing campaign has brought rates closer to neutral territory. The central bank emphasized that it will maintain a data-dependent, meeting-by-meeting approach and is “not pre-committing to a particular rate path” given the exceptional levels of uncertainty.

    ECB noted that disinflation process remains “well on track,” with both headline and core inflation continuing to decline in line with forecasts. Importantly, services inflation—previously a key sticking point—has also “eased markedly” in recent months.

    However, the central bank also highlighted growing downside risks to the economic outlook. ECB acknowledged that rising global trade tensions have begun to weigh on business and household confidence. The resulting volatility in financial markets is already tightening financing conditions and could further dampen activity in the Eurozone.

    BoJ’s Nakagawa and Ueda highlight US tariff risk, urge vigilance

    BoJ board member Junko Nakagawa cited US trade policy as one of the most significant risks to Japan’s economic outlook. In a speech, she noted that higher US tariffs could directly damage Japanese corporate activity, pressuring exports, production, sales, capital expenditure, and profitability.

    Nakagawa also noted the potential for broader spillover effects, including weakened business and consumer sentiment and volatility in commodity prices and financial markets.

    Echoing these concerns, BoJ Governor Kazuo Ueda told the parliament that uncertainty surrounding US policy, especially tariffs, has “heightened sharply” in recent weeks. Ueda stressed that the central bank will assess trade-related developments at each policy meeting without any pre-conception.

    While reaffirming BoJ’s intention to raise interest rates if economic and price conditions align with projections, Ueda emphasized, “we must be vigilant to the fact uncertainty surrounding each country’s trade policy is heightening.”

    Japan’s exports grow 3.9% yoy in March, imports up 2.0% yoy

    Japan’s exports rose 3.9% yoy in March to JPY 9.85T, below the expected 4.5% yoy gain. Shipments to the US rose 3.1% yoy overall, boosted by strong gains in electronic parts (+35.8%), pharmaceuticals (+29.7%), and autos (+4.1%). However, this was offset by weakness in China, where exports fell -4.8% yoy.

    On the import side, inbound shipments rose 2.0% yoy to JPY 9.30T , also falling short of the forecast 3.1% yoy. That resulted in trade surplus of JPY 544B.

    In seasonally adjusted term, exports dropped -3.8% mom to JPY 9.31 trillion, while imports ticked up 0.6% mom, bringing the adjusted trade balance into a JPY -234B deficit.

    Australia jobs rise 32.2k in March, misses expectations

    Australia added 32.2k jobs in March, falling short of expectations for a 41.2k increase. The composition of gains was relatively balanced with 15k full-time and 17.2k part-time positions added.

    Unemployment rate ticked up slightly to 4.1% from 4.0%, coming in better than the expected 4.2%. The modest rise in the jobless rate was largely due to a higher participation rate, which increased from 66.7 to 66.8%.

    A potential sign of underlying weakness came from a -0.3% mom decline in total monthly hours worked, the second consecutive monthly drop. But that could be attributed partly to weather disruptions linked to ex-Tropical Cyclone Alfred.

    NZ CPI surprises to the upside at 2.5% in Q1, domestic pressures driving

    New Zealand’s consumer prices rose more than expected in the first quarter, with CPI climbing 0.9% qoq and accelerating from 2.2% yoy to 2.5% yoy, above forecasts of 0.7% qoq and 2.3% yoy.

    Nevertheless, this still marks the third consecutive quarter that annual inflation has stayed within RBNZ’s 1–3% target band.

    Tradeable inflation, reflecting imported price dynamics, rose 0.8% qoq and just 0.3% yoy, indicating limited external pricing pressure. In contrast, non-tradeable inflation, a proxy for domestic conditions, surged 1.1% qoq and 4.0% yoy.

    The strength in non-tradeables points to robust local demand and ongoing cost pressures within the domestic economy.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1314; (P) 1.1363; (R1) 1.1449; More…

    EUR/USD is still bounded in consolidation below 1.1472 and intraday bias remains neutral. Deeper retreat cannot be ruled out. But downside should be contained by 1.1145 resistance turned support to bring another rally. On the upside, break of 1.1472 will target 161.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1694.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0745) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD CPI Q/Q Q1 0.90% 0.70% 0.50%
    22:45 NZD CPI Y/Y Q1 2.50% 2.30% 2.20%
    23:50 JPY Trade Balance (JPY) Mar -0.23T -0.25T 0.18T 0.19T
    01:30 AUD Employment Change Mar 32.2K 41.2K -52.8K -57.5K
    01:30 AUD Unemployment Rate Mar 4.10% 4.20% 4.10% 4.00%
    06:00 CHF Trade Balance (CHF) Mar 6.35B 5.22B 4.80B 4.74B
    06:00 EUR Germany PPI M/M Mar -0.70% -0.10% -0.20%
    06:00 EUR Germany PPI Y/Y Mar -0.20% 0.40% 0.70%
    12:15 EUR ECB Main Refinancing Rate 2.40% 2.40% 2.65%
    12:15 EUR ECB Deposit Rate 2.25% 2.25% 2.50%
    12:30 USD Initial Jobless Claims (Apr 11) 215K 224K 223K
    12:30 USD Building Permits Mar 1.48M 1.45M 1.46M
    12:30 USD Housing Starts Mar 1.32M 1.42M 1.50M
    12:30 USD Philadelphia Fed Manufacturing Apr -26.4 6.8 12.5
    12:45 EUR ECB Press Conference
    14:30 USD Natural Gas Storage 24B 57B

     



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  • Muted Markets Await ECB Cut, While US-Japan Trade Talks Show Tentative Progress

    Muted Markets Await ECB Cut, While US-Japan Trade Talks Show Tentative Progress


    The forex markets held steady in tight ranges during Asian session, with investors treading cautiously ahead of the Easter long weekend. Market mood has been mildly lifted by signs of progress in US-Japan trade negotiations. In a surprise move, US President Donald Trump joined preliminary talks and later declared “Big Progress!” via social media, injecting some optimism into an otherwise quiet session.

    While Trump’s gesture lifted sentiment briefly, Japanese Economy Minister Ryosei Akazawa remained measured, describing the meeting as a first step with a second round planned for later this month. He also confirmed that exchange rates were not part of the discussions, indicating Tokyo’s desire to keep talks focused on trade and investment.

