Tag: European Union

  • Geopolitical Escalation Fuels Risk Aversion; Dollar Still Lags Despite Bounce

    Geopolitical Escalation Fuels Risk Aversion; Dollar Still Lags Despite Bounce


    Risk aversion dominates global markets today as geopolitical tensions in the Middle East intensify, though the broader equity selloff has remained contained so far. The trigger came early Friday when Israel launched a series of airstrikes deep into Iranian territory, targeting key military and nuclear infrastructure. In response, Iran retaliated with a wave of drone attacks aimed at Israel—estimated at around 100 drones. The development marked a sharp escalation in hostilities that took markets by surprise. While the US has so far distanced itself from the conflict, analysts have warned that any Iranian attack on American bases could pull Washington into the war, an outcome that would significantly raise the stakes for global markets.

    In currency markets, risk-sensitive assets are bearing the brunt of the shift in sentiment. Aussie and Kiwi have fallen to the bottom of the weekly performance board, weighed down by geopolitical fear and, in the Kiwi’s case, a sharp deterioration in domestic manufacturing activity too. Dollar has managed to rebound modestly today, but remains the third worst-performing major for the week. Earlier inflation data, both CPI and PPI, came in softer than expected, reinforcing expectations for a Fed rate cut in September and limiting the Dollar’s momentum.

    Swiss Franc stands out as the strongest performer for the week, benefiting from traditional safe-haven demand amid heightened geopolitical uncertainty. Euro has also held firm, underpinned by a steady flow of ECB commentary indicating that the easing cycle is nearing its end. Loonie ranks third, supported by surging oil prices. Yen and Sterling are trading in the middle of the pack. The Yen, despite an early jump, has given back gains as safe-haven flows rotate toward the Franc.

    In Europe, at the time of writing, FTSE is down -0.02%. DAX is down -1.08%. CAC is down -0.78%. UK 10-year yield is up 0.042 at 4.524. Germany 10-year yield is up 0.016 at 2.500. Earlier in Asia, Nikkei fell -0.89%. Hong Kong HSI fell -0.59%. China Shanghai SSE fell -0.75%. Singapore Strait Times fell -0.27%. Japan 10-year JGB yield fell -0.058 to 1.402.

    Eurozone industrial production down -2.4% mom in April, broad-based weakness

    Eurozone industrial production dropped sharply by -2.4% mom in April, significantly below expectations of a -1.6% decline. Output fell in all major categories, with non-durable consumer goods posting the steepest drop at -3.0%. Capital goods, energy (-1.1%), and intermediate goods (-0.7%) also contracted. Durable consumer goods saw a modest -0.2% fall, offering little relief in an otherwise dismal report.

    At the EU level, industrial output slipped -1.8% mom, driven by steep declines in Ireland (-15.2%), Malta (-6.2%), and Lithuania (-3.0%). While a few economies such as Denmark (+3.5%) and Luxembourg (+3.2%) managed modest gains, the regional picture remains weak.

    EU exports drop -1.9% yoy in April as shipments to China plunge -15.9% yoy

    Eurozone trade data for April showed signs of weakening external demand, with goods exports falling -1.4% yoy to EUR 243.0B, while imports edged up 0.1% yoy to EUR 233.1B. Despite the drop in exports, the region maintained a trade surplus of EUR 9.9B, helped by subdued import growth. Intra-Eurozone trade also declined, down -2.0% yoy to EUR 217.3B.

    Across the broader European Union, the trade picture reflected similar pressures. EU exports dropped -1.9% yoy to EUR 218.2B, while imports increased 0.5% yoy to EUR 210.7B, yielding a surplus of EUR 7.4B. Intra-EU trade fell -1.7% yoy to EUR 341.9B.

    While exports to the US remained a bright spot, rising 3.8% yoy, exports to China plunged -15.9% yoy. On the import side, EU purchases from China rose 8.4% yoy. Imports from the U.S. rose modestly by 2.4% yoy.

    NZ BNZ manufacturing fall to 47.5, slumps back into contraction

    New Zealand’s manufacturing sector slipped sharply back into contraction in May, with the BusinessNZ Performance of Manufacturing Index plunging from 53.3 to 47.5. The reading not only marks a decisive reversal from April’s expansion but also sits well below the historical average of 52.5.

    Key components of the index showed broad-based weakness: production dropped from 53.0 to 48.7, employment tumbled from 54.6 to 45.7, and new orders fell sharply from 50.8 to 45.3—all signaling deteriorating activity across the sector.

    The sharp decline was echoed in business sentiment, with 64.5% of survey respondents offering negative comments—up from 58% in April. The commentary reflects a growing sense of pessimism as manufacturers grapple with falling demand, weak forward orders, and subdued consumer spending. Rising input costs, ongoing economic uncertainty, and stalled investment plans are compounding pressures.

    BNZ’s Senior Economist Doug Steel said that “the New Zealand economy can claw its way forward over the course of 2025, but the PMI is yet another indicator that suggests an increased risk that the bounce in GDP reported for Q4, 2024 and Q1, 2025 could come to a grinding halt”.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1503; (P) 1.1567; (R1) 1.1649; More…

    Intraday bias in EUR/USD remains neutral and more consolidations could be seen below 1.1630 temporary top. . Further rally is expected as long as 1.1372 support holds. Above 1.1630 will resume the rally from 1.0176 to 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. However, break of 1.1372 support will indicate short term topping, and turn bias 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 1.1604 support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PMI May 47.5 53.9 53.3
    04:30 JPY Tertiary Industry Index M/M Apr 0.30% 0.20% -0.30% -1.00%
    04:30 JPY Industrial Production M/M Apr -1.10% -0.90% -0.90%
    06:00 EUR Germany CPI M/M May F 0.10% 0.10% 0.10%
    06:00 EUR Germany CPI Y/Y May F 2.10% 2.10% 2.10%
    08:30 GBP Consumer Inflation Expectations 3.20% 3.40%
    09:00 EUR Eurozone Industrial Production M/M Apr -2.40% -1.60% 2.60% 2.40%
    09:00 EUR Eurozone Trade Balance (EUR) Apr 14.0B 22.5B 27.9B 28.8B
    12:30 CAD Manufacturing Sales M/M Apr -2.80% -2.00% -1.40%
    12:30 CAD Capacity Utilization Q1 80.10% 79.80% 79.80% 79.70%
    12:30 CAD Wholesale Sales M/M Apr -2.30% 0.30% 0.20% 0.00%
    14:00 USD UoM Consumer Sentiment Jun P 53.5 52.2
    14:00 USD UoM Inflation Expectations Jun P 6.60%

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

    Intraday bias in EUR/USD is turned neutral with current retreat. While another rise might be seen, strong resistance could emerge from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1356 support will indicate that the corrective pattern from 1.1572 might have started the third leg, and target 1.1209 support for confirmation.

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

    Economic Indicators Update

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

     



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  • Euro Firms as ECB Lagarde Stays Confident; Silver Surges on Shift from US Assets

    Euro Firms as ECB Lagarde Stays Confident; Silver Surges on Shift from US Assets


    Euro surged against Dollar after ECB President Christine Lagarde struck a relatively confident tone in her post-meeting press conference. She downplayed immediate trade war fallout, stating that U.S. tariffs would likely impact growth more in 2026, by which time EU fiscal expansion—particularly military spending—would help cushion the blow.

    Also, Lagarde emphasized that the ECB is well positioned to respond to prevailing uncertainties. There was no explicit signal of a pause in the easing cycle, but the emphasis on a “meeting-by-meeting” approach suggests the ECB will tread carefully going forward.

    Meanwhile, US futures ticked up after Chinese state media reported that President Trump and President Xi had held a phone call, providing a modicum of relief amid heightened trade tensions. The news sparked a mild rally in US equity futures and lent support to risk-sensitive currencies like the Australian and Canadian Dollars.

    However, Dollar itself faced renewed pressure following a surprising jump in initial jobless claims. The data added to a string of disappointing US labor signals this week—weak ADP job growth and declines in ISM employment components—raising the risk of a downside surprise in Friday’s NFP report.

    Elsewhere, Silver extended its rally and surged to its highest level in 13 years. The move reflects growing investor demand for tangible, supply-constrained assets amid structural uncertainties around US fiscal and trade policies.

    For decades, persistent US current account deficits were offset by capital inflows into Treasuries and equities. That dynamic is now being reassessed, as sovereign wealth funds and large institutional investors rebalance away from the US due to rising geopolitical risk, trade protectionism, and concerns over long-term debt sustainability. This structural shift has driven renewed interest in precious and industrial metals.

    Technically, next near term target for Silver is 100% projection of 28.28 to 33.66 from 31.65 at 37.03. Decisive break there will pave the way to 161.8% projection at 40.35. For now, outlook will remain bullish as long as 33.66 resistance turned support holds, in case of retreat.

