Tag: Eurozone

  • EUR/GBP hovers near 0.8500 as soft Eurozone inflation, dovish BoE shape outlook

    EUR/GBP hovers near 0.8500 as soft Eurozone inflation, dovish BoE shape outlook


    • EUR/GBP may depreciate due to weaker-than-expected preliminary April HICP data from the Eurozone’s largest economies.
    • Markets have largely priced in a 25 basis point rate cut by the ECB at its June meeting.
    • The Pound Sterling weakens as markets are now anticipating a BoE 25 basis point rate cut in May.

    EUR/GBP holds ground for a second consecutive session, trading around the 0.8500 mark during the Asian session on Thursday. However, the upside of the EUR/GBP cross may be capped as the Euro (EUR) trades cautiously following weaker-than-expected preliminary April Harmonized Index of Consumer Prices (HICP) data from Germany and France, along with steady readings from Italy and Spain.

    These figures suggest moderate inflationary pressures across the Eurozone’s largest economies, reinforcing market expectations for further monetary easing by the European Central Bank (ECB). A 25 basis point rate cut is now almost fully priced in for the ECB’s June meeting, as policymakers anticipate further declines in inflation and economic activity amid the impact of new US tariffs on its trading partners.

    Despite potential headwinds for the Euro, the EUR/GBP cross may find support from a weakening Pound Sterling (GBP) against its peers, as sentiment turns increasingly dovish toward the Bank of England (BoE). Markets are now anticipating a 25 basis point rate cut at the BoE’s upcoming policy decision on May 8. These expectations have intensified on concerns that the US’s new tariff measures could reduce global inflation and weigh on UK economic growth.

    BoE policymaker Megan Greene added to the dovish tone, stating in a speech at the Atlantic Council on Friday that the potential trade conflict would have a “net disinflationary” effect on the UK economy. Greene also flagged labor market risks, citing the recent increase in employers’ national insurance contributions from 13.8% to 15%, which took effect this month.

    Central banks FAQs

    Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

    A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

    A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

    Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.



    Source link

  • 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

     



    Source link

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

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


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

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

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

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

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

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

    ECB consumer survey shows inflation expectations ticking higher

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    USD/CHF Mid-Day Outlook

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

    No change in USD/CHF’s outlook and intraday bias remains neutral. On the upside, above 0.8333 will resume the rebound from 0.8038 short term bottom. But upside should be limited by 38.2% retracement of 0.9200 to 0.8038 at 0.8482. On the downside, below 0.8196 minor support will bring retest of 0.8038. Firm break there will resume larger down trend.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8783) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Shop Price Index Y/Y Apr -0.10% -0.20% -0.40%
    06:00 EUR Germany GfK Consumer Sentiment May -20.6 -26 -24.5 -24.3
    08:00 EUR Eurozone M3 Money Supply Y/Y Mar 3.60% 4.00% 4.00% 3.90%
    09:00 EUR Eurozone Economic Sentiment Apr 93.6 94.5 95.2 95
    09:00 EUR Eurozone Industrial Confidence Apr -11.2 -10.7 -10.6 -10.7
    09:00 EUR Eurozone Services Sentiment Apr 1.4 2.4 2.2
    09:00 EUR Eurozone Consumer Confidence Apr F -16.7 -16.7 -16.7
    12:30 USD Goods Trade Balance (USD) Mar P -162.0B -146.3B -147.9B
    12:30 USD Wholesale Inventories Mar P 0.50% 0.70% 0.30%
    13:00 USD S&P/Case-Shiller Home Price Indices Y/Y Feb 4.80% 4.70%
    13:00 USD Housing Price Index M/M Feb 0.30% 0.20%
    14:00 USD Consumer Confidence Apr 87.1 92.9

     



    Source link

  • 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

     



    Source link

  • Subdued Start to a Heavy Data Week with Risk Sentiment Holding Steady

    Subdued Start to a Heavy Data Week with Risk Sentiment Holding Steady


    Trading was particularly subdued today, even by the quiet standards of a typical Monday in Asia. That’s not surprising, given the near-empty economic calendar offering little to move the markets. Instead, traders are exercising understandable caution ahead of a heavy barrage of important data releases later this week, including US and Eurozone GDP figures, inflation reports from the US, Eurozone, and Australia, and the US non-farm payrolls report.