    Markets will now turn their attention to the ECB’s policy decision later today, where a 25bps cut in deposit rate to 2.25% is widely anticipated. The focus will be on ECB’s guidance and choice of language. In its last meeting, the Governing Council avoided declaring whether policy was still restrictive, and instead said it had become “meaningfully less restrictive”. This strategy is expected to continue, particularly as internal divisions within the ECB remain over forward guidance amid elevated uncertainty.

    While some may hope for clearer signals on the future rate path, ECB is unlikely to oblige. According to the minutes of the previous meeting, several members stressed the need to avoid committing to even any directional bias on future moves. That caution is likely to persist, especially as external risks, including US trade actions and global demand uncertainty, still loom large. As a result, markets should expect a rate cut accompanied by continued strategic ambiguity.

    Currency performance this week so far see Kiwi leads after stronger-than-expected CPI figures. Sterling follows as second despite mixed UK employment and inflation miss. Aussie is also holding firm even after weak job data. On the other side, Loonie is the weakest, with the BoC hold overnight failing to inspire confidence. Swiss Franc and Dollar are also underperforming, while Euro and Yen are trading in the middle.

    Technically, it looks like EUR/USD’s consolidation from 1.1472 is going to extend with another downleg. A dovish ECB outlook today could fuel some selloff. But downside should be contained by 1.1145 resistance turned support to bring rebound. Break of 1.1472 resistance is expected, to resume the larger up trend, after current consolidation completes.

    In Asia, at the time of writing, Nikkei is up 1.01%. Hong Kong HSI is up 1.38%. China Shanghai SSE is down -0.03%. Singapore Strait Times is up 0.93%. Japan 10-year JGB yield is up 0.02 at 1.318. Overnight, DOW fell -1.73%. S&P 500 fell -2.24%. NASDAQ fell -3.07%. 10-year yield fell -0.044 to 4.279.

    Fed’s Powell warns of dual-mandate tensions ahead

    In a speech overnight, Fed Chair Jerome Powell pointed to substantial changes underway, by US administration, in trade, immigration, fiscal policy, and regulation—all of which are still “evolving” and difficult to assess in terms of economic impact.

    In particular, Powell acknowledged that the scale of tariff increases already announced is “significantly larger than anticipated,” and warned that the resulting economic effects will likely include “higher inflation and slower growth.”

    Powell noted a clear rise in near-term inflation expectations, with both market-based breakevens and survey indicators moving up in response to the new tariff regime. While long-term expectations remain largely anchored, he cautioned that the inflationary impulse from tariffs could prove “more persistent” than initially thought. In the near term, tariffs are highly likely to generate “at least a temporary rise in inflation” .

    Importantly, Powell acknowledged that Fed could face a scenario where its “dual-mandate goals are in tension.” In such a case, policymakers would need to carefully weigh how far the economy is from each objective, and over what time horizons those gaps might close.

    BoJ’s Nakagawa and Ueda highlight US tariff risk, urge vigilance

    BoJ board member Junko Nakagawa cited US trade policy as one of the most significant risks to Japan’s economic outlook. In a speech, she noted that higher US tariffs could directly damage Japanese corporate activity, pressuring exports, production, sales, capital expenditure, and profitability.

    Nakagawa also noted the potential for broader spillover effects, including weakened business and consumer sentiment and volatility in commodity prices and financial markets.

    Echoing these concerns, BoJ Governor Kazuo Ueda told the parliament that uncertainty surrounding US policy, especially tariffs, has “heightened sharply” in recent weeks. Ueda stressed that the central bank will assess trade-related developments at each policy meeting without any pre-conception.

    While reaffirming BoJ’s intention to raise interest rates if economic and price conditions align with projections, Ueda emphasized, “we must be vigilant to the fact uncertainty surrounding each country’s trade policy is heightening.”

    Japan’s exports grow 3.9% yoy in March, imports up 2.0% yoy

    Japan’s exports rose 3.9% yoy in March to JPY 9.85T, below the expected 4.5% yoy gain. Shipments to the US rose 3.1% yoy overall, boosted by strong gains in electronic parts (+35.8%), pharmaceuticals (+29.7%), and autos (+4.1%). However, this was offset by weakness in China, where exports fell -4.8% yoy.

    On the import side, inbound shipments rose 2.0% yoy to JPY 9.30T , also falling short of the forecast 3.1% yoy. That resulted in trade surplus of JPY 544B.

    In seasonally adjusted term, exports dropped -3.8% mom to JPY 9.31 trillion, while imports ticked up 0.6% mom, bringing the adjusted trade balance into a JPY -234B deficit.

    Australia jobs rise 32.2k in March, misses expectations

    Australia added 32.2k jobs in March, falling short of expectations for a 41.2k increase. The composition of gains was relatively balanced with 15k full-time and 17.2k part-time positions added.

    Unemployment rate ticked up slightly to 4.1% from 4.0%, coming in better than the expected 4.2%. The modest rise in the jobless rate was largely due to a higher participation rate, which increased from 66.7 to 66.8%.

    A potential sign of underlying weakness came from a -0.3% mom decline in total monthly hours worked, the second consecutive monthly drop. But that could be attributed partly to weather disruptions linked to ex-Tropical Cyclone Alfred.

    NZ CPI surprises to the upside at 2.5% in Q1, domestic pressures driving

    New Zealand’s consumer prices rose more than expected in the first quarter, with CPI climbing 0.9% qoq and accelerating from 2.2% yoy to 2.5% yoy, above forecasts of 0.7% qoq and 2.3% yoy.

    Nevertheless, this still marks the third consecutive quarter that annual inflation has stayed within RBNZ’s 1–3% target band.

    Tradeable inflation, reflecting imported price dynamics, rose 0.8% qoq and just 0.3% yoy, indicating limited external pricing pressure. In contrast, non-tradeable inflation, a proxy for domestic conditions, surged 1.1% qoq and 4.0% yoy.

    The strength in non-tradeables points to robust local demand and ongoing cost pressures within the domestic economy.