    In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.52%. CAC is up 0.24%. UK 10-year yield is up 0.01 at 4.621. Germany 10-year yield is up 0.031 at 2.558. Earlier in Asia, Nikkei fell -0.51%. Hong Kong HSI rose 1.07%. China Shanghai SSE rose 0.23%. Singapore Strait Times rose 0.35%. Japan 10-year JGB yield fell -0.044 to 1.461.

    US initial jobless claims jump to 247k vs exp 235k

    US initial jobless claims rose 8k to 247k in the week ending May 30, above expectation of 235k. Four-week moving average of initial claims rose 4.5k to 235k. Continuing claims fell -3k to 1904k in the week ending May 24. Four-week moving average of continuing claims rose 8k to 1895k, highest since November 27, 2021.

    ECB cuts 25bps, downgrades inflation forecasts

    ECB lowered deposit rate by 25bps to 2.00% as widely expected. The central bank cited “exceptional uncertainty,” and its commitment to a data-dependent, meeting-by-meeting approach, refraining from offering forward guidance on the future path of interest rates.

    In the updated economic projections, ECB now expects headline inflation to average 2.0% in 2025 and 1.6% in 2026—down 0.3 percentage points from March’s forecast. Headline inflation would then return to target at 2.0% in 2027. The revision was largely due to lower energy prices and a stronger Euro.

    Core inflation is expected to ease to 2.4% in 2025 and 1.9% in both 2026 and 2027, broadly unchanged from previous forecasts.

    On growth, ECB projects real GDP to expand by 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. While the 2025 GDP forecast remains unchanged due to a strong first quarter, ECB acknowledged that the remainder of the year looks weaker, in part due to trade-related uncertainty.

    Weak global demand and potential retaliation to US tariffs could continue to drag on exports and business investment. However, rising public investment, particularly in defense and infrastructure, is expected to lend some support to growth in the medium term.

    Eurozone PPI slumps -2.2% mom on energy prices

    Eurozone PPI dropped sharply by -2.2% mom in April, steeper than the expected -1.8% mom. decline. Annual PPI rose just 0.7% yoy, below forecasts of 1.2% yoy. PPI ex-energy was up 0.1% mom, 1.1% yoy

    The drag on Eurozone PPI was driven primarily by a -7.7% mom fall in energy prices. Prices for intermediate goods also declined slightly by -0.1% mom, while capital goods prices held flat. In contrast, consumer goods offered some offset, with durable and non-durable segments rising 0.1% mom and 0.3% mom respectively.

    The broader EU showed a similar picture, with PPI falling -2.1% mom and rising just 0.6% yoy. Country-level data revealed significant monthly drops in industrial prices in France (-4.3%), Ireland (-4.0%), and Bulgaria (-4.9%). Only a handful of smaller economies like Cyprus and Malta posted slight increases.

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1371; (P) 1.1403; (R1) 1.1449; More…

    EUR/USD’s rebound from 1.1064 resumed by breaking through 1.1453 today. Intraday bias is back on the upside for 1.1572 high. Strong resistance could be seen there to limit upside, at least on first attempt. On the downside, On the downside, break of 1.1356 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1209 support. Nevertheless, decisive break of 1.1572 will confirm larger up trend resumption.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Apr 2.30% 2.60% 2.30%
    01:30 AUD Trade Balance (AUD) Apr 5.41B 6.05B 6.90B 6.89B
    01:45 CNY Caixin Services PMI May 51.1 51.1 50.7
    06:00 EUR Germany Factory Orders M/M Apr 0.60% -1.10% 3.60% 3.40%
    07:00 CHF Unemployment Rate May 2.90% 2.80% 2.80%
    08:30 GBP Construction PMI May 47.9 47.2 46.6
    09:00 EUR Eurozone PPI M/M Apr -2.20% -1.80% -1.60% -1.70%
    09:00 EUR Eurozone PPI Y/Y Apr 0.70% 1.20% 1.90%
    11:30 USD Challenger Job Cuts Y/Y May 47.00% 62.70%
    12:15 EUR ECB Deposit Rate 2.00% 2.00% 2.25%
    12:30 CAD Trade Balance (CAD) Apr -7.1B 0.2B -0.5B -2.3B
    12:30 USD Initial Jobless Claims (May 30) 247K 235K 240K 239K
    12:30 USD Trade Balance (USD) Apr -61.6B -117.2B -140.5B -138.3B
    12:30 USD Nonfarm Productivity Q1 -1.50% -0.80% -0.80%
    12:30 USD Unit Labor Costs Q1 6.60% 5.70% 5.70%
    12:45 EUR ECB Press Conference
    14:00 CAD Ivey PMI May 48.3 47.9
    14:30 USD Natural Gas Storage 111B 101B

     



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

    Markets Unshaken by Weak US Data, Await Guidance from ECB


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    USD/CAD Daily Outlook

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

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

    In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Apr 2.30% 2.60% 2.30%
    01:30 AUD Trade Balance (AUD) Apr 5.41B 6.05B 6.90B 6.89B
    01:45 CNY Caixin Services PMI May 51.1 51.1 50.7
    05:45 CHF Unemployment Rate May 2.80% 2.80%
    06:00 EUR Germany Factory Orders M/M Apr -1.10% 3.60%
    08:30 GBP Construction PMI May 47.2 46.6
    11:30 USD Challenger Job Cuts Y/Y May 62.70%
    12:15 EUR ECB Deposit Rate 2.00% 2.25%
    12:30 CAD Trade Balance (CAD) Apr 0.2B -0.5B
    12:30 USD Initial Jobless Claims (May 30) 235K 240K
    12:30 USD Trade Balance (USD) Apr -117.2B -140.5B
    12:30 USD Nonfarm Productivity Q1 -0.80% -0.80%
    12:30 USD Unit Labor Costs Q1 5.70% 5.70%
    12:45 EUR ECB Press Conference
    14:00 CAD Ivey PMI May 48.3 47.9
    14:30 USD Natural Gas Storage 111B 101B

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Here are som ehighlights for the week:

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

    AUD/USD Daily Report

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

    Range trading continues in AUD/USD and intraday bias stays neutral. Further rally is expected with 0.6406 support intact. Above 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6406 will confirm short term topping, and turn bias back to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Capital Spending Q1 6.40% 3.80% -0.20%
    00:30 JPY Manufacturing PMI May 49.4 49 49
    01:00 AUD TD-MI Inflation Gauge M/M May -0.40% 0.60%
    06:30 CHF Real Retail Sales Y/Y Apr 2.50% 2.20%
    07:00 CHF GDP Q/Q Q1 0.40% 0.20%
    07:30 CHF Manufacturing PMI May 48.1 45.8
    07:50 EUR France Manufacturing PMI May F 49.5 49.5
    07:55 EUR Germany Manufacturing PMI May F 48.8 48.8
    08:00 EUR Eurozone Manufacturing PMI May F 49.4 49.4
    08:30 GBP Manufacturing PMI May F 45.1 45.1
    08:30 GBP Mortgage Approvals Apr 65K 64K
    08:30 GBP M4 Money Supply M/M Apr 0.20% 0.30%
    13:30 CAD Manufacturing PMI May 45.3
    13:45 USD Manufacturing PMI May F 52.3 52.3
    14:00 USD ISM Manufacturing PMI May 49.3 48.7
    14:00 USD ISM Manufacturing Prices Paid May 70.2 69.8
    14:00 USD ISM Manufacturing Employment Index May 46.5
    14:00 USD Construction Spending M/M Apr 0.30% -0.50%

     



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  • Risk Appetite Returns After Trump Backs Off Immediate EU Tariff Threat

    Risk Appetite Returns After Trump Backs Off Immediate EU Tariff Threat


    Global markets are showing tentative signs of relief after US President Donald Trump walked back his threat to impose a 50% tariff on the European Union. The abrupt shift to reinstate a July 9 deadline for negotiations has helped ease investor concerns for now. Stocks in Germany and France are trading modestly higher in European session, though the UK market remains closed for holiday. US equity futures are also pointing to a firmer open, suggesting a rebound from last week’s tariff-induced selloff. This shift in tone has also taken some steam out of safe-haven flows. Gold prices dipped slightly as investors rotated back into risk assets.

    The European Commission confirmed that trade representatives from both sides are scheduled to talk later today, describing the development as a “new impetus”. A Commission spokesperson noted that both parties have agreed to fast-track negotiations and remain in close contact, providing hope that a workable framework could still be reached before the “old” deadline.

    In the currency markets, the mildly risk-on environment is supporting higher-beta currencies. Kiwi and Aussie are leading the pack, with Sterling also gaining some traction. On the other hand, traditional safe havens like Yen, Swiss Franc are under modest pressure, while Dollar is also weak. Euro and Loonie positioning in the middle.