    Now that the peak of the tariff shock appears to have passed, at least for this current wave, the market’s attention is shifting toward how these escalations are starting to materialize in hard economic data. Early indications from global PMIs and corporate earnings have been mixed, but this week’s heavyweight releases will offer more definitive evidence. For now, the overall market mood remains cautiously optimistic, and there is still room for a further rebound in risk assets if the incoming data holds up or surprises to the upside.

    Meanwhile, Yen will also be a major focus this week with BoJ’s rate decision and new economic projections due. Yen has softened notably since last week as risk appetite improved globally. Speculation is also building that BoJ might delay its next rate hike in response to tariff-induced uncertainties. Should the BoJ’s updated projections lean dovish, Yen could face another leg of weakness against its major counterparts.

    Technically, USD/JPY’s recovery from the short-term bottom at 139.87 remains in favor as long as 142.26 minor support holds. However, the broader near-term outlook stays bearish unless the pair can break decisively above 38.2% retracement of 158.86 to 139.87 at 147.12. Failure to do so, followed by break back below 142.26, would argue that the recovery is a corrective move, and bring retest of 139.87 next.

    In Asia, at the time of writing, Nikkei is up 0.43%. Hong Kong HSI is up 0.07%. China Shanghai SSE is down -0.03%. Singapore Strait Times is down -0.43%. Japan 10-year JGB yield is down -0.017 at 1.323.

    Japan denies report of US preference for weaker Dollar and stronger Yen

    Japanese officials moved swiftly to deny a media report suggesting that US Treasury Secretary Scott Bessent had conveyed a preference for a weaker Dollar and stronger Yen during recent bilateral meetings in Washington last week.

    Japan’s top currency diplomat, Atsushi Mimura, emphasized to reporters that “the US side did not touch upon exchange-rate targets” in discussions between Finance Minister Katsunobu Kato and his US counterpart.

    Finance Minister Kato also reiterated via social media that exchange-rate frameworks were not discussed, directly refuting the report published by the Yomiuri newspaper.

    Meanwhile, Bessent himself described the talks with Japan as “very constructive” in a post on X, noting that they covered reciprocal trade issues and “matters pertaining to exchange rates” without mentioning any explicit preferences.

    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.

    High-stakes week ahead

    It’s shaping up to be an extremely busy week for global markets, even though Monday’s economic calendar is near-empty. The action will pick up quickly, with BoJ rate decision and BoC summary of deliberations. Meanwhile, high-profile data releases include US GDP, PCE inflation, non-farm payrolls; Eurozone GDP and CPI’ Australia’s CPI; Canada’s GDP; and China’s PMIs.

    Starting with BoJ, the central bank is widely expected to leave its short-term policy rate unchanged at 0.50% during this week’s meeting. According to a recent Reuters poll, only about half of economists still expect a hike to 0.75% in Q3, a notable drop from the 70% figure recorded in March. Market pricing now sees about a 65% chance of a 25bps hike by year-end.

    The impact of Trump’s tariffs has made Japan’s economic outlook highly uncertain, particularly with manufacturing earnings expected to deteriorate. As a result, BoJ is likely to delay any further rate hikes, and is set to lower its economic growth forecast in the upcoming quarterly outlook. Nevertheless, BoJ is still expected to signal that rising wages and gradually firming inflation trends remain intact, keeping the door open for tightening when conditions allow.

    From the US, a barrage of key releases will take center stage: the advance estimate of Q1 GDP, PCE inflation report, ISM manufacturing, and the all-important April non-farm payrolls. Fed officials have recently made it clear that May is too early for any rate cut, but there are increasing signs that attention is shifting back toward the employment side of the dual mandate. Should the labor market show signs of unexpected weakness, the probability of a Fed rate cut in June — currently hovering around 65% — could firm up sharply.

    Turning to the Eurozone, flash GDP and CPI figures will be pivotal. Reports suggest a growing consensus within the ECB for another rate cut in June. Relief comes from the observation that the inflationary shock from US tariffs has been relatively muted, with Euro’s appreciation and weakening growth dynamics exerting deflationary pressure.

    However, the durability of this trend is still in question. If Eurozone core inflation shows signs of re-acceleration, it could complicate ECB’s easing plans. Hence, this week’s CPI data will be crucial in either validating or challenging the market’s current expectation for further ECB easing.