    Looking ahead

    ECB rate decision is the main focus in European session. Later in the day, US will release jobless claims, Philly Fed survey, housing starts and building permits.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3817; (P) 1.3896; (R1) 1.3936; More…

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

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD CPI Q/Q Q1 0.90% 0.70% 0.50%
    22:45 NZD CPI Y/Y Q1 2.50% 2.30% 2.20%
    23:50 JPY Trade Balance (JPY) Mar -0.23T -0.25T 0.18T 0.19T
    01:30 AUD Employment Change Mar 32.2K 41.2K -52.8K -57.5K
    01:30 AUD Unemployment Rate Mar 4.10% 4.20% 4.10% 4.00%
    06:00 CHF Trade Balance (CHF) Mar 5.22B 4.80B
    06:00 EUR Germany PPI M/M Mar -0.10% -0.20%
    06:00 EUR Germany PPI Y/Y Mar 0.40% 0.70%
    12:15 EUR ECB Main Refinancing Rate 2.40% 2.65%
    12:15 EUR ECB Deposit Rate 2.25% 2.50%
    12:30 USD Building Permits Mar 1.45M 1.46M
    12:30 USD Housing Starts Mar 1.42M 1.50M
    12:30 USD Initial Jobless Claims (Apr 11) 224K 223K
    12:30 USD Philadelphia Fed Manufacturing Apr 6.8 12.5
    12:45 EUR ECB Press Conference
    14:30 USD Natural Gas Storage 24B 57B

     



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  • Risk Appetite Eases; Markets Await Clarity from US-Japan Negotiations

    Risk Appetite Eases; Markets Await Clarity from US-Japan Negotiations


    Global markets are trading with a mildly risk-off tone today, with losses spanning from Asia through to Europe, and US futures following suit. Technology stocks are under pressure, led by AI-chip giant Nvidia, which warned of significant charges stemming from new US restrictions on semiconductor exports to China. The announcement marks the latest escalation in trade tensions between Washington and Beijing, particularly in high-tech sectors where geopolitical and economic interests are increasingly colliding.

    Despite the drag from tech, the broader equity pullback remains relatively contained. Some support is being drawn from slightly stronger-than-expected US retail sales data, which helped ease fears of a sharp consumer slowdown. Still, sentiment remains cautious ahead of potential headlines from US-Japan negotiations later today. The discussion is expected to touch on key topics including tariffs, defense cost-sharing, energy policy, and exchange rate management. The results of these talks could offer a clearer view of US President Donald Trump’s broader trade strategy and whether current tariff policies are a prelude to further escalation.

    Meanwhile, pressure is mounting on BoJ, with reports suggesting it is preparing to downgrade its economic growth outlook at the April 30–May 1 policy meeting. BoJ’s current forecast of 1.1% GDP growth for fiscal 2025 is likely to be revised downward in response to the mounting impact of US tariffs. While inflation in Japan has been trending upward gradually, central bank officials are now questioning whether the external drag from trade tensions could offset domestic momentum.

    In the currency markets, the Swiss Franc is leading gains for the day, followed by Euro and Yen, as investors rotate back into safer assets. Dollar, by contrast, is the day’s weakest performer, followed by Kiwi and Pound. Loonie and Aussie are positioning in he middle.

    Technically, Sterling has shown some resilience this week, but signs of fatigue are emerging near key resistance levels. EUR/GBP has found support at 0.8518, while GBP/USD is struggling to break above its near-term channel ceiling. Pullback in the Pound from current levels is plausible, though any downside is likely to remain limited unless EUR/GBP breaks back above 0.8737. Conversely, a decisive upside break against both Euro and Dollar could reignite a broader rally in Sterling.

    In Europe, at the time of writing, FTSE is down -0.34%. DAX is down -0.54%. CAC is down -0.66%. UK 10-year yield is down -0.0037 at 4.622. Germany 10-year yield is down -0.034 at 2.502. Earlier in Asia, Nikkei fell -1.01%. Hong Kong HSI fell -1.91%. China Shanghai SSE rose 0.26%. Singapore Strait Times rose 1.04%. Japan 10-year JGB yield fell -0.078 to 1.298.

    US retail sales rise 1.4% mom in March, above exp 1.3%

    US retail sales rose 1.4% mom to USD 734.9B in March, slightly above expectation of 1.3% mom. Ex-auto sales rose 0.5% mom to USD 590.9B, above expectation of 0.4% mom. Ex-gasoline sales rose 1.7% mom to USD 683.4B. Ex-auto & gasoline sales rose 0.8% mom to USD 539.5B.

    Total sales for the January through March period were up 4.1% from the same period a year ago.

    Eurozone CPI finalized at 2.2% in March, core at 2.4%

    Final data confirmed that Eurozone headline inflation edged lower to 2.2% yoy in March, down from 2.3% in February. Core inflation (ex energy, food, alcohol & tobacco) also softened to 2.4% from 2.6%.

    Services was the main contributor to price pressures in Eurozone, adding 1.56 percentage points to the annual rate, followed by food, alcohol and tobacco at 0.57 points. Energy contributed negatively, subtracting -0.10 points from the overall figure.

    At the EU level, inflation was finalized at 2.5% yoy, an improvement from February’s 2.7% yoy. France registered the lowest annual rate at just 0.9%, while Denmark and Luxembourg followed at 1.5% and 1.5% respectively. In contrast, inflation remains more persistent in Eastern Europe, with Romania (5.1%), Hungary (4.8%), and Poland (4.4%)recording the highest annual rates.

    UK CPI falls to 2.6%, both goods and services inflation ease

    UK consumer inflation continued to ease in March, with headline CPI slowing to 2.6% yoy, slightly below the expected 2.7% and down from 2.8% yoy in February. On a monthly basis, prices rose 0.3%, also under consensus 0.4% mom forecast.

    The decline was broad-based, with annual goods inflation falling to 0.6% yoy from 0.8% yoy and services inflation easing to 4.7% yoy from 5.0% yoy.

    Core CPI (excluding energy, food, alcohol and tobacco) edged down to 3.4% as expected, from 3.5% previously.

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

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

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

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

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

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

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

    Australia Westpac leading index falls as tariff shock starting to weigh

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

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

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

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

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

    China Q1 GDP tops forecasts with 5.4% growth

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

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

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

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 142.71; (P) 143.15; (R1) 143.70; More…

    USD/JPY is still bounded in consolidations from 142.05 temporary low and intraday bias remains neutral. Another recovery cannot be ruled out, but outlook will stay bearish as long as 151.20 resistance holds. Below 142.05 will resume the fall from 158.86 to 139.57 support.