    For Gold, as long as 3279.22 support holds, the bullish case for Gold still holds. That is, correction from 3499.79 should have completed with three waves down to 3120.34. Further rise should be seen to retest 3499.79 next. Firm break there will resume larger up trend. Nevertheless, break of 3279.22 will dampen this case and extend the corrective pattern with another falling leg.

    In Europe, the UK is on holiday. DAX is up 1.45% at the time of writing, CAC i sup 0.97%. Germany 10-year yield is up 0.011 at 2.583. Earlier in Asia, Nikkei rose 1.00%. Hong Kong HSI fell -1.35%. China Shanghai SSE fell -0.05%. Singapore Strait Times fell -0.18%. Japan 10-year JGB yield fell -0.052 to 1.496.

    Fed Kashkari: Uncertainty to delay policy at least until September

    Minneapolis Fed President Neel Kashkari warned today that major shifts in US trade policies are clouding the outlook for monetary policy, making it difficult for the Fed to move on interest rates before September.

    While “anything is possible,” Kashkari said in an interview with Bloomberg TV, he’s unsure whether the picture will be “clear enough” by then. Much hinges, he added, on whether trade negotiations between the US and its partners yield concrete deals in the coming months, which could “provide a lot of the clarity we are looking for.”

    The uncertainty, Kashkari explained, is weighing on economic activity. He emphasized the stagflationary nature of the tariff shock, noting that its impact will depend on both the scale and duration of the levies.

    On financial markets, Kashkari acknowledged that rising US Treasury yields might reflect a broader reassessment by global investors about the risks of holding American assets. He suggested that the current bond market reaction could signal a new global paradigm.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1303; (P) 1.1339; (R1) 1.1402; More…

    Intraday bias in EUR/USD remains on the upside for the moment. Correction from 1.1572 should have completed at 1.1064. Further rise should be seen to retest 1.1572 first. Decisive break there will resume larger up trend to 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, below 1.1255 minor support will turn intraday bias neutral, and probably extend the corrective pattern with another falling leg.

    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 1.0858) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    05:00 JPY Leading Economic Index Mar F 108.1 107.7 107.7
    06:30 CHF Employment Level Q1 5.512M 5.534M

     



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  • Dollar Drops as Tariff Confusion Reignites and Trade Talks Drag On

    Dollar Drops as Tariff Confusion Reignites and Trade Talks Drag On


    Dollar extended its slide as the new week opened in Asia, with investors once again thrown off balance by US President Donald Trump’s unpredictable tariff messaging. The latest development sees Trump agreeing to delay the planned 50% tariff hike on the European Union to July 9, following a direct request from European Commission President Ursula von der Leyen. While that initially offered a sense of relief, markets remain unsettled by Trump’s abrupt shifts in tone, having only days ago vowed there would be “no deal” before June and called for an immediate 50% levy.

    Von der Leyen’s message on social media highlighted the EU’s readiness to move the discussions forward “swiftly and decisively”, But with Trump’s prior threats still fresh in investors’ minds, confidence in any stable outcome remains low. The tariff truce extension does little to erase concerns over the longer-term outlook for transatlantic trade, especially with the US’s broader reciprocal tariff regime still in place at a baseline of 10%.

    At the same time, Japan is pushing ahead with its own talks with Washington. Prime Minister Shigeru Ishiba indicated on Sunday that Tokyo aims to reach a deal by the G7 summit next month. There appears to be some traction in the bilateral dialogue, including discussions on non-tariff measures and shipbuilding cooperation. Notably, the US has expressed interest in using Japanese shipyards to repair warships, while Japan has floated the potential for collaboration on Arctic icebreakers, an area where it claims a technological edge.

    However, Japan’s chief negotiator Ryosei Akazawa struck a cautious tone upon returning from his third round of discussions in Washington. He reiterated that any agreement would be contingent on all elements falling into place as a package, and that “nothing is agreed until everything is agreed.” The scheduling of the next round, including a meeting with US Treasury Secretary Scott Bessent, is still being finalized.

    With US and UK markets closed for holiday and an empty data calendar to start the week, focus is squarely on trade developments and sentiment-driven flows. Later in the week, attention will turn to RBNZ, which is widely expected to cut interest rates by 25bps. FOMC minutes, US durable goods, consumer confidence, and PCE inflation data will offer critical insight too. In addition, key releases from Australia (monthly CPI and retail sales), Canada (Q1 GDP), and Japan (Tokyo CPI) will round out the week. But given the pace of political developments on trade, economic figures may take a back seat unless they show sharp surprises.

    In the currency markets, Dollar is at the bottom of the board, followed by Yen and Swiss Franc. Kiwi is leading gains, followed by Aussie and Euro. Sterling and Loonie are more mixed, hovering around the middle.

    Technically, with today’s rally, immediate focus is now on 0.6028 resistance in NZD/USD. Decisive break there will resume the rise from 0.5484 and target 61.8% projection of 0.5484 to 0.6028 from 0.5845 at 0.6181. Nevertheless, the real test for NZD/USD’s medium term outlook is on 38.2% retracement of 0.7463 (2021 high) to 0.5484 at 0.6240.

    In Asia, at the time of writing, Nikkei is up 0.83%. Hong Kong HSI is down -0.98%. China Shanghai SSE is down -0.18%. Singapore Strait Times is down -0.43%. Japan 10-year JGB yield is down -0.007 at 1.542.

    Fed Kashkari: Uncertainty to delay policy at least until September

    Minneapolis Fed President Neel Kashkari warned today that major shifts in US trade policies are clouding the outlook for monetary policy, making it difficult for the Fed to move on interest rates before September.

    While “anything is possible,” Kashkari said in an interview with Bloomberg TV, he’s unsure whether the picture will be “clear enough” by then. Much hinges, he added, on whether trade negotiations between the US and its partners yield concrete deals in the coming months, which could “provide a lot of the clarity we are looking for.”

    The uncertainty, Kashkari explained, is weighing on economic activity. He emphasized the stagflationary nature of the tariff shock, noting that its impact will depend on both the scale and duration of the levies.

    On financial markets, Kashkari acknowledged that rising US Treasury yields might reflect a broader reassessment by global investors about the risks of holding American assets. He suggested that the current bond market reaction could signal a new global paradigm.

    RBNZ set to ease again, FOMC minutes and PCE inflation watched

    RBNZ is widely expected to lower the Official Cash Rate by 25bps to 3.25% this week, continuing its cautious policy easing cycle. Q1 CPI in New Zealand surprised to the upside and may warrant a slight upward revision in near-term inflation forecasts. Nevertheless, the outlook for growth has become increasingly clouded by external trade risks. As such, the RBNZ would probably adopt a data-dependent easing bias beyond this meeting, weighing the need for further cuts against incoming global and domestic developments.

    Markets will be particularly attentive to any forward guidance on July from RBNZ. A hawkish tilt, such as hinting at an openness to pause depending on how trade and inflation evolve—could dampen expectations for a follow-up cut. Nonetheless, the baseline remains tilted toward continued easing unless global risks recede or domestic data markedly improve.

    In the US, the release of the FOMC minutes from the May meeting will draw scrutiny, though Fed is unlikely to deviate from its current stance. Policymakers have made clear they are in no rush to resume easing, preferring to wait for clearer signs from inflation and trade.

    With the 90-day trade truce now at the halfway mark and tensions reemerging—especially with Trump’s threats toward the EU, uncertainty still dominates the outlook. More clarity may arrive with Fed’s next meeting on June 17–18, when updated economic projections will be published.

    Investors will also focus on key US data including durable goods orders, consumer confidence, and the core PCE price index.

    Elsewhere, Australia’s monthly CPI and retail sales will shed light on the pace of disinflation and consumption ahead of the RBA’s July decision. Canada’s GDP, Japan’s Tokyo CPI, retail sales, and industrial output will also be important inputs for their respective central banks.

    Here are some highlights for the week:

    • Tuesday: Japan corporate service price; Swiss trade balance; Germany Gfk consumer sentiment; US durable goods orders, consumer confidence.
    • Wednesday: Australia CPI; RBNZ rate decision; Germany import prices, unemployment; France consumer spending; Swiss UBS economic expectations; FOMC minutes.
    • Thursday: New Zealand ANZ business confidence; US GDP revision, pending home sales.
    • Friday: New Zealand building permits; Japan Tokyo CPI, industrial production, retail sales; Australia retail sales; Germany retail sales, CPI flash; Swiss KOF economic barometer; Eurozone M3 money supply; Canada GDP; US trade balance, personal income and spending, PCE inflation, Chicago PMI.

    GBP/USD Daily Outlook

    Daily Pivots: (S1) 1.3451; (P) 1.3496; (R1) 1.3587; More…

    Intraday bias in GBP/USD stays on the upside at this point. Firm break of 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593 will target 100% projection at 1.3874. On the downside, below 1.3468 minor support will turn intraday bias neutral first. But retreat should be contained well above 1.3138 support to bring another rally.