    In Australia, sentiment is shifting toward an imminent rate cut by RBA. Recent data have underwhelmed, with wage growth missing RBA’s own projections and consumption proving softer than expected. Coupled with lingering global trade uncertainties, particularly between the US and China, the case for another RBA rate cut to cushion the economy has strengthened considerably. Unless Australia’s Q1 CPI report delivers a major upside surprise this week, the market is likely to fully price in a rate cut at the May meeting.

    Here are some highlights for the week:

    • Tuesday: Germany Gfk consumer sentiment; Eurozone M3 money supply; US goods trade balance, house price index, consumer confidence.
    • Tuesday: Japan industrial production, retail sales, housing starts; New Zealand ANZ business confidence; Australia quarterly CPI; China officials PMIs, Caixin PMI manufacturing; Eurozone GDP flash; Swiss KOF economic barometer; US ADP employment, GDP advance, Chicago PMI; personal income and spending, PCE inflation; Canada GDP, BoC summary of deliberations.
    • Thursday: Japan PMI manufacturing final, consumer confidence, BoJ rate decision; Australia trade balance, import prices; Swiss retail sales; UK PMI manufacturing final, M4 money supply, mortgage approvals; US jobless claims, PMI manufacturing final, ISM manufacturing, construction spending; Canada PMI manufacturing.
    • Friday: Japan unemployment rate, monetary base; Australia retail sales, PPI; Swiss PMI manufacturing; Eurozone PMI manufacturing final, CPI flash, unemployment rate; US non-farm payroll, factory orders.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3833; (P) 1.3863; (R1) 1.3883; More…

    Further recovery remains mildly in favor in USD/CAD despite some loss of upside momentum as seen in 4H MACD. Still, even in case of another rise, upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166). On the downside, firm break of 1.3780 short term bottom will resume the whole fall from 1.4791.

    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
    10:00 GBP CBI Realized Sales Apr -20 -41

     



    Source link

  • Global Risk Sentiment Brightens, But Caution Lingers Around US Assets

    Global Risk Sentiment Brightens, But Caution Lingers Around US Assets


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

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

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

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

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

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

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

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

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

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

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

    European Strength Offers Hope, Caution Persists for US Indexes

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

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

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

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

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

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

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

    Dollar Struggles Despite Risk Stabilization, Policy Uncertainty Remains a Drag

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

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

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

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

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

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

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

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

    EUR/CHF Weekly Outlook

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

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

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



    Source link

  • Dollar Rebound Stalls as US-China Trade Talks Hit a Wall

    Dollar Rebound Stalls as US-China Trade Talks Hit a Wall


    The forex markets remain subdued today, with all major pairs and crosses trading inside yesterday’s range. After a brief bounce, Dollar’s recovery appears to be losing momentum. While it’s too soon to confirm whether the rebound has fully run its course, fading trade optimism is clearly starting to weigh on sentiment, especially as the broader macro picture continues to be dominated by uncertainty surrounding US trade policy.

    One of the key sources of hesitation remains the unresolved state of US trade negotiations. Despite market hopes earlier in the week for progress, there has been no meaningful development between the US and its key trading partners regarding tariff reductions. More critically, the much-anticipated talks with China appear not to have even started at all—deflating sentiment that had briefly lifted risk assets and commodity currencies earlier in the week.

    China’s Ministry of Commerce poured cold water on any speculation of near-term breakthroughs, stating unequivocally that there are “absolutely no negotiations” currently underway with the US on trade. The Foreign Ministry further emphasized that reports of ongoing talks or agreements are “false news,” and reiterated that Washington must first cancel its unilateral measures for talks to begin. The firm stance from Beijing signals a hardening of positions, making the path toward de-escalation far less certain than previously hoped.

    For now, Dollar and other major currencies are in wait-and-see mode, with traders looking for more concrete signals before re-engaging decisively. As for the week so far, Kiwi is still sitting at the top of the performance ladder, followed by Aussie, and then Sterling. On the weaker side, safe-haven currencies continue to lag, with Swiss Franc underperforming, followed by Euro and Yen. The Dollar and Loonie position in the middle of the pack.

    In Europe, at the time of writing, FTSE is down -0.19%. DAX is down -0.24%. CAC is down -0.03%. UK 10-year yield is down -0.048 at 4.515. Germany 10-year yield is down -0.049 at 2.455. Earlier in Asia, Nikkei rose 0.49%. Hong Kong HSI fell -0.74%. China Shanghai SSE rose 0.03%. Singapore Strait Times fell -0.01%. Japan 10-year JGB yield fell -0.014 to 1.310.