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

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

    German ZEW collapses to -14 as trade uncertainty rattles outlook

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

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

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

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

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

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

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

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

    UK payolled employment falls -78k, wage growth slows

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0745) holds.

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Tariff Shockwaves Test BoC and ECB Resolve

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

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

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

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

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

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

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

    Here are some highlights for the week:

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

    USD/JPY Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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  • A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil

    A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil


    It has been a brutally volatile week across global markets, driven by a whirlwind of US tariff implementations, abrupt reversals, and rapid retaliatons. Investors were left scrambling to make sense of the White House’s constantly shifting trade stance. We won’t attempt to recap every step of the tariff saga, when even members of the administration seemed unable to track the unfolding policy moves.

    The most consequential outcome of the week was the broad-based pressure on US assets. The sharp selloff in Treasuries drew the most concern, raising alarms over whether the bedrock of the financial markets is beginning to erode. That said, while the jump in yields was certainly eye-catching, it has yet to cross the threshold into full-blown crisis territory.

    US stocks, after plunging to their lowest levels in months mid-week, managed to stage a strong rebound. Key technical support levels held, keeping the long-term uptrend intact—for now. However, that doesn’t mean the risks are gone. If the mounting tariffs ultimately tip the US into recession, the bounce may prove to be nothing more than a bear market rally.

    Dollar also struggled, ending as the week’s worst performer. Despite rising yields and some risk-off mood, neither provided the greenback any meaningful support. Dollar Index is now on the verge of resuming its broader medium-term downtrend.

    In the broader forex markets, Sterling and Yen also underperformed. On the other end, Swiss Franc stood tall as the market’s safe-haven anchor, followed by Australian and New Zealand Dollars. Euro and Canadian Dollar ended the week in middle ground.

    Tariff Shock and Yield Spike Rattle Markets; Not a Crisis Yet, But Warnings Are Flashing

    The essence of the market chaos: US reciprocal tariffs officially went into effect—only to be paused within hours to allow room for negotiation, except for China. On the surface, that might have calmed markets. And indeed, it opened the door to dialogue, with Taiwan reportedly holding the first video talks, while delegations from the EU and Japan are en route for face-to-face meetings in Washington in the coming days.

    But on the other side of the equation was deepening hostilities between the US and China. Both sides escalated tariffs beyond economically meaningful levels, effectively moving toward full-scale trade decoupling. The narrative is no longer about negotiation—it’s about economic separation.

    What spooked markets the most wasn’t just the trade conflict, but the simultaneous selloff in US assets—equities, Dollar, and perhaps most importantly, Treasuries. This rare alignment of outflows suggested something deeper: a loss of confidence. Some speculate this is precisely why US President Donald Trump reversed course and paused the reciprocal tariffs—because of the violent reaction in the bond market.

    Indeed, Trump and his economic advisors have repeatedly cited the importance of keeping bond yields low to support the broader economic agenda. As yields spiked and refinancing costs soared, concerns within the White House likely escalated. A persistent rise in yields would undermine everything from fiscal stimulus to housing affordability and corporate balance sheets.

    There are several theories about what triggered the Treasury selloff. Some point to the unwinding of the “Treasury basis trade”—a leveraged strategy used by hedge funds that collapsed under margin stress. Others blame foreign governments, particularly China, for dumping US debt in retaliation.

    But perhaps the most straightforward explanation is the simplest: long-term investors are losing interest in US assets, shifting instead into alternatives like Gold in this time of uncertainty, which surged to fresh record highs this week.

    Importantly, not all global bond markets are suffering. Germany’s 10-year yield remained within a calm 2.5–2.7% range.

    Japan’s 10-year yield held steady around 1.3–1.4% after being pulled up by US yields.

    In contrast, US 10-year yields soared, nearing 4.6%, a stark rise from just 3.89% a week ago.

    Technically, the picture in US 10-year yields is worrying but not yet in panic mode. For the near term, the decline from 4.809 should have bottomed at 3.886% as a correction. As long as 4.289 support holds, further rise toward 4.809 is expected.

    That said, this is still within the bounds of a broad consolidation pattern from the 2023 peak at 4.997%. Current rally might just be one of the legs.

    However, if 10-year Treasury yields were to break decisively above the symbolic 5% level, the impact could be seismic. Borrowing costs across the economy would surge along, from mortgages to corporate debt, tightening financial conditions at a pace that could choke off growth.

    Beyond the US, such a move could trigger forced selling by foreign holders, particularly if trade tensions worsen or FX reserves are rebalanced. The result could be a broad and disorderly repricing of global assets, especially in equity markets and emerging economies, ushering in a new chapter where financial stability, rather than inflation, becomes the dominant concern.

    Stock Rebound Preserves Uptrend, But Recession Could Break the Spell

    The steep intra-week selloff in US equities, among the sharpest in years, has been met with an equally aggressive rebound. Key technical levels held, for example in DOW, which bounced decisively ahead of the 55-month EMA, preserving the long-term uptrend from the 2009 low. For now, market action points to a deep medium-term correction rather than the beginning of a full-blown bear market. However, it would be premature to call the all-clear.

    Many economists and central bankers globally have described the US tariff hikes as a textbook stagflationary shock—simultaneously dampening growth and fueling price pressures. According to estimates from the European Commission, the existing 10% blanket tariffs and the 25% metal duties could shave 0.8% to 1.4% off US GDP by 2027. For the EU, the impact is more muted at around 0.2%. But if the tariff regime becomes entrenched or if retaliations escalate further, those numbers could rise dramatically—especially with US-China tariffs not yet fully factored in.

    Inflation expectations are also flashing warning signs. While the March US CPI data delivered some relief by slowing more than expected, the University of Michigan’s consumer survey painted a grimmer picture. One-year inflation expectations surged to 6.7%—a level last seen in 1981—up sharply from 5.0% in March. Inflation could reaccelerate ahead if supply shocks persist or if inflation expectations become unanchored.

    Adding to the concern is the historical warning from the yield curve, something that we have mentioned a number of times. The spread between the US 10-year and 2-year Treasuries—the classic recession signal—inverted in mid-2022 and uninverted last August. Historically, this un-inversion has preceded recessions around 6 to 12 months. That puts the timeline for a economic downturn squarely within 2025. That clock is ticking.