    In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2870) holds, even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    05:00 JPY Leading Economic Index Mar F 108.1 107.7 107.7
    06:30 CHF Employment Level Q1 5.534M

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Gold Eyes Fresh Record High as Safe Haven Flows Persist

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

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

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

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

    GBP/USD Weekly Outlook

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

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

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



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

    ECB’s Rehn and Stournaras back June rate cut

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Focus Turns to Fragile Trade Progress as Dollar Lags in Cautious Markets

    Focus Turns to Fragile Trade Progress as Dollar Lags in Cautious Markets


    Dollar is once again under pressure in a relatively calm Asian session, as broader financial markets appear to have stabilized following the earlier bout of volatility driven by US deficit and debt concerns. Wall Street closed the day nearly flat with little direction, while US 10-year Treasury yield held above the 4.5% level after recent volatility. In Asia, risk appetite is returning modestly, with regional equities trading slightly higher.

    The spotlight, however, has shifted back to the slow-moving trade negotiations between the US and several of its major partners. Japan is intensifying its engagement with the US on tariff talks, with top negotiator Ryosei Akazawa said to make a fourth visit to Washington on May 30, just one week after this weekend’s third round. Akazawa is seeking a direct meeting with US Treasury Secretary Scott Bessent, who won’t attend the upcoming session. Prime Minister Shigeru Ishiba also held a 45-minute phone call with US President Donald Trump at the latter’s request, though Ishiba said Trump made no concessions on Japan’s demand for complete tariff elimination.

    On the European front, the Financial Times reported that US Trade Representative Jamieson Greer plans to deliver a strong message to European Trade Commissioner Maros Sefcovic. Washington views Brussels’ recent “explanatory note” as insufficient and continues to push for unilateral tariff reductions on US goods. Without meaningful concessions, the US is prepared to impose additional 20% reciprocal tariffs on EU exports.

    Meanwhile, US-China communication channels remain open but unclear. A call between Chinese Vice Foreign Minister Ma Zhaoxu and US Deputy Secretary of State Christopher Landau yielded “substantial progress” in Beijing’s phrasing, though neither side confirmed whether tariff issues were addressed. Earlier, Vice Premier He Lifeng emphasized China’s willingness to open its markets further to US firms, a potentially strategic signal of compromise from Beijing amid slow progress elsewhere.

    Currency markets continue to reflect a defensive stance. Yen remains the top performer for the week, followed by Euro and Swiss Franc. Dollar lags as the weakest currency, alongside Aussie and Kiwi. Sterling and the Canadian Dollar are holding in mid-pack.

    Technically, WTI crude oil reversed quickly after a brief spike to 64.60 earlier in the week. Overall outlook is that price actions from 55.20 low are merely a corrective pattern. Firm break of 60.54 support will suggest that the consolidation has completed with three waves to 64.60. Retest of 55.20/55.64 support zone should then be seen next.

    In Asia, at the time of writing, Nikkei is up 0.58%. Hong Kong HSI is up 0.77%. China Shanghai SSE is up 0.03%. Singapore Strait Times is down -0.20%. Japan 10-year JGB yield is down -0.007 at 1.555. Overnight, DOW fell -0.00%. S&P 500 fell -0.04%. NASDAQ rose 0.28%. 10-year yield fell -0.043 to 4.553.

    Looking ahead, retail sales data from the UK and Canada are the main focuses of the day.

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

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

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

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

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

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

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

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

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

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

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3840; (P) 1.3864; (R1) 1.3883; More…

    Intraday bias in USD/CAD remains mildly on the downside at this point. Deeper decline should be seen for retesting 1.3479 low, or further to 1.3727 key fibonacci level. Nevertheless, break of 1.3888 minor resistance will turn bias back to the upside, to extend the corrective pattern from 1.3749 with another rising leg.

    In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4150 resistance turned support holds. Firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    Economic Indicators Update

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

     



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  • Euro and Pound Rally on UK-EU Pact, Dollar Wobbles

    Euro and Pound Rally on UK-EU Pact, Dollar Wobbles


    Euro and Sterling surged today after the UK and EU unveiled a sweeping new agreement resetting their defence and trade relationship, the most substantial since Brexit in 2020. The comprehensive deal spans key sectors including security, energy, travel, trade, and fisheries. UK Prime Minister Keir Starmer hosted European Commission President Ursula von der Leyen in London for the high-stakes summit, highlighting the UK’s shift toward pragmatic diplomacy while respecting key post-Brexit red lines.

    The UK Labour government was quick to clarify that this reset does not mark a reversal of Brexit. Officials emphasized that the agreement avoids returning to the EU single market, customs union, or freedom of movement. Still, the new deal is being hailed as a boost to corporate confidence and may pave the way for fresh investment flows into the UK, especially following other trade breakthroughs this month with the US and India.

    While optimism lifted the Euro and Pound, US assets are under renewed pressure following last week’s credit downgrade by Moody’s. Dollar weakness was notable, with the greenback falling to the bottom of the major currency pack. Treasury yields, however, surged as bond markets reeled from the implications of a swelling fiscal deficit. 10-year yield broke through the key 4.5% level, while 30-year yield topped 5% for the first time in months.

    Part of the angst stems from fresh momentum behind President Donald Trump’s multitrillion-dollar domestic policy package. Passed by the House Budget Committee on Sunday, the bill includes major increases in immigration and defense spending, along with an extension of the 2017 tax cuts. It’s now headed for floor debate later this week. Markets are interpreting this as a structural shift toward higher deficits, particularly as tariff revenue is unlikely to fully compensate for lost tax income.

    In the currency markets, Euro leads the day’s gains, followed by Sterling and Aussie. Dollar is the weakest performer, trailed by Loonie and Swiss Franc. The Japanese Yen and New Zealand Dollar are trading more mixed.

    Technically, GBP/USD is now in focus as it approaches key resistance level at 1.3433 (2024 high) again. Decisive break of 1.3433 will confirm resumption of whole up trend from 1.0351 (2022 low). Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004.

    In Europe, at the time of writing, FTSE is down 0.44%. DAX is down -0.09%. CAD is down -0.74%. UK 10-year yield is up 0.059 at 4.706. Germany 10-year yield is up 0.057 at 2.645. Earlier in Asia, Nikkei fell -0.68%. Hong Kong HSI fell -0.05%. China Shanghai SSE closed flat. Singapore Strait Times fell -0.56%. Japan 10-year JGB yield rose 0.033 to 1.488.

    Fed’s Bostic leans toward one rut in 2025 as inflation expectations turn concerning

    Atlanta Fed President Raphael Bostic said on CNBC today that he currently favors just one interest rate cut this year, citing persistent inflation pressures and growing concern over shifting inflation expectations.

    “I worry a lot about the inflation side,” Bostic said, noting that recent data shows expectations are beginning to drift upward again “in a troublesome way”, which “will make our job harder.”

    Eurozone CPI finalized at 2.2% in April, core at 2.7%

    Eurozone headline CPI was finalized at 2.2% yoy in April. CPI core, which excludes energy, food, alcohol, and tobacco, accelerated, to 2.7%, up from 2.4% previously.

    Services remained the primary driver of inflation, contributing 1.80 percentage points to the overall figure, followed by food, alcohol and tobacco at 0.57 pp. Energy continued to exert a dampening effect, subtracting -0.35 pp.

    At the EU level, annual inflation was slightly higher at 2.4% yoy. Inflation disparities remained wide across the bloc, with France posting the lowest annual rate at 0.9% and Romania the highest at 4.9%.

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

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

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

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

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

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

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

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

    NZ BNZ services slips to 48.5, sector remains under pressure

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

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

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

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1123; (P) 1.1171; (R1) 1.1212; More…

    Immediate focus is now on 1.1292 resistance in EUR/USD as rebound from 1.1064 resumes. Decisive break there will indicate that correction from 1.1572 has already completed after defending 38.2% retracement of 1.0176 to 1.1572 at 1.1039. Intraday bias will be turned back to the upside for retesting 1.1572 next.

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

    Economic Indicators Update

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

     



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  • Markets Stuck in Ranges as Data Fail to Inspire

    Markets Stuck in Ranges as Data Fail to Inspire


    Market activity remains subdued ahead of the weekend, with major currency pairs and crosses locked within yesterday’s tight ranges. Earlier in the day, New Zealand Dollar received a brief lift from rise in inflation expectations, but the move lacked conviction and quickly faded. Similarly, Japan’s weaker-than-expected Q1 GDP figures failed to trigger much reaction, as traders largely shrugged off domestic data and remained directionless.

    Broader risk sentiment is offering little help, with global equity markets also confined to narrow ranges. Investors are awaiting fresh cues, with some attention turning to the upcoming US University of Michigan Consumer Sentiment survey. While a bounce in sentiment is possible following the 90-day reciprocal tariff truce, lingering policy uncertainty may cap any gains. Of particular interest will be the inflation expectations component, as a notable uptick could reinforce concerns that tariffs are beginning to feed into price pressures.