    US durable goods orders surge 9.2% mom on transportation demand, but underlying momentum stalls

    US durable goods orders soared by 9.2% mom in March to USD 315.7B, far surpassing expectations of a 1.5% mom gain. The sharp rise was driven almost entirely by a surge in transportation equipment, which jumped 27% mom to USD124.6B, marking a third consecutive monthly increase.

    Orders excluding defense also posted a strong 10.4% mom gain to USD 300.0B, highlighting a significant boost in civilian aircraft and related components.

    However, the underlying momentum in business investment appeared far less robust. Core orders excluding transportation were flat at USD 191.1B, missing forecasts for a modest 0.2% mom increase.

    US initial jobless claims rise to 222k, matched expectations

    US initial jobless claims rose 6k to 222k in the week ending April 19, matched expectations. Four-week moving average of initial claims fell -1k to 220k. Continuing claims fell -37k to 1841k in the week ending April 12. Four-week moving average of continuing claims fell -1.5k to 1864k.

    ECB’s Nagel and Lane warn of growth hit from tariffs, downplay recession risk

    German ECB Governing Council member Joachim Nagel acknowledged today that Germany faces significant downside risks to growth due to US tariffs.

    “As far as economic growth is concerned, which of course also depends on the level of the respective tariffs, the impact in Europe will also be significant for Germany,” he warned.

    But on inflation, “we are relatively certain that the impact on inflation in the US will be stronger than in the euro zone,” Nagel added.

    Separately, ECB Chief Economist Philip Lane told Bloomberg News that while the tariff shock will likely drag on Eurozone growth, the region is not on an automatic path toward recession.

    Lane emphasized the bloc’s diversified trade relationships beyond the US, which could act as a cushion against a more severe downturn.

    German Ifo climbs slightly to 86.9, but rising uncertainty signals turbulence ahead

    Germany’s Ifo Business Climate Index edged higher in April, rising from 86.7 to 86.9 and beating market expectations of 85.2. Current Assessment Index climbed to 86.4 from 85.7. Expectations, while slightly lower at 87.4 compared to March’s 87.7, still surpassed the anticipated 85.0.

    However, a closer look at the sectoral breakdown reveals growing divergence and fragility. Manufacturing sentiment deteriorated further, dropping from -16.6 to -18.1, while trade confidence took a notable hit, falling from -23.8 to -27.0. On the other hand, modest gains in services (from -1.1 to -0.8) and construction (from -24.3 to -21.9) offered some relief, though both remain firmly in negative territory.

    The Ifo Institute cautioned that “uncertainty among the companies has increased,” adding that “the German economy is preparing for turbulence.”

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8215; (P) 0.8264; (R1) 0.8355; More….

    USD/CHF’s rebound from 0.8038 is still in progress and intraday bias stays mildly on the upside. However, strong resistance should be seen from 38.2% retracement of 0.9200 to 0.8038 at 0.8482 to limit upside. On the downside, break of 0.8038 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 0.8794) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Corporate Service Price Index Y/Y Mar 3.10% 3% 3% 3.20%
    08:00 EUR Germany IFO Business Climate Apr 86.9 85.2 86.7
    08:00 EUR Germany IFO Current Assessment Apr 86.4 85.5 85.7
    08:00 EUR Germany IFO Expectations Apr 87.4 85 87.7
    12:30 USD Initial Jobless Claims (Apr 18) 222K 222K 215K 216K
    12:30 USD Durable Goods Orders Mar 9.20% 1.50% 1.00%
    12:30 USD Durable Goods Orders ex-Trans Mar 0.00% 0.20% 0.70%
    14:00 USD Existing Home Sales Mar 4.14M 4.26M
    14:30 USD Natural Gas Storage 69B 16B

     



    Source link

  • Markets Pause After Relief Rally, Bessent Tempers De-escalation Optimism

    Markets Pause After Relief Rally, Bessent Tempers De-escalation Optimism


    Markets are treading water in the Asian session today, with most asset classes trading mixed and within familiar ranges. While US equities closed higher overnight, much of the early gains were pared back, signaling the fragility of the current risk-on mood. The price action reflects what is often seen during a relief rally—short-lived optimism that fades quickly if underlying uncertainty persists. Hopes of a breakthrough in US-China tariff talks briefly lifted sentiment, but optimism quickly met a dose of reality from Washington.