    Technically, DOW’s defense of 55 M EMA (now at 3558.57) keeps long-term uptrend from 6369.96 (2009 low) alive. For the near term tough, firm break of 61.8% retracement of 45703.63 to 36611.78 at 41841.20 is needed to confirm that correction from 45703.63 has completed. Without that, the best investors can expect is range-bound consolidation.

    The worst-case scenario? Decisive break of 55 M EMA would open up deeper fall to 38.2% retracement of 6469.95 to 45703.64 at 30327.02 at least.

    Dollar Index Cracks 100 Psychological Level, Heading to 95?

    Dollar Index dived to as low as 99.01 last week as fall from 110.17 reaccelerated. The break of 100.15 support (2024 low) affirms the case that whole down trend from 114.77 (2022 high) is resuming. Further break of 99.57 (2023 low) should confirm this bearish case. Meanwhile, near term risk will stay heavily on the downside as long as 103.22 support turned resistance holds, even in case of recovery.

    So where will Dollar Index head to? Price actions from 114.77 are so far still viewed as a corrective pattern. The next line of defense could come at 38.2% retracement of 70.69 (2008 low) to 114.77 at 97.93. If not, the next target will be 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    The development in EUR/USD should also be considered. Last week’s break of 1.1274 resistance (2023 high) should confirm resumption of whole rise from 0.9534 (2022 low). More importantly, EUR/USD is now breaking through the falling channel resistance that lasted more than 1.5 decade. Rise from 0.9534 is likely to extend to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916, or slightly further to 38.2% retracement of 1.6039 (2008 high) to 0.9534 at 1.2019.

    Given the EUR/USD’s bullish outlook, and that Yen is also strong against Dollar, Dollar index is more likely to hit above mentioned 94.97 projection level than not.

    USD/CAD Weekly Outlook

    USD/CAD’s fall from 1.4791 high continued last week and accelerated through 1.3946/76 key support zone. There is no sign of bottoming yet. Initial bias stays on the downside this week for 100% projection of 1.4791 to 1.4150 from 1.4414 at 1.3773. On the upside, break of 1.4150 support turned resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

    In the bigger picture, the break of 1.3976 resistance turned support (2022 high) and 55 W EMA (now at 1.3992) indicates that a medium term is already in place at 1.4791. Fall from there would either be a correction to rise from 1.2005, or trend reversal. In either case, firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    In the long term picture, as long as 55 M EMA (now at 1.3479) holds, up trend from 0.9056 (2007 low) should still resume through 1.4791 at a later stage. However, sustained trading below 55 M EMA will argue that the up trend has already completed, with rise from 1.2005 to 1.4791 as the fifth wave. 1.4791 would then be seen as a long term top and deeper medium term correction should then follow.



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  • Dollar Selloff Extends Into Week’s End, Trade Talks With EU and JP Offset China Escalations

    Dollar Selloff Extends Into Week’s End, Trade Talks With EU and JP Offset China Escalations


    Financial markets showed signs of stabilization since European session, despite another round of retaliatory tariff hikes from China. While the latest move saw China raise levies on US goods to 125% from 84%, the response was widely anticipated and thus well absorbed by investors. Both President Donald Trump and President Xi Jinping have maintained uncompromising stances, so markets had largely priced in another step in the tit-for-tat trade war. The absence of any conciliatory tone keeps tensions high, but the predictability of the escalation appears to have dulled the market impact.

    Also, China’s latest move may have reached a symbolic peak. In a strongly worded statement, China’s finance ministry noted that at current tariff levels, “there is no longer a market for US goods imported into China,” implying that further retaliation may be economically futile. “If the U.S. government continues to increase tariffs on China, Beijing will ignore,” it added.

    Some of the bearish sentiment from the US-China standoff is being offset by more constructive developments on other trade fronts. Negotiations between the US and both the European Union and Japan appear to be gaining traction. EU trade commissioner Maroš Šefčovič is scheduled to visit Washington on April 14 to meet US officials and continue discussions on tariff matters. Meanwhile, Japan’s newly formed task force, led by Economy Minister Ryosei Akazawa, is preparing for key meetings on April 17 with US Treasury and trade representatives.

    Despite the stabilization in broader risk sentiment, Dollar continues to bleed, extending a week-long selloff and positioning itself as the worst performer among major currencies. Sterling is tracking as the second weakest despite a strong UK GDP report. Loonie follows closely behind, pressured by declining oil prices and general risk aversion.

    Swiss Franc stands out as the week’s clear winner, underpinned by its status as the undisputed safe-haven, while Kiwi and Euro are also among the strongest performers. Aussie and Yen are positioning in the middle.

    Eyes are now on the University of Michigan consumer sentiment report. Any significant surprises in that data could prompt a final reshuffling of currency rankings before markets settle for the weekend.

    In Europe, at the time of writing, FTSE is up 0.50%. DAX is down -1.26%. CAC is down -0.45%. UK 10-year yield is up 0.048 at 4.699. Germany 10-year yield is down -0.067 at 2.516. Earlier in Asia, Nikkei fell -2.96%. Hong Kong HSI rose 1.13%. China Shanghai SSE rose 0.45%. Singapore Strait Times fell -1.83%. Japan 10-year JGB yield fell -0.031 to 1.346.

    US PPI unexpectedly falls -0.3% mom in March

    US producer prices posted a surprise decline in March, with the headline PPI for final demand falling -0.4% mom, well below expectations of a 0.2% mom rise.

    The drop was driven largely by a -0.9% mom decline in final demand goods, while final demand services also slipped -0.2% mom.

    On an annual basis, PPI slowed to 2.7% year-on-year from 3.2%, also below forecasts.

    PPI excludes food, energy, and trade services, rose just 0.1% mom on the month, with the year-on-year rate at 3.4%.

    EU’s Dombrovskis: Existing tariffs enough to shave up to 1.4% off US GDP, hit EU by 0.2%

    EU Economy Commissioner Valdis Dombrovskis acknowledged the US decision to pause reciprocal tariffs above 10% for 90 days as a positive step that opens the door to negotiations. However, he cautioned that the existing 10% duties still in place on nearly all countries continue to weigh on the global economy. Additionally, the US has not lifted its 25% tariffs on steel, aluminum, cars, and car parts—measures that remain a significant source of transatlantic economic tension.