    For the week, Aussie is leading the pack, followed by Dollar and Sterling. On the weaker side, Swiss Franc is underperforming, trailed by Euro and Kiwi. Yen and Canadian Dollar are trading more neutrally.

    In Europe, at the time of writing, FTSE is up 0.40%. DAX is up 0.45%. CAC is up 0.37%. UK 10-year yield is down -0.038 at 4.623. Germany 10-year yield is down -0.047 at 2.575. Earlier in Asia, Nikkei closed flat. Hong Kong HSI fell -0.46%. China Shanghai SSE fell -0.40%. Singapore Strait Times rose 0.15%. Japan 10-year JGB yield fell -0.024 at 1.455.

    Fed’s Bostic sees only one rate cut in 2025, as uncertainty unlikely to resolve quickly

    Atlanta Fed President Raphael Bostic reiterated his expectation for just one interest rate cut this year, citing persistent uncertainty surrounding global trade policy “is unlikely to resolve itself quickly.”

    Speaking on Bloomberg’s Odd Lots podcast, Bostic pointed to the 90-day delay of reciprocal tariffs and the tentative nature of the recent US-China de-escalation, warning that the final outcomes of trade negotiations remain unclear.

    Bostic emphasized that tariffs are expected to exert upward pressure on inflation, a view supported by the Atlanta Fed’s own analysis and echoed by many economists.

    As a result, monetary policy may need to lean against those inflationary forces, limiting how far the Fed can ease. “Our policy is going to have to anticipate — and to some extent — potentially push against those inflationary forces,” he said.

    EU exports jump 15.% yoy in March on strong US shipments

    Eurozone trade data showed a strong performance in March, with exports rising 13.7% yoy to EUR 279.8B and imports up 8.8% yoy to EUR 243.0B, resulting in a solid trade surplus of EUR 36.8B. Intra-eurozone trade also rose 1.7% yoy to EUR 226.0B, indicating modest growth in internal demand.

    For the broader European Union, the trade picture was similarly positive. Exports jumped 15.2% yoy to EUR 254.8B, while imports increased by 10.4% yoy to EUR 219.5B, yielding a EUR 35.3B surplus.

    The standout development came from transatlantic trade: EU exports to the United States surged 59.5% yoy to EUR 71.4B, far outpacing the 15.8% yoy rise in imports from the U.S.

    Meanwhile, trade with the UK also showed moderate growth, with exports rising 4.8% yoy and imports increasing 5.4% yoy. In contrast, trade with China as a weak spot. EU exports to China fell sharply by -10.1% yoy to EUR 17.9B, while imports surged 15.8% yoy to EUR 48.6B.

    ECB’s Kazaks: Interest rates near terminal level of easing cycle

    Latvian ECB Governing Council member Martins Kazaks indicated market pricing of a 25bps cut at the June 5 meeting is “relatively appropriate”.

    Nevertheless, speaking to CNBC, Kazaks added that inflation developments are “by and large within the baseline scenario”. Thus, ECB is “relatively close to the terminal rate” of its easing cycle.

    Kazaks’ comments argue that ECB may enter a phase of pause after the June rate cut.

    Meanwhile, French Governing Council member Francois Villeroy de Galhau, in an interview with a regional French newspapers, acknowledged the risk of a trade war but dismissed the notion that central banks are currently engaged in a currency war.

    Villeroy defined a currency war as using interest rates competitively to gain economic advantage. Instead, he said recent currency movements are more reflective of “revisions to economic forecasts.”

    BoJ’s Nakamura urges caution on rate hikes as economy faces mounting downward pressure

    BoJ board member Toyoaki Nakamura, known for his dovish stance, warned that Japan’s economy is under “mounting downward pressure” and cautioned against “rushing” to interest rate hikes.

    Speaking today, Nakamura highlighted the risks of tightening policy while growth slows, noting that higher rates could “curb consumption and investment with a lag”.

    Nakamura also pointed to growing uncertainty stemming from US tariff policy, which he said is already causing Japanese firms to delay or scale back capital spending plans.

    He warned that escalating trade tensions could spark a “vicious cycle of lower demand and prices,” undermining both growth and inflation.

    Japan’s GDP contracts -0.2% qoq in Q1, export drag offsets capex gains

    Japan’s economy shrank by -0.2% qoq in Q1, marking its first contraction in a year and falling short of the -0.1% qoq consensus. On an annualized basis, GDP contracted by -0.7%, a sharp disappointment compared to expectations for -0.2%.

    The weakness was largely driven by external demand, which subtracted -0.8 percentage points from growth as exports declined -0.6% qoq while imports jumped 2.9% qoq.

    Domestically, the picture was mixed. Private consumption, comprising more than half of Japan’s output, was flat on the quarter. However, capital expenditure provided some support, rising by a solid 1.4% qoq.

    Meanwhile, inflation pressures showed no sign of easing, with the GDP deflator accelerating from 2.9% yoy to 3.3% yoy, above expectations of 3.2% yoy.

    RBNZ inflation expectations rise to 2.41%, further easing seen ahead

    RBNZ’s latest Survey of Expectations for May revealed a notable uptick in inflation forecasts across all time horizons.

    One-year-ahead inflation expectations climbed from 2.15% to 2.41%, while two-year expectations rose from 2.06% to 2.29%. Even long-term projections edged higher, with five- and ten-year-ahead expectations increasing to 2.18% and 2.15% respectively.

    Despite the upward revisions in inflation outlook, expectations for monetary policy point clearly toward easing.

    With the Official Cash Rate currently at 3.50%, most respondents anticipate a 25 bps cut by the end of Q2. Looking further ahead, the one-year-ahead OCR expectation also declined from 3.23% to 2.91%.

    NZ BNZ manufacturing rises to 53.9, recovery gains ground

    New Zealand’s BusinessNZ Performance of Manufacturing Index edged up from 53.2 to 53.9 in April. The gain was driven by improvements in employment and new orders, up to 55.0 and 51.4 respectively, with employment reaching its highest level since July 2021. However, production eased slightly to 53.8.

    BNZ Senior Economist Doug Steel noted that while the sector isn’t booming, the recovery is clear, with the PMI rebounding sharply from a low of 41.4 last June.

    Still, he cautioned, “there remain questions around how sustainable it is given uncertainty stemming from offshore”.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.3263; (P) 1.3292; (R1) 1.3331; More…

    Intraday bias in GBP/USD remains neutral as range trading continues. On the upside, decisive break of 1.3433/42 key resistance zone will confirm larger up trend resumption. Nevertheless, below 1.3138 will resume the correction from 1.3442. But downside should be contained by 38.2% retracement of 1.2099 to 1.3442 at 1.2929 to bring rebound.

    In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could either be resuming the up trend, or the second leg of a consolidation pattern. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on decisive break of 1.3433 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PMI Apr 53.9 53.2
    23:50 JPY GDP Q/Q Q1 P -0.20% -0.10% 0.70%
    23:50 JPY GDP Deflator Y/Y Q1 P 3.30% 3.20% 2.90%
    03:00 NZD RBNZ Inflation Expectations Q2 2.29% 2.06%
    04:30 JPY Industrial Production M/M Mar F 0.20% -1.10% -1.10%
    09:00 EUR Eurozone Trade Balance (EUR) Mar 27.9B 17.5B 21.0B 22.7B
    12:30 USD Housing Starts Apr 1.36M 1.37M 1.32M 1.34M
    12:30 USD Building Permits Apr 1.41M 1.45M 1.48M
    12:30 USD Import Price Index M/M Apr 0.10% -0.40% -0.10% -0.40%
    14:00 USD UoM Consumer Sentiment May P 53 52.2
    14:00 USD UoM Inflation Expectations May P 6.50%

     



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  • Markets Tread Water as Traders Shrug Off US PPI and UK GDP Surprises

    Markets Tread Water as Traders Shrug Off US PPI and UK GDP Surprises


    Global financial markets are trading in tight ranges today, with little conviction seen across major asset classes. U.S. futures are pointing to a mildly weaker open. Despite a surprise decline in US producer prices in April, suggesting a possible easing of inflation pressures, there was little follow-through in market reaction. Earlier today, stronger-than-expected UK Q1 GDP data also offered limited support to the Pound. Overall sentiment remains contained as traders await further clarity on the trade front.

    Much of the current hesitation in markets can be attributed to persisting trade uncertainty. The EU Foreign Affairs Council is holding a key meeting today in Brussels to discuss trade relations with the US and broader economic security. Ahead of the meeting, European trade ministers expressed dissatisfaction with the limited UK-US trade agreement announced last week, which retains a 10% tariff on British exports. EU officials signaled that such a deal would not suffice to deter retaliatory measures.