    US Treasury Secretary Scott Bessent pushed back against speculation that President Donald Trump had offered any unilateral gesture to ease tariffs on China. “No unilateral offer—none at all,” Bessent clarified. He acknowledged that current tariff levels are likely unsustainable but stressed that any reduction would have to be mutual. His remarks serve as a reminder that structural obstacles in the trade negotiations remain and that headline-driven rallies may lack staying power.

    In the currency markets, price actions are subdued, with all major pairs and crosses trading within yesterday’s ranges. Kiwi is leading gains for the week so far, followed by Dollar and Loonie. On the other side, the safe-haven trio in on the back foot, with Swiss Franc, Yen, and Euro the weakest performers, in line with stabilizing risk sentiment and a broader unwinding of prior defensive flows. Sterling and Aussie are middling.

    Technically, Gold’s breach of 3283.69 minor support indicates short term topping at 3499.79, just ahead of 3500 psychological level. Some consolidations should be seen in the near term, with risk of deeper pullback. But downside should be contained by 3167.62 cluster support (38.2% retracement of 2584.24 to 3499.79 at 3150.04 to bring rebound. Gold’s long term up trend is expected to continue after the consolidation completes.

    In Asia, at the time of writing, Nikkei is up 0.40%. Hong Kong HSI is down -1.08%. China Shanghai SSE is up 0.06%. Singapore Strait Times is up 0.26%. Japan 10-year JGB yield is up 0.001 at 1.325. Overnight, DOW rose 1.07%. S&P 500 rose 1.67%. NASDAQ rose 2.50%. 10-year yield fell -0.02 to 4.387.

    Looking ahead, German Ifo business climate is the main feature in European session. Later in the day, US will release jobless claims, durable goods orders, and existing home sales.

    IMF: BoJ may delay rate hike on tariff risk, cacks Yen’s haven role

    Nada Choueiri, deputy director of IMF’s Asia Pacific Department, told Reuters that BoJ is likely to delay further interest rate hikes as heightened uncertainty from US tariff policy weighs on business sentiment and economic outlook.

    She noted that many Japanese firms are now hesitant to move forward with investment plans, opting instead to wait for greater clarity on global trade developments. “This is postponing investment decisions as well,” Choueiri said, adding that the downside risks to both growth and inflation have increased.

    “We do see that if our reference scenario materializes, the BOJ interest rate increases will be pushed backwards in time,” she said.

    Choueiri also commented on the recent appreciation of Yen, reaffirming its role as a “safe-haven currency”, supported by the country’s economic stability and predictability.

    Fed’s Beige Book: Stagnant growth, tariff-driven inflation

    The latest Fed Beige Book painted a picture of a stagnating US economy, with activity described as “little changed” across most of the country. Of the 12 Districts, only five reported slight growth, while three saw flat conditions and the remaining four noted modest declines.

    However, the most striking theme running through the report was the “pervasive” uncertainty around international trade policy, which was highlighted in nearly all Districts as a key concern weighing on sentiment and business planning.

    Inflation pressures remain persistent, with half of the Districts describing price growth as moderate and the other half calling it modest. However, many businesses signaled “elevated input cost growth” tied to tariffs, with some already receiving notices from suppliers warning of upcoming price hikes.

    In response, firms have started add “tariff surcharge” or shortening their pricing terms. Still, the ability to fully pass on higher costs is proving difficult in some sectors, particularly for consumer-facing sectors where demand remains sluggish.

    ECB’s Lane sees Dollar outflows as rebalancing, not the end of dominance

    Speaking at an IIF conference overnight, ECB Chief Economist Philip Lane downplayed concerns over recent portfolio shifts away from US Dollar assets, suggesting the move may reflect a normalization rather than a structural retreat.

    Lane noted that allocations are likely moving from an overweight position in Dollar-denominated assets toward a more balanced distribution among global currencies.

    He pointed out that US assets had been “priced to perfection” following US President Donald Trump’s election last year, making some degree of reallocation expected as valuations adjust.

    Lane also addressed recent outflows from U.S. Treasuries, framing them as part of this rebalancing process. “It can either settle down or invite a deeper rethink,” he said, leaving the door open to further shifts depending on global investor sentiment.

    However, he admitted that despite the near-term adjustments, Dollar is still expected to far outweigh Euro in most global portfolios.