    Dombrovskis pointed to a model simulations indicating that the current US tariff structure could reduce US GDP by 0.8% to 1.4% through 2027. While the economic fallout for the EU is expected to be milder—around 0.2% of GDP—he warned that the damage could escalate dramatically if tariffs become entrenched or retaliatory actions intensify.

    Under such a worst-case scenario, Dombrovskis said US GDP could fall by as much as 3.3%, with the EU losing up to 0.6% and global GDP shrinking by 1.2%. The impact on global trade would be particularly severe, with an estimated contraction of 7.7% over the next three years.

    UK GDP rises 0.5% mom in Feb, broad-based growth

    The UK economy delivered a strong upside surprise in February, with GDP expanding by 0.5% mom, far exceeding market expectations of just 0.1% mom. All three major sectors contributed to the growth: services rose by 0.3% mom, production surged by 1.5% mom, and construction edged up 0.4% mom.

    On a three-month rolling basis, real GDP grew by 0.6% to February 2025 compared to the previous three months, driven largely by a 0.6% rise in services output and a 0.7% gain in production. Construction, however, was flat over the period.

    NZ BNZ manufacturing falls to 53.2, new orders signal trouble ahead

    New Zealand’s BusinessNZ Performance of Manufacturing Index slipped slightly from 54.1 to 53.2 in March, but remained firmly in expansion territory. Production climbed to 54.2, the highest level since December 2021. Employment also posted a robust 54.7, marking its strongest result since mid-2021. However, a decline in new orders, which dipped below the 50-neutral mark to 49.6, raises concerns about the durability of this rebound.

    BusinessNZ’s Catherine Beard acknowledged the resilience in activity and employment, but highlighted persistent challenges. Despite improving sentiment, nearly 58% of surveyed manufacturers cited negative conditions, pointing to weak demand, fewer new orders, and uncertainty across both domestic and export channels.

    BNZ Senior Economist Doug Steel noted that the PMI data supports the case for manufacturing GDP growth in early 2025. Still, he cautioned that risks to the outlook are clearly tilted to the downside, “given recent extreme volatility on global markets following rapidly evolving US-driven trade policy changes.”

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1016; (P) 1.1129; (R1) 1.1315; More…

    EUR/USD’s rally is still in progress and intraday bias stays on the upside. Current rise form 1.0176 should target 161.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1694. On the downside, below 1.1245 minor support will turn intraday bias neutral and bring consolidations. But downside should be contained well above 1.0912 support to bring another rally.

    In the bigger picture, break of 1.1274 (2024 high) indicates resumption of whole up trend from 0.9534 (2022 low). Next target is 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through the multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 55 D EMA (now at 1.0745) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PMI Mar 53.2 53.9 54.1
    23:50 JPY Money Supply M2+CD Y/Y Mar 0.80% 1.20% 1.20%
    06:00 EUR Germany CPI M/M Mar F 0.30% 0.30% 0.30%
    06:00 EUR Germany CPI Y/Y Mar F 2.20% 2.20% 2.20%
    06:00 GBP GDP M/M Feb 0.50% 0.10% -0.10% 0%
    06:00 GBP Industrial Production M/M Feb 1.50% 0.10% -0.90% -0.50%
    06:00 GBP Industrial Production Y/Y Feb 0.10% -2.30% -1.50% -0.50%
    06:00 GBP Manufacturing Production M/M Feb 2.20% 0.20% -1.10% -1%
    06:00 GBP Manufacturing Production Y/Y Feb 0.30% -2.40% -1.50% -0.90%
    06:00 GBP Index of Services 3M/3M Feb 0.60% 0.50% 0.40%
    06:00 GBP Goods Trade Balance (GBP) Feb -20.8B -17.9B -17.8B
    12:30 USD PPI M/M Mar -0.40% 0.20% 0.00% 0.10%
    12:30 USD PPI Y/Y Mar 2.70% 3.30% 3.20%
    12:30 USD PPI Core M/M Mar -0.10% 0.30% -0.10%
    12:30 USD PPI Core Y/Y Mar 3.30% 3.60% 3.40% 3.50%
    14:00 USD UoM Consumer Sentiment Apr P 55 57
    14:00 USD UoM Inflation Expectations Apr P 5.00%

     



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  • Dollar Falls as Disinflation Accelerates, EU Holds Fire on Tariff Retaliation

    Dollar Falls as Disinflation Accelerates, EU Holds Fire on Tariff Retaliation


    Dollar faced renewed selling pressure in early US session, as markets digested softer-than-expected inflation data. The latest CPI report confirmed that disinflation is regaining traction, with both headline and core inflation easing more than expected in March. This strengthens the case for Fed to resume its rate cut cycle in the coming months.

    A May rate cut remains unlikely — with Fed fund futures currently pricing in an 84% chance of a hold. Markets are still more confident that a move will come by June, with odds now standing around 78%. If the disinflation trend persists, that expectation could soon become consensus.

    On the trade front, the mood is notably less tense today. The European Union announced a 90-day suspension of its first wave of retaliatory tariffs, originally planned in response to the US’s 25% steel and aluminum duties. This follows US decision to pause the broad reciprocal tariff for 90 days.

    European Commission President Ursula von der Leyen emphasized, “We want to give negotiations a chance”. But she also made clear that the EU remains ready to act if talks fail. Preparatory work for broader countermeasures remains underway, with all options said to be “on the table.”

    Despite this temporary de-escalation, overall market sentiment remains shaky. US futures are pointing to a weaker open after yesterday’s massive relief rally, suggesting that investors are still wary of the underlying risks. In contrast, European markets are tracking Asia higher, but overall confidence is fragile.

    In the currency markets, Dollar is currently the worst performer of the week, followed by Sterling and Loonie. Swiss Franc continues to shine as a safe haven, with Aussie and Kiwi showing resilience as well. Meanwhile, Yen and Euro are positioning in the middle.

    Technically, Gold’s rebound from 2956.61 extended higher today. The strong support from 2956.09, as well as rising trend line, keeps Gold’s up trend intact. Nevertheless, corrective pattern from 3167.62 might still be incomplete. Break of 3048.43 support will start another down leg. Though, firm break of 3167.62 will confirm up trend resumption.