    European Trade Commissioner Maros Sefcovic confirmed a recent conversation with U.S. Commerce Secretary Howard Lutnick and noted that both sides have agreed to step up engagement. Additional meetings are anticipated in Brussels or during upcoming OECD sessions. However, the complexity of negotiations and diverging expectations between the EU and US continue to cast doubt on a swift resolution.

    Elsewhere, trade talks between the US and India also show signs of friction. US President Donald Trump claimed that India had offered a trade deal with “no tariffs” on American goods. However, India’s foreign minister Subrahmanyam Jaishankar quickly pushed back, saying that talks remain ongoing and nothing has been finalized. It’s believed that India would  demand strict reciprocity on tariffs, while it’s unlikely to concede easily in politically sensitive sectors such as agriculture, where protectionist pressures remain high.

    In the currency markets, Aussie is leading gains for the week, followed by Dollar and then Sterling. On the weaker side, the Swiss Franc is the laggard, with Kiwi and Euro also underperforming. Yen and Canadian Dollar are holding middle positions.

    In Europe, at the time of writing, FTSE is up 0.34%. DAX is up 0.10%. CAC is down -0.19%. UK 10-year yield is down -0.042 at 4.674. Germany 10-year yield is down -0.061 at 2.64. Earlier in Asia, Nikkei fell -0.98%. Hong Kong HSI fell -0.79%. China Shanghai SSE fell -0.68%. Singapore Strait Times rose 0.54%. Japan 10-year JGB yield rose 0.022 to 1.479.

    US retail sales rises 0.1% mom in Apr, ex-auto sales up 0.1% mom

    US retail sales rose 0.1% mom to USD 724.1B in April, matched expectations. Ex-auto sales rose 0.1% mom to USD 582.5B, below expectation of 0.3% mom. Ex-gasoline sales rose 0.1% mom to USD 673.1B. Ex-auto & gasoline sales rose 02% mom to USD 531.5B.

    Total sales for the February through April period were up 4.8% from the same period a year ago.

    US PPI at -0.5% mom, 2.4% yoy in April, below expectations

    US PPI fell -0.5% mom in April, below expectation of 0.2% mom. PPI services fell -0.7% mom while PPI goods was unchanged. PPI less foods, energy and trade services ticked down by -0.1% mom, the first decline since April 2020.

    For the 12 months, PPI slowed from 2.7% yoy to 2.4% yoy, below expectation of 2.5% yoy. PPI less foods, energy and trade services rose 2.9% yoy.

    US initial jobless claims unchanged at 229k

    US initial jobless claims was unchanged at 229k in the week ending May 10, slightly below expectation of 230k. Four-week moving average of initial claims rose 3k to 230.5k.

    Continuing claims rose 9k to 1881k in the week ending May 3. Four-week moving average of continuing claims rose 1k to 1874k.

    Eurozone industrial output surges 2.6% mom in March, led by capital goods

    Eurozone industrial production jumped 2.6% mom in March, significantly outperforming expectations of 1.7% mom. The surge was driven by strong gains across key categories, including capital goods (+3.2%), durable consumer goods (+3.1%), and non-durable consumer goods (+2.3%). Intermediate goods also posted a modest 0.6% rise, while energy output dipped by -0.5%.

    Across the broader EU, industrial production rose by 1.9% mom. Ireland led the gains with a remarkable 14.6% surge, followed by Malta (+4.4%) and Finland (+3.5%). However, there were notable declines in Luxembourg (-6.3%), Denmark, Greece (both -4.6%), and Portugal (-4.0%).

    UK economy beats expectations with 0.7% qoq growth in Q1, 0.2% mom in March

    The UK economy expanded by 0.7% qoq in Q1, slightly ahead of expectations at 0.6% qoq. Growth was led by a 0.7% qoq rise in the services sector and a robust 1.1% qoq increase in production output, while construction activity was flat. Importantly, real GDP per head also rose by 0.5% qoq, ending two consecutive quarters of contraction.

    On the expenditure side, growth was underpinned by a 2.9% qoq rise in gross fixed capital formation, signaling strong business investment. Household consumption also edged up by 0.2% qoq, while net trade contributed positively as exports rose by 3.5% qoq and imports by 2.1% qoq.

    Monthly data for March further supported the upbeat quarterly reading, with GDP rising by 0.2% mom, exceeding expectations of flat growth. Services output was the standout, rising 0.4% mom and contributing the most to overall GDP expansion. Meanwhile, construction rose by 0.5% mom, offsetting a -0.7% mom decline in production output.

    Australia jobs surge 89k in April, unemployment rate unchanged at 4.1%

    Australia’s labor market delivered a strong upside surprise in April, with employment rising by 89k, sharply above expectations of 20.9k. Full-time jobs accounted for 59.5k of the gain, while part-time employment rose by 29.5k.

    Unemployment rate held steady at 4.1%, in line with forecasts, as the surge in employment was matched by a jump in labor force participation from 66.8% to 67.1%.

    Despite the headline strength, hours worked were largely unchanged on the month. Nonetheless, the employment-to-population ratio rose by 0.3 percentage points to 64.4%, just shy of the record high reached in January.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1136; (P) 1.1201; (R1) 1.1238; More…

    Range trading continues in EUR/USD and intraday bias stays neutral. On the upside, break of 1.1292 resistance will argue that correction from 1.1572 has completed after defending 38.2% retracement of 1.0176 to 1.1572 at 1.1039. Intraday bias will be back on the upside for retesting 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0789) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:00 AUD Consumer Inflation Expectations May 4.10% 4.20%
    01:30 AUD Employment Change Apr 89K 20.9K 32.2K 36.4K
    01:30 AUD Unemployment Rate Apr 4.10% 4.10% 4.10%
    06:00 JPY Machine Tool Orders Y/Y Apr 7.70% 11.40%
    06:00 GBP GDP Q/Q Q1 P 0.70% 0.60% 0.10%
    06:00 GBP GDP M/M Mar 0.20% 0.00% 0.50%
    06:00 GBP Industrial Production M/M Mar -0.70% -0.60% 1.50%
    06:00 GBP Industrial Production Y/Y Mar -0.70% -0.90% 0.10% 0.40%
    06:00 GBP Manufacturing Production M/M Mar -0.80% -0.80% 2.20%
    06:00 GBP Manufacturing Production Y/Y Mar -0.80% -0.50% 0.30% 0.50%
    06:00 GBP Goods Trade Balance (GBP) Mar -19.9B -19.7B -20.8B -21.0B
    06:30 CHF Producer and Import Prices M/M Apr 0.10% 0.20% 0.10%
    06:30 CHF Producer and Import Prices Y/Y Apr -0.50% -0.10%
    09:00 EUR Eurozone GDP Q/Q Q1 P 0.30% 0.40% 0.40%
    09:00 EUR Eurozone Employment Change Q/Q Q1 P 0.30% 0.10% 0.10%
    09:00 EUR Eurozone Industrial Production M/M Mar 2.60% 1.70% 1.10%
    12:15 CAD Housing Starts Apr 279K 234K 214K
    12:30 CAD Manufacturing Sales M/M Mar -1.40% -1.90% 0.20% -0.20%
    12:30 CAD Wholesale Sales M/M Mar 0.20% -0.30% 0.30%
    12:30 USD Initial Jobless Claims (May 9) 229K 230K 228K 229K
    12:30 USD Retail Sales M/M Apr 0.10% 0.10% 1.50% 1.70%
    12:30 USD Retail Sales ex Autos M/M Apr 0.10% 0.30% 0.50% 0.80%
    12:30 USD PPI M/M Apr -0.50% 0.20% -0.40% 0.00%
    12:30 USD PPI Y/Y Apr 2.40% 2.50% 2.70%
    12:30 USD PPI Core M/M Apr -0.40% 0.30% -0.10% 0.40%
    12:30 USD PPI Core Y/Y Apr 3.10% 3.10% 3.30% 4.00%
    12:30 USD Empire State Manufacturing May -9.2 -7.1 -8.1
    12:30 USD Philadelphia Fed Survey May -4 -8.5 -26.4
    13:15 USD Industrial Production M/M Apr 0.00% 0.10% -0.30%
    13:15 USD Capacity Utilization Apr 77.70% 77.80% 77.80%
    14:00 USD Business Inventories Mar 0.20% 0.20%
    14:00 USD NAHB Housing Market Index May 41 40
    14:30 USD Natural Gas Storage 111B 104B

     



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  • Calm in Currency Markets Ahead of Fed’s Fourth Straight Hold

    Calm in Currency Markets Ahead of Fed’s Fourth Straight Hold


    The forex markets are treading water ahead of today’s FOMC decision. While the announcement typically acts as a volatility trigger, the lack of suspense surrounding this meeting could mean muted price action even after Chair Jerome Powell’s press conference. Markets are pricing in a near-certainty, 99% probability, that Fed will hold the policy rate steady at 4.25–4.50% for a fourth straight meeting, leaving little room for surprise. Adding to the quiet is the absence of updated economic projections and dot plot guidance, which are only due at the June meeting.