    ECB’s Knot and Muller downplay tariff impacts on inflation and growth

    Dutch ECB Governing Council member Klaas Knot noted that the combination of US tariffs, a stronger Euro, and falling energy prices could push eurozone inflation lower than expected in the short term.

    “The strong euro, together with falling energy prices, suggests that the near-term impact might not be so inflationary after all,” Knot said. However, he cautioned that medium-term risks remain, especially if global supply chain disruptions intensify. He supported keeping the ECB’s key policy rate within a neutral range of 1.75% to 2.25%, where it currently stands.

    Echoing a cautious but measured tone, Estonia’s ECB Governing Council member Madis Muller acknowledged that the US’s evolving trade policy creates “quite a bit more challenging” outlook for the Eurozone. Nevertheless, he maintained that moderate growth remains achievable, albeit at a slower pace than previously anticipated.

    Muller added that he is not forecasting a recession, noting that the impact of trade tensions, while significant, is unlikely to derail the region’s economic recovery entirely. Though, he emphasized the need for optionality, suggesting that more accommodation could be warranted if conditions deteriorate

    BoE’s Bailey: We must take tariff-related growth risks very seriously

    BoE Governor Andrew Bailey emphasized the growing downside risks to UK growth stemming from US President Donald Trump’s tariff policies. Speaking at an IIF conference, Bailey said, “We do have to take very seriously the risk to growth,” highlighting the UK’s vulnerability as a highly open economy.

    He noted that the impact of U.S. trade measures extends far beyond bilateral ties, influencing the UK through broader disruptions in global trade dynamics.

    When asked how much the BoE is factoring in the effects of US trade policy, Bailey confirmed that the issue is front and center. “We’re currently working through that because we’ve got an interest rate decision coming in two weeks’ time,” he said.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3818; (P) 1.3861; (R1) 1.3925; More…

    A short term bottom should be in place at 1.3780, just ahead of 100% projection of 1.4791 to 1.4150 from 1.4414 at 1.3773, and on bullish convergence condition in 4H MACD. Intraday bias in USD/CAD is mildly on the upside for recovery. But upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166. On the downside, firm break of 1.3780 will resume the whole fall from 1.4791.

    In the bigger picture, the break of 1.3976 resistance turned support (2022 high) and 55 W EMA (now at 1.3982) indicates that a medium term top is already in place at 1.4791. Fall from there would either be a correction to rise from 1.2005, or trend reversal. In either case, firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Corporate Service Price Index Y/Y Mar 3.10% 3% 3% 3.20%
    08:00 EUR Germany IFO Business Climate Apr 85.2 86.7
    08:00 EUR Germany IFO Current Assessment Apr 85.5 85.7
    08:00 EUR Germany IFO Expectations Apr 85 87.7
    12:30 USD Initial Jobless Claims (Apr 18) 222K 215K
    12:30 USD Durable Goods Orders Mar 1.50% 1.00%
    12:30 USD Durable Goods Orders ex-Trans Mar 0.20% 0.70%
    14:00 USD Existing Home Sales Mar 4.14M 4.26M
    14:30 USD Natural Gas Storage 69B 16B

     



    Source link

  • Relief Rally Continues, Yet Fragile Geopolitics May Limit Momentum

    Relief Rally Continues, Yet Fragile Geopolitics May Limit Momentum


    Global financial markets are trading with a cautiously positive tone today, with modest gains across Europe and US futures pointing to a higher open. Investor sentiment has improved on the back of US President Donald Trump stepping back from recent aggressive rhetoric—both toward Fed Chair Jerome Powell and on tariffs against China. The perceived softening in tone has provided much-needed relief after weeks of heightened tension, leading to a reversal in safe-haven flows and helping risk assets stabilize.

    In the currency space, European majors are lagging, with Euro and Pound among the worst performers of the day. This weakness partly reflects the broader pullback in safe-haven demand but is also driven by disappointing PMI services data. Both Eurozone and the UK saw service sector activity slip back into contraction. Conversely, Aussie and Kiwi are leading the pack, buoyed by the improved risk mood. Dollar is mixed—holding steady alongside Loonie and Yen. Traders are closely watching whether the recent dollar weakness has bottomed out.