    In Europe, at the time of writing, FTSE is up 3.84%. DAX is up 4.83%. CAC is up 4.49%. UK 10-year yield is down -0.073 at 4.742. Germany 10-year yield is up 0.049 at 2.640. Earlier in Asia, Nikkei rose 9.13%. Hong Kong HSI rose 2.06%. China Shanghai SSE rose 1.16%. Singapore Strait Times rose 5.43%. Japan 10-year JGB yield rose 0.095 to 1.377.

    US CPI surprise: Both headline and core inflation cools sharply in March

    US inflation came in much softer than expected in March, with headline CPI falling -0.1% mom, surprising markets that had forecast a 0.2% mom increase. Core CPI, which excludes food and energy, also underwhelmed with just a 0.1% mom gain, well below the anticipated 0.3% mom. The pullback was led by a -2.4% mom drop in energy prices, while food costs continued to climb, rising 0.4% mom.

    On an annual basis, the CPI decelerated from 2.8% yoy to 2.4% yoy, lower than the expected 2.5% yoy. Core CPI also slowed to 2.8% yoy, down from 3.1% yoy, and marked the smallest 12-month increase since March 2021. The sharp drop in energy prices, down -3.3% yoy, played a significant role, although food inflation remained sticky at 3.0% yoy.

    US initial jobless claims rise to 223k, vs exp 222k

    US initial jobless claims rose 4k to 223k in the week ending April 5, slightly above expectation of 222k. Four-week moving average of initial claims was unchanged at 223k.

    Continuing claims fell -43k to 1850k in the week ending March 29. Four-week moving average of continuing claims fell -250 to 1868k.

    ECB’s Villeroy: Thank God we created Euro, as tariff turmoil undermines Dollar

    French ECB Governing Council member François Villeroy de Galhau emphasized today that while the US has long championed the global centrality of the Dollar, recent policy moves on tariffs are beginning to erode international confidence in the greenback.

    Speaking on France Inter radio, Villeroy said the Trump administration’s approach is “very incoherent,” and suggested that its recent actions “play against the confidence” typically held in Dollar.

    He contrasted this with the Euro, praising Europe’s foresight in establishing its own independent monetary system 25 years ago. “Thank God that Europe… created the Euro,” he noted, adding that the bloc now enjoys “monetary autonomy” that allows ECB to manage interest rates in a way that diverges from US policy, something that was not possible in the past.

    RBA’s Bullock: Too early to call rate path amid tariff-driven uncertainty

    RBA Governor Michele Bullock stated today that it is “too early” to judge how escalating global trade war will shape the path of Australian interest rates. “it’s too early for us to determine what the path will be for interest rates,” she added.

    Bullock noted that “a period of uncertainty and adjustment” is inevitable as countries react to Washington’s trade moves. RBA plans to stay patient while assessing how these global shocks might affect both supply and demand dynamics. “It will take some time to see how all of this plays out,” she said.

    Japan’s PPI accelerates to 4.2% while import costs ease

    Japan’s PPI rose 4.2% yoy in March, a slight acceleration from February’s 4.1% yoy and topping expectations of 3.9% yoy rise. The increase was broad-based, with notable gains in food prices, which rose 3.1% yoy, and energy costs, with petroleum and coal prices surging by 8.6% yoy.

    Despite the uptick in domestic producer prices, import costs in Yen terms fell -2.2% yoy in March, extending the -0.9% decline in February. Export prices, however, rose a modest 0.3% yoy, slowing sharply from February’s 1.7% yoy growth.

    China’s CPI falls -0.1% yoy in March, PPI highlights persistent deflationary pressures

    China’s consumer inflation remained in negative territory for a second straight month in March, with CPI falling -0.1% yoy, missing expectations of 0.1% yoy increase. While the decline was narrower than February’s -0.7% yoy, it still reflects subdued demand pressures across the economy.

    Food prices was a drag, down -1.4% yoy, while service prices provided only modest support, rising 0.3% yoy. Core CPI, which excludes volatile food and energy prices, edged up to 0.5% yoy from 0.3% previously, offering a slight glimmer of resilience.

    However, with headline inflation still hovering around zero and signs of consumer caution persisting, the broader disinflation trend appears entrenched.

    On a monthly basis, CPI dropped -0.4% mom, following February’s -0.2% mom decline, suggesting continued weakness in household spending momentum.

    Meanwhile, producer prices extended their decline for a 30th straight month, with PPI dropping -2.5% yoy, deeper than the expected -2.3%.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0876; (P) 1.0986; (R1) 1.1057; More…

    Intraday bias in EUR/USD remains neutral first, but focus is immediately on 1.1145 resistance with today’s rebound. Firm break there will resume whole rally from 1.0176. Next target is 1.1213/74 key resistance zone next. In case of another retreat, downside should be contained by 38.2% retracement of 1.0176 to 1.1145 at 1.0775 to complete the near term consolidation.

    In the bigger picture, fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through the multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0731 support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance Mar 2% 8% 11%
    23:50 JPY Bank Lending Y/Y Mar 2.80% 3.10% 3.10% 3.00%
    23:50 JPY PPI Y/Y Mar 4.20% 3.90% 4.00% 4.10%
    01:30 CNY CPI M/M Mar -0.40% -0.20%
    01:30 CNY CPI Y/Y Mar -0.10% 0.10% -0.70%
    01:30 CNY PPI Y/Y Mar -2.50% -2.30% -2.20%
    12:30 CAD Building Permits M/M Feb 2.90% -0.90% -3.20% -4.30%
    12:30 USD Initial Jobless Claims (Apr 4) 223K 222K 219K
    12:30 USD CPI M/M Mar -0.10% 0.20% 0.20%
    12:30 USD CPI Y/Y Mar 2.40% 2.50% 2.80%
    12:30 USD CPI Core M/M Mar 0.10% 0.30% 0.20%
    12:30 USD CPI Core Y/Y Mar 2.80% 3.00% 3.10%
    14:30 USD Natural Gas Storage 60B 29B

     



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  • Reciprocal Tariffs Take Effect; China Hit with 104% Rate

    Reciprocal Tariffs Take Effect; China Hit with 104% Rate


    The rebound in US stock markets proved short-lived, with major indexes slipping back into the red by the end of Tuesday’s session. NASDAQ led the losses, as sentiment turned increasingly fragile. Asian markets followed suit, opening lower with large intraday volatility across the region. Concerns about a global recession continue to weigh heavily on investors’ minds, particularly as the commodity complex offers no reprieve—oil prices plunged to fresh four-year lows on fears of a steep demand collapse.