    Last week’s stronger-than-expected non-farm payrolls cooled expectations for near-term easing, with the chance of a June rate cut falling to around 30%. Traders will be closely watching Powell’s tone for any nuanced shift, particularly regarding the timing of the next rate cut. However, officials are likely to maintain their cautious, data-dependent posture given persistent economic uncertainty, especially around the evolving US tariff policies.

    Indeed, Powell is expected to reiterate that the Fed is not in a hurry to adjust rates. The ongoing tariff truce and upcoming negotiations—such as this weekend’s Geneva meeting between U.S. and Chinese trade officials—introduce substantial geopolitical risks that could influence inflation, growth, and financial conditions. With so many moving parts, Fed is unlikely to make any forward commitments. For now, the market still leans toward three rate cuts by year-end, which would bring the target range down to 3.50–3.75%, but policymakers are not ready to validate that path.

    In terms of price action so far this week, the Dollar has underperformed, joined by Loonie and Swiss Franc near the bottom of the board. Yen has led gains, followed by Kiwi and Sterling. Euro and Aussie are positioned in the middle. But with ranges tightly held, these relative standings could shift quickly depending on today’s Fed tone and incoming trade headlines.

    Technically, USD/CAD has clearly lost must momentum, as seen in D MACD, as it approaches 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727. Break of 1.3903 resistance should indicate short term bottoming, and bring stronger rebound back to 55 D EMA (now at 1.4057). However, firm break of 1.3727 could then bring deeper fall to 1.3418 support before USD/CAD tries to bottom again.

    In Europe, at the time of writing, FTSE is down -0.53%. DAX is down -0.24%. CAC is down -0.68%. UK 10-year yield is down -0.049 at 4.471. Germany 10-year yield is down -0.04 at 2.503. Earlier in Asia, Nikkei fell -0.14%. Hong Kong HSI rose 0.13%. China Shanghai SSE rose 0.80%. Singapore Strait Times rose 0.13%. Japan 10-year JGB yield rose 0.038 to 1.300.

    Eurozone retail sales fall -0.1% mom in March

    Eurozone retail sales slipped by -0.1% mom in March, in line with expectations. The breakdown shows marginal declines across key categories, with food, drinks, and tobacco sales down -0.1%, and non-food products (excluding fuel) also falling -0.1%. Only automotive fuel recorded a modest rise, up 0.4%.

    Across the broader EU, retail trade also declined -0.1% mom. Notable contractions were seen in Slovenia (-2.0%), Estonia (-1.3%), and Slovakia (-0.9%). Malta led the gainers with a 2.0% increase, followed by Belgium, Croatia (both +1.4%), and Bulgaria (+1.1%).

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

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

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

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

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

    NZ employment grow 0.1% in Q1, wages growth cool

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

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

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

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

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

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

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

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8201; (P) 0.8233; (R1) 0.8254; More….

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

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Employment Change Q1 0.10% 0.10% -0.10% -0.20%
    22:45 NZD Unemployment Rate Q1 5.10% 5.30% 5.10%
    22:45 NZD Labour Cost Index Q/Q Q1 0.40% 0.50% 0.60%
    00:30 JPY Services PMI Apr F 52.4 52.2 50
    06:00 EUR Germany Factory Orders M/M Mar 3.60% 1.10% 0.00%
    07:00 CHF Foreign Currency Reserves (CHF) Apr 703B 726B
    08:30 GBP Construction PMI Apr 46.6 46 46.4
    09:00 EUR Eurozone Retail Sales M/M Mar -0.10% -0.10% 0.30% 0.20%
    14:30 USD Crude Oil Inventories -1.7M -2.7M
    18:00 USD Fed Interest Rate Decision 4.50% 4.50%
    18:30 USD FOMC Press Conference

     



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  • Franc and Euro Falter, Yen Strengthens as Risk-Off Returns

    Franc and Euro Falter, Yen Strengthens as Risk-Off Returns


    Both Swiss Franc and Euro are under some selling pressure today, especially against Sterling. The Franc suffered after SNB Chair Martin Schlegel signaled the willingness to reintroduce negative interest rates if deflationary risks persist. Meanwhile, Euro came under pressure as fresh political instability emerged in Germany

    CDU/CSU leader Friedrich Merz’s failure to secure a parliamentary majority in his bid to become chancellor. Merz’s defeat highlighted cracks within his coalition and prompted concern across Europe. Eighteen coalition lawmakers reportedly broke ranks. European observers warned that Berlin’s political instability could have ramifications for EU-wide cohesion, especially at a time when coordinated responses to US tariffs are essential.

    Euro’s fragility was further compounded by European Trade Commissioner Maros Sefcovic’s remarks in the European Parliament. He emphasized that all options remain on the table if US tariff negotiations fail. The EU is preparing contingency measures ahead of the July 8 deadline, with Sefcovic warning that US tariffs now affect 70% of EU exports and could rise to 97%.

    Markets will be closely watching the results of the EU’s trade diversion task force due in mid-May, especially given the risk of redirected Chinese exports flooding European markets. While Sefcovic emphasized the EU’s preference for a negotiated settlement with the US, his tone reflected limited optimism for swift progress.

    Despite Sterling rally again its European peers, it was Yen that claimed the top spot among major currencies today. The Pound is sitting at the second place, with Kiwi as the third. On the other hand, Swiss Franc is the worst performer, followed by Dollar and then Aussie. Euro and Loonie are positioning in the middle.

    Technically, as USD//JPY’s decline from 145.90 gathers momentum, focus is now on 141.90 support. Firm break there will suggest that recovery from 139.87 has completed as a three-wave corrective move. Larger fall from 158.86 should then be ready to resume to 139.26 key long term fibonacci support.

    In Europe, at the time of writing, FTSE is down -0.01%. DAX is down -0.54%. CAC is down -0.23%. UK 10-year yield is flat at 4.524. Germany 10-year yield is up 0.023 at 2.541. Earlier in Asia, Japan was on holiday. Hong Kong HSI rose 0.70%. China Shanghai SSE rose 1.13%. Singapore Strait Times rose 0.19%.

    SNB’ Schlegel signals willingness to revisit negative rates

    SNB Chairman Martin Schlegel said that while the central bank does not favor negative interest rates, it remains fully prepared to reintroduce them if necessary.

    Speaking at an event today, Schlegel said “if we have to do it, the negative interest rates, we’re certainly prepared to do it again”.

    “For the last couple of quarters, we have always said we are ready to intervene in the forex market if it’s necessary,” Schlegel said.

    The comments come just a day after Swiss CPI data revealed that inflation slowed to 0% in April — the lowest reading in four years. The data has triggered market expectations that SNB will cut its policy rate from the current 0.25% at its upcoming meeting on June 19. Expectations are also mounting that rates could eventually fall back below zero this year.

    Eurozone PPI falls -1.6% mom in March on steep energy decline

    Eurozone PPI fell -1.6% mom in March, dragged down by a steep -5.8% mom drop in energy costs. Excluding energy, however, PPI ticked up 0.1% mom. Annually, PPI stood at 1.9% yoy, down from prior month’s 3.0% yoy.

    Modest monthly gains was seen across most segments — 0.1% mom for capital goods, 0.2% mom for durable consumer goods, and 0.5% mom for non-durable goods. Intermediate goods were unchanged.

    In the broader EU, PPI also fell -1.6% m/m and rose 2.1% yoy. The largest monthly decreases in industrial producer prices were recorded in Estonia (-8.0%), Spain (-3.9%) and Italy (-3.3%). The highest increases were observed in Greece (+1.3%), Luxembourg (+0.9%) and Slovenia (+0.6%).

    Eurozone PMI services finalized at 50.1, cost pressure easing, hiring hesitant

    Eurozone’s PMI Composite was finalized at 50.4 in April, down from 50.9 in March, confirming a sluggish start to Q2. The services sector, a critical growth engine, nearly stalled with a reading of 50.1, down from 51.0.

    Nationally, Ireland (54.0) led the bloc in growth, followed by Spain (52.5) and Italy (52.1). Germany (50.1) was in slight expansion, while France (47.8) fell deeper into contraction territory.

    Cyrus de la Rubia of Hamburg Commercial Bank noted that cost pressures in services remain “relatively high”, but easing price trends are adding weight to expectations for an ECB rate cut in June.

    Employment growth across the Eurozone has stabilized, though businesses remain hesitant to expand their workforce amid continued uncertainty.

    Country-level divergence is also growing more apparent. Germany’s growth is fragile but could improve in coming months, supported by its new fiscal stimulus measures.

    UK PMI servies finalized at 49.0, tariffs and wage costs hit outlook

    UK PMI Services was finalized at 49.0 in April, down from 52.5 in March, its lowest level since January 2023. PMI Composite also dropped into contraction at 48.5, marking the first negative reading in 18 months.