    One development that has raised eyebrows is the abrupt cancellation of a planned diplomatic meeting in London involving US Secretary of State Marco Rubio, European leaders, and Ukraine. The talks were meant to address an endgame to Russia’s war in Ukraine but were downgraded to a lower-level “technical” discussion after Rubio withdrew. Reports suggest sharp divisions between Washington and European allies, particularly over Trump’s proposals to recognize Russian control over Crimea and large parts of eastern Ukraine—conditions deemed unacceptable by Europe. Observers suggest this could mark a significant shift in US posture, from active mediator to a more unilateral stance, further straining transatlantic cohesion over the handling of the war in Ukraine.

    Technically, the focus of Dollar Index will be on 100.27 resistance in coming days. Firm break there should confirm short term bottoming at 97.92, and open up further rebound back to 38.2% retracement of 110.17 to 97.92 as a corrective move. However, before that, risk will stay on the downside for extending recent decline through 97.92 sooner rather than later.

    In Europe, at the time of writing, FTSE is up 1.20%. DAX is up 2.45%. CAC is up 2.07%. UK 10-year yield is down -0.054 at 4.506. Germany 10-year yield is up 0.028 at 2.476. Earlier in Asia, Nikkei rose 1.89%. Hong Kong HSI rose 2.37%. China Shanghai SSE fell -0.10%. Singapore Strait Times rose 0.97%. Japan 10-year JGB yield rose 0.013 to 1.324.

    UK PMI composite plunges to 48.2, recession fears, pressures BoE to cut rates

    The UK private sector contracted sharply in April, with the flash PMI Composite falling from 51.5 to 48.2, the lowest reading in 29 months. PMI Manufacturing dropped from 45.3 to 44.0, a 20-month low. PMI Services slipped from 52.5 to 48.9, the weakest in 27 months.

    According to S&P Global’s Chris Williamson, the downturn marks the steepest fall in output in nearly two and a half years, with data now pointing to a potential quarterly GDP decline of -0.3%.

    Also, business sentiment has sunk to its lowest level since late 2021, and even beneath the post-Brexit vote lows. The slump in exports, tied to weak global demand and escalating trade tensions, is adding to domestic burdens. Rising staffing costs—partly due to changes in National Insurance and minimum wage rules—have further squeezed margins.

    The sharp contraction and collapsing sentiment pose “red flags” for policymakers and could tip BoE toward cutting rates at its upcoming May meeting.

    Eurozone PMI Composite slips to 50.1, services contract but manufacturing unfazed by tariffs

    Eurozone economy showed signs of stagnation in April as its Composite PMI slipped to 50.1, down from 50.9 in March—a four-month low. The decline was driven primarily by a downturn in the services sector, which contracted for the first time in five months, with the PMI falling from 51.0 to 49.7. In contrast, manufacturing showed unexpected resilience, with PMI ticking up slightly from 48.6 to 48.7, reaching a 27-month high.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that manufacturers appear “not too fazed” by the recent imposition of broad US tariffs, including 10% general duties and 25% on autos.

    He pointed to falling energy prices, driven in part by US recession fears, and planned increases in defence spending as factors supporting the manufacturing sector. However, the decline in services activity has dragged down overall output, pushing the Eurozone economy into what de la Rubia called “stagnation territory.”

    ECB may find some comfort in the latest inflation signals. While input costs in services remained elevated, the pace of selling price increases eased. In the goods sector, input prices fell, breaking a four-month trend of rising costs, while output prices saw only a modest rise.

    At the country level, both Germany and France mirrored the regional trend, with manufacturing output gaining but services activity declining.

    Japan’s PMI composite rises to 51.1, service leads while manufacturing drags

    Japan’s flash PMI data for April signaled a return to growth in the private sector, with Composite PMI rising from 48.9 to 51.1. The recovery was driven primarily by a rebound in the services sector, where activity rose to 52.2 from 50.0. Meanwhile, manufacturing remained in contraction, though the pace of decline eased slightly, with the PMI inching up from 48.4 to 48.5.

    According to S&P Global’s Annabel Fiddes, the divergence between sectors reflected subdued factory output versus strengthening service demand.

    A closer look at new business trends revealed further divergence. Manufacturers reported the sharpest drop in new orders in over a year, driven by falling foreign demand and persistent concerns over tariffs and client spending. In contrast, service providers saw their strongest rise in new work since January.

    Still, inflationary pressures were strong across the board, with input costs rising at the fastest pace in two years, prompting firms to pass on those costs to customers via higher selling prices.

    Overall optimism for output over the next year fell to its lowest level since August 2020, during the early phase of the COVID-19 crisis.