    Gold, traditionally a safe haven, is fighting to hold above the 3000 psychological level. The safe-haven metal has been benefiting from the market’s defensive posture. In the currency space, Dollar extended its slide, joined by other risk-sensitive currencies including Aussie, Kiwi and Loonie. Sterling wasn’t spared either. Meanwhile, Euro, Yen, and Swiss Franc are holding firm as traders flock toward relative safety amid escalating trade tensions.

    The key driver of current market anxiety is the formal implementation of US reciprocal tariffs today, with the most aggressive action aimed at China. An eye-watering 104% effective tariff rate now applies to Chinese imports, effectively escalating the bilateral conflict into a full-blown trade war. Adding fuel to the fire, US President Donald Trump signed an executive order tripling tariff rates on low-value Chinese packages shipped through international postal systems.

    This rapidly escalating standoff between the world’s two largest economies marks a dangerous phase in global trade, with both nations seemingly unwilling to blink first. The economic fallout remains difficult to quantify at this stage, but the longer the impasse drags on, the more serious the risks to global growth and supply chains. Perhaps most troubling is the collateral damage to third-party nations, which are now caught between the crosshairs of US-China economic warfare.

    More tariff action is on the horizon. Adding more fuel to the fire, Trump indicated during a political dinner that a major new round of tariffs targeting pharmaceuticals would be announced “very shortly.” These measures are expected to be aimed at shifting pharmaceutical production out of China and back into the US, with rates speculated to reach 25% or higher. The move has sparked concern not only about inflation in drug prices but also about global supply chain disruptions in the healthcare sector.

    Elsewhere, Canada confirmed its retaliation, implementing 25% tariffs on US-made vehicles. Japan, another major trading partner, is bracing for heightened scrutiny. Finance Minister Katsunobu Kato noted that exchange rate policies may enter upcoming discussions, indicating that Washington’s pressure on currencies—particularly Yen—could be a brewing flashpoint.

    Technically, an immediate focus in on 1.0741 in GBP/CHF as selloff accelerates further this week. Firm break there will solidify the case that corrective pattern from 1.0183 has already completed, be it counted as at 1.1675 or 1.1501. Larger down trend should then be ready to resume through 1.0183 (2022 low).

    In Asia, at the time of writing, Nikkei is down -4.14%. Hong Kong HSI is down -1.43%. China Shanghai SSE is up 0.21%. Singapore Strait Times is down -2.44%. Japan 10-year JGB yield is down -0.024 at 1.255. Overnight, DOW fell -0.84%. S&P 500 fell -1.57%. NASDAQ fell -2.15%. 10-year yield rose 0.107 to 4.262.

    RBNZ cuts 25bps, trade barriers as downside risk to both growth and inflation

    RBNZ delivered a widely expected 25bps cut in the Official Cash Rate, bringing it to 3.50%. The policy statement highlighted that the recently announced global trade barriers create “downside risks to the outlook for economic activity and inflation” in New Zealand.

    The central bank noted that with inflation close to the midpoint of its target range, it is in the “best position” to respond to economic shifts. RBNZ added it has “has scope to lower the OCR further as appropriate”, depending on how the impact of tariffs evolves.

    This leaves the door wide open for further easing, particularly if global economic headwinds intensify or domestic data disappoints.

    NZD/USD edged lower earlier today with broad risk aversion, but there is no particular selloff after RBNZ’s decision.

    Technically, the breach of 0.5515 support suggests that recent fall from 0.6378 is resuming. Near term risk will stay on the downside as long as 0.5644 resistance holds. Next target is 61.8% projection of 0.6378 to 0.5515 from 0.5852 at 0.5319.

    But more importantly, sustained trading below 0.5467 (2020 low) would confirm resumption of whole downtrend from 0.8835 (2014 high). That would pave the way to 61.8% projection of 0.7463 to 0.5511 from 0.6378 at 0.5172 in the medium term.

    Fed’s Goolsbee: Tariff shock far exceeds expectations; Daly calls for caution

    Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly both sounded cautious overnight amid rising uncertainty from the unfolding global tariff war.

    Goolsbee highlighted the unexpected magnitude of the tariff impact, calling them a “way bigger” shock than anticipated. He likened them to a “negative supply shock” and acknowledged that Fed’s appropriate policy response is unclear.

    He warned of ripple effects through slower consumer and business activity, especially in a post-pandemic economy still scarred by past inflationary surges.

    Meanwhile, Daly struck a more measured tone, noting that while she is “a little concerned” about the inflationary effects of tariffs, she emphasized Fed’s current policy is well-positioned and policymarkers can “just tread slowly and tread carefully.”

    “The thing that’s really important is you stay steady in the boat while you think about not what’s happening over the last two days, but the net effect of the slate of changes that any administration wants to take,” she added.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.8097; (P) 1.8259; (R1) 1.8560; More…

    EUR/AUD’s rally resumed after brief retreat and intraday bias is back on the upside. Current up trend should target 161.8% projection of 1.6355 to 1.7417 from 1.7047 at 1.8765 next. On the downside, below 1.7957 minor support could now indicate short term topping, possibly on bearish divergence condition in 4H MACD, and bring lengthier consolidations.

    In the bigger picture, up trend from 1.4281 (2022 low) is in progress, and in reacceleration phase as seen in W MACD. Next target is 100% projection of 1.4281 to 1.7062 from 1.5963 at 1.8744. Firm break there will pave the way to 138.2% projection at 1.9806, which is close to 1.9799 (2020 high). Outlook will remain bullish as long as 1.7417 resistance turned support holds even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    02:00 NZD RBNZ Interest Rate Decision 3.50% 3.50% 3.75%
    05:00 JPY Consumer Confidence Index Mar 34.1 34.9 35
    06:00 JPY Machine Tool Orders Y/Y Mar P 3.50%
    14:00 USD Wholesale Inventories Feb F 0.30% 0.30%
    14:30 USD Crude Oil Inventories 2.2M 6.2M
    18:00 USD FOMC Minutes

     



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