    S&P Global’s Tim Moore pointed to heightened business uncertainty as a major drag on activity. Export conditions were the weakest since early 2021. Rising payroll costs linked to National Insurance hikes and increased National Living Wage rates contributed to the sharpest input cost growth since mid-2023. Service providers responded with their steepest price increases in nearly two years.

    Business confidence deteriorated significantly as “service sector firms braced for an extended period of global economic turbulence and heightened recession risks.” 22% of firms forecasted a decline in activity over the next 12 months—more than triple the level seen after the 2024 general election.

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

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

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

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

    EUR/GBP Mid-Day Outlook

    Daily Pivots: (S1) 0.8504; (P) 0.8518; (R1) 0.8527; More…

    EUR/GBP’s fall from 0.8737 resumed after brief consolidations and intraday bias is back on the downside. Sustained trading below 55 D EMA (now at 0.8457) will suggest that whole rise from 0.8221 has already complete and turn outlook bearish. Nevertheless, rebound from current level, followed by break of 0.8539 resistance, will suggest that the correction from 0.8737 has completed, and retain near term bullishness.

    In the bigger picture, down trend from 0.9267 (2022 high) should have completed at 0.8221, just ahead of 0.9201 key support (2024 low). Rise from 0.8221 is likely reversing the whole fall. Further rise should be seen to 61.8% retracement of 0.9267 to 0.8221 at 0.8867 next. This will remain the favored case as long as 0.8472 resistance turned support holds. However, firm break of 0.8472 will argue that the down trend hasn’t completed yet.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD Building Permits M/M Mar -8.80% -1.70% -0.30% -0.20%
    01:45 CNY Caixin Services PMI Apr 50.7 51.7 51.9
    06:45 EUR France Industrial Output M/M Mar 0.20% 0.40% 0.70% 1.00%
    07:50 EUR France Services PMI Apr F 47.3 46.8 46.8
    07:55 EUR Germany Services PMI Apr F 49 48.8 48.8
    08:00 EUR Eurozone Services PMI Apr F 50.1 49.7 49.7
    08:30 GBP Services PMI Apr F 49 48.9 48.9
    09:00 EUR Eurozone PPI M/M Mar -1.60% -1.60% 0.20%
    09:00 EUR Eurozone PPI Y/Y Mar 1.90% 2% 3%
    12:30 CAD Trade Balance (CAD) Mar -0.5B -1.7B -1.5B -1.4B
    12:30 USD Trade Balance (USD) Mar -140.5B -124.7B -122.7B -123.2B
    14:00 CAD Ivey PMI Apr 51.2 51.3

     



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

    Risk Sentiment Sours on US GDP Contraction, Recession Fears Mount


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    12 out of 20 industrial sectors posting declines.

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

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

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

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

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

    Swiss KOF falls to 97.1, outlook considerably subdued

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

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

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

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

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

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

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

    NZ ANZ business confidence falls to 49.3, inflation expectations steady

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0792) holds.

    Economic Indicators Update

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

     



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  • Markets Stay Subdued Ahead of Big Data and Earnings; Trade Talks Remain in Focus

    Markets Stay Subdued Ahead of Big Data and Earnings; Trade Talks Remain in Focus


    Trading remains notably subdued across global financial markets today as investors adopt a cautious stance. On deck are quarterly earnings from four of the “Magnificent Seven”—Amazon, Apple, Meta Platforms, and Microsoft. On top of that, key releases including US and Eurozone GDP, US non-farm payrolls, and Eurozone CPI flash inflation data will provide critical insights into the impacts of recent trade tensions on the economy.

    Sentiment is caught between two powerful forces. On the pessimistic side, growing risks of a global recession stemming from escalating trade disruptions are weighing heavily. According to a Reuters poll, three-quarters of economists have downgraded their 2025 global growth forecasts, cutting the median forecast to 2.7% from 3.0% just a few months ago. Alarmingly, 60% of surveyed economists rated the risk of a global recession this year as either “high” or “very high.” Investors will be keenly watching this week’s economic releases for validation—or rejection—of these rising recession fears.

    However, there is also a glimmer of optimism. Any tangible breakthrough in ongoing trade negotiations could quickly improve sentiment. US Treasury Secretary Scott Bessent emphasized that “it’s up to China to de-escalate,” highlighting that China’s trade surplus with the US makes their current tariff burden “unsustainable.” Bessent also hinted that India could soon become one of the first countries to finalize a new trade agreement with the US, keeping markets alert for needed boost to sentiment.

    In the currency markets, Kiwi is the weakest performer of the day so far, followed by Swiss Franc and Loonie. On the stronger side, Ten is leading gains, followed by Sterling, and then Aussie. Dollar and Euro are sitting in the middle of the pack.

    Technically, AUD/NZD’s extended recovery suggests that a short term bottom was formed at 1.0649, on bullish convergence condition in 4H MACD. Stronger rally is in favor for the near term. But outlook will stay bearish as long as 38.2% retracement of 1.1173 to 1.0649 at 1.0849 holds. Another decline through 1.0649 is expected at a later stage once the current consolidation completes—especially if RBA moves toward faster rate cuts in response to weakening economic conditions.

    In Europe, at the time of writing, FTSE is up 0.16%. DAX is up 0.55%. CAC is up 0.87%. UK 10-year yield is up 0.039 at 4.521. Germany 10-year yield is up 0.052 at 2.515. Earlier in Asia, Nikkei rose 0.38%. Hong Kong HSI fell -0.04%. China Shanghai SSE fell -0.20%. Singapore Strait Times fell -0.31%. Japan 10-year JGB yield fell -0.025 to 1.315.

    IMF warns US tariffs to outweigh Germany’s stimulus, recommends just one more ECB cut

    Higher infrastructure spending in Germany will offer some support to Europe’s growth outlook, but it won’t be enough to offset the damage caused by US tariffs, according to Alfred Kammer, director of the European department at the IMF.

    Speaking to CNBC, Kammer stressed that “it’s the tariffs and the trade tensions which weigh on the outlook rather than the positive effects on the fiscal side.”

    He noted that the IMF has delivered a “meaningful downgrade” to growth forecasts for Europe’s advanced economies and an even steeper downgrade for the emerging Eurozone countries over the next two years. The IMF cut its Eurozone growth forecasts by -0.2% for each of the next two years, now projecting growth of just 0.8% in 2025 and 1.2% in 2026.

    Kammer also outlined a clear policy recommendation for ECB. Acknowledging the success of the disinflation efforts, he suggested that ECB has room for “one more 25-basis-point cut in the summer,” after which it should hold rates steady at around 2%, barring major shocks.

    ECB’s Villeroy reaffirms gradual rate cut, sees no recession risk

    French ECB Governing Council member Francois Villeroy de Galhau expressed confidence today that there is no imminent recession risk for either France or Europe, while inflation continues to decline.

    Speaking to RTL Radio, Villeroy also reaffirmed that the ECB retains “a gradual margin for rate cuts”, despite global uncertainties.

    Villeroy also issued a strong warning about the risks stemming from US trade policies. He criticized the administration’s protectionist stance, saying it was “playing against the US economy and unfortunately also against the world economy.”

    He stressed that protectionism ultimately leads to “less growth and more inflation.”

    China reaffirms growth target, holds back on major stimulus

    China pledged its full confidence in achieving this year’s growth target of around 5%, vowing to implement timely and multiple support measures as the country is now in full-fledged trade war with the US. However, no major stimulus was announced immediately, giving the impression that Beijing is not in a rush to roll out large-scale interventions. Authorities appear inclined to first monitor the trade shock’s timing and magnitude before deciding on more aggressive measures.

    Zhao Chenxin, deputy head of the National Development and Reform Commission, stressed at a press conference today that China retains “ample policy reserves and plenty of policy space,” and highlighted plans to stabilize employment and strengthen public employment services.

    At a Politburo meeting chaired by President Xi Jinping last week, officials called for a “timely reduction” in interest rates and reserve requirement ratios to support the economy. Additional measures to aid struggling businesses, boost consumption among middle- and lower-income groups, and promote further development in technology and artificial intelligence were also emphasized.

    As a touch of optimism, official data released over the weekend showed China’s industrial profits returning to growth in the first quarter. Cumulative profits rose 0.8% yoy to CNY 1.5T, reversing a -0.3% decline seen in the first two months.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.3268; (P) 1.3318; (R1) 1.3361; More…

    Intraday bias in GBP/USD is turned neutral first with today’s recovery. Correction from 1.3422 short term top could still extend, and break of 1.3232 will turn intraday bias back the downside. But in this case, downside should be contained by 38.2% retracement of 1.2099 to 1.3422 at 1.2917. On the upside, firm break of 1.3422/33 resistance zone will resume larger up trend.

    In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could either be resuming the up trend, or the second leg of a consolidation pattern. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on break of 1.3433 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    10:00 GBP CBI Realized Sales Apr -8 -20 -41

     



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