    Australia’s PMI composite dips to 51.4, cost pressures emerge

    Australia’s flash PMI data for April showed continued, albeit slower, expansion in the private sector, with Manufacturing PMI slipping from 52.1 to 51.7 and Services PMI easing from 51.6 to 51.4. The Composite PMI also declined slightly from 51.6 to 51.4.

    Despite the modest pullback, S&P Global’s Jingyi Pan noted that domestic demand remained a “strong proponent” of business activity, supporting further job creation across sectors. The data suggests a solid start to Q2, underpinned by internal momentum, even as external headwinds mount.

    However, the impact of US tariffs are starting to show. Export performance weakened, and manufacturers reported “intensification of cost pressures” due to currency fluctuations.

    In response, many firms passed on higher costs to clients, pushing overall selling price inflation to a nine-month high.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 140.44; (P) 141.05; (R1) 142.22; More…

    Intraday bias in USD/JPY remains mildly on the upside at this point. Rebound from 139.87 short term bottom could extend higher. But overall risk will stay on the downside as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds. On the downside, decisive break of 139.26 will carry larger bearish implications.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:00 AUD Manufacturing PMI Apr P 51.7 52.1
    23:00 AUD Services PMI Apr P 51.4 51.6
    00:30 JPY Manufacturing PMI Apr P 48.5 48.7 48.4
    00:30 JPY Services PMI Apr P 52.2 50
    04:30 JPY Tertiary Industry Index M/M Feb 0.00% 0.50% -0.30% 1.40%
    06:00 UK Public Sector Net Borrowing (GBP) Mar 16.4B 15.4B 10.7B 12.3B
    07:15 EUR France Manufacturing PMI Apr P 48.2 47.7 48.5
    07:15 EUR France Services PMI Apr P 46.8 47.6 47.9
    07:30 EUR Germany Manufacturing PMI Apr P 48 47.5 48.3
    07:30 EUR Germany Services PMI Apr P 48.8 50.3 50.9
    08:00 EUR Eurozone Manufacturing PMI Apr P 48.7 47.4 48.6
    08:00 EUR Eurozone Services PMI Apr P 49.7 50.4 51
    08:30 GBP Manufacturing PMI Apr P 44 44 44.9
    08:30 GBP Services PMI Apr P 48.9 51.4 52.5
    09:00 EUR Eurozone Trade Balance (EUR) Feb 21.0B 14.9B 14.0B 14.4B
    12:30 CAD New Housing Price Index M/M Mar 0.00% 0.00% 0.10%
    13:45 USD Manufacturing PMI Apr P 49.3 50.2
    13:45 USD Services PMI Apr P 52.9 54.4
    14:00 USD New Home Sales Mar 679K 676K
    14:30 USD Crude Oil Inventories 1.6M 0.5M
    18:00 USD Fed’s Beige Book

     



    Source link

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

    Fragile Calm Returns to Markets as Focus Shifts to Fed Remarks


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

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

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

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

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

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

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

    ECB Survey: Inflation expectations tick higher, growth outlook softens

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0776) holds.

    Economic Indicators Update

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

     



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Australia jobs rise 32.2k in March, misses expectations

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link

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

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


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

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

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

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

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

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

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

    Fed’s Powell warns of dual-mandate tensions ahead

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

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

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

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

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

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

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

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

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

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

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

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

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

    Australia jobs rise 32.2k in March, misses expectations

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

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

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

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

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

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

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

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

    Looking ahead

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

    USD/CAD Daily Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Australia Westpac leading index falls as tariff shock starting to weigh

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

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

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

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

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

    China Q1 GDP tops forecasts with 5.4% growth

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

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

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

    USD/JPY Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link

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

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


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

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

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

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

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

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

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

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

    German ZEW collapses to -14 as trade uncertainty rattles outlook

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

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

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

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

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

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

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

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

    UK payolled employment falls -78k, wage growth slows

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Tariff Shockwaves Test BoC and ECB Resolve

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

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

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

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

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

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

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

    Here are some highlights for the week:

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

    USD/JPY Daily Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link

  • A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil

    A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Stock Rebound Preserves Uptrend, But Recession Could Break the Spell

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

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

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

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

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

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

    Dollar Index Cracks 100 Psychological Level, Heading to 95?

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

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

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

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

    USD/CAD Weekly Outlook

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

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

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



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link