Tag: Fed

  • USD/CHF rallies to over one-week top, close to mid-0.8300s on the tariff-block news

    USD/CHF rallies to over one-week top, close to mid-0.8300s on the tariff-block news


    • USD/CHF resumes its weekly uptrend after a US federal court blocked Trump’s tariffs.
    • Wednesday’s hawkish FOMC Minutes boosts the USD and contributes to the move up.
    • Traders now look forward to Thursday’s US macro data for short-term opportunities.

    The USD/CHF pair regains positive traction following the previous day’s directionless price move and jumps to over a one-week high, around the 0.8345-0.8350 area during the Asian session Thursday. Moreover, the fundamental backdrop supports prospects for an extension of a multi-day-old uptrend from sub-0.8200 levels, or a nearly three-week low touched on Monday.

    The global risk sentiment gets a strong boost after the Court of International Trade on Wednesday blocked US President Donald Trump’s proposed reciprocal trade tariffs. Wall Street futures and equities across Asia rise sharply in reaction to the court ruling, which, in turn, is seen weighing on the safe-haven Swiss Franc (CHF). This along with a strong follow-through US Dollar (USD) buying, turns out to be another factor acting as a tailwind for the USD/CHF pair.

    In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, scales higher for the third straight day in the wake of the tariff-block news and hawkish FOMC Minuets released on Wednesday. Federal Reserve (Fed) officials agreed to maintain the wait-and-see approach on interest rates amid the uncertainty about the economic outlook and trade policies. This tempers hopes for more aggressive Fed rate cuts and continues to push the USD higher.

    However, traders are still pricing in the possibility that the US central bank will deliver at least two 25 basis points (bps) rate cuts by the end of this year. This, in turn, holds back the USD bulls from placing aggressive bets and caps the USD/CHF pair. Market participants now look forward to the US economic docket – featuring the release of the Prelim Q1 GDP print, the usual Weekly Jobless Claims, and Pending Home Sales data – for short-term trading opportunities.

    US Dollar PRICE Today

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

    USD EUR GBP JPY CAD AUD NZD CHF
    USD 0.39% 0.25% 0.63% 0.10% 0.12% 0.53% 0.68%
    EUR -0.39% -0.13% 0.23% -0.29% -0.20% 0.13% 0.28%
    GBP -0.25% 0.13% 0.35% -0.15% -0.06% 0.25% 0.33%
    JPY -0.63% -0.23% -0.35% -0.53% -0.52% -0.15% -0.04%
    CAD -0.10% 0.29% 0.15% 0.53% -0.03% 0.43% 0.47%
    AUD -0.12% 0.20% 0.06% 0.52% 0.03% 0.34% 0.39%
    NZD -0.53% -0.13% -0.25% 0.15% -0.43% -0.34% 0.05%
    CHF -0.68% -0.28% -0.33% 0.04% -0.47% -0.39% -0.05%

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).



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  • Dollar Recovery Slows Ahead of FOMC Minutes as Market Seeks Clarity

    Dollar Recovery Slows Ahead of FOMC Minutes as Market Seeks Clarity


    Dollar’s near-term rebound is still intact as markets head into US session. But appears to be fading as traders await fresh catalysts. While the greenback has benefited from stabilizing sentiment, there’s a lack of conviction behind the move, particularly with no data releases of note today. Markets are now turning their attention to the upcoming FOMC minutes, though expectations for a clear policy signal remain low.

    The minutes from the May 6–7 FOMC meeting are expected to show a divided Fed grappling with increased volatility and an unpredictable policy backdrop, largely stemming from trade tensions. A key point of debate within the Fed may have been how to respond if elevated tariffs return and remain in place. While some officials may view tariff-driven inflation as transitory and argue for policy support to counteract the drag on growth, others may be more concerned about a shift in inflation expectations and the risk of persistent price pressures. Despite those differences, there is likely consensus around two core ideas: that tariffs are inherently stagflationary, and that it’s too early to commit to rate adjustments amid current uncertainty.

    As a result, today’s release is unlikely to shift the market narrative in a meaningful way. Trading may remain subdued unless there’s an unexpected shift in tone or language around inflation risks or rate sensitivity. With Fed still firmly in a no-hurry, data-dependent mode, the market may continue to drift until the next major inflation print or employment report.

    Looking across the broader currency markets, Dollar remains the week’s strongest performer so far. Kiwi follows as second, receiving a boost after RBNZ delivered a 25bps rate cut with a surprising dissent. Euro also finds modest support, ranking third on the performance board. In contrast, Yen remains the weakest major, weighed down by falling super-long JGB yields. Aussie and Swiss Franc also trail, while Sterling and Loonie remain in the middle.

    Technically, Ethereum might be ready to complete the near-term triangle consolidation pattern from 2737.57. Firm break of this resistance will resume the rally from 1382.55. Next target is 61.8% projection of 1382.55 to 2737.57 from 2507.39 at 3344.79. However, break of 2507.39 support will extend the corrective pattern with another falling leg instead.

    In Europe, at the time of writing, FTSE is down -0.06%. DAX is down -0.45%. CAC is down -0.13%. UK 10-year yield is up 0.012 at 4.683. Germany 10-year yield is down -0.001 at 2.541. Earlier in Asia, Nikkei closed flat. Hong Kong HSI fell -0.53%. China Shanghai SSE fell -0.02%. Singapore Strait Times rose 0.41%. Japan 10-year JGB yield rose 0.052 to 1.518.

    ECB survey shows short-term inflation expectations climb as growth outlook worsens

    ECB’s latest Consumer Expectations Survey for April showed a modest but notable uptick in short-term inflation expectations.

    Median expectations for inflation over the next 12 months rose to 3.1%, the highest since February 2024. However, medium- and long-term inflation expectations remained steady, with the three-year outlook unchanged at 2.5% and the five-year projection holding at 2.1% for the fifth straight month.

    Alongside the rise in short-term inflation forecasts, the survey revealed an increase in uncertainty about inflation over the coming year, matching levels last seen in June 2024.

    More concerning, however, is the deepening pessimism around growth and employment. Expectations for economic growth over the next 12 months dropped sharply to -1.9% from -1.2% in March. Expected unemployment ticked up slightly from 10.4% to 10.5%.

    RBNZ cuts OCR to 3.25%, one member favors holding steady

    RBNZ lowered the Official Cash Rate by 25 basis points to 3.25%, in line with market expectations. The decision was not unanimous, passed by a 5-1 vote.

    The central bank emphasized that inflation is now within the target band and is “well placed” to respond to both domestic and international developments.

    Meeting minutes revealed that some committee members favored holding the rate steady at 3.50%, citing a desire to monitor elevated global uncertainty and potential inflation risks stemming from recent tariff increases.

    Maintaining the OCR, they argued, could have helped anchor inflation expectations more firmly around the 2% midpoint.

    In its accompanying Monetary Policy Statement, RBNZ revised down its rate path projections slightly. The OCR is now expected to fall to 3.12% by September 2025 (previously 3.23%), and to 2.87% by June 2026 (previously 3.10%).

    Australia’s monthly CPI unchanged 2.4%, core inflation edges higher

    Australia’s monthly CPI held steady at 2.4% yoy in April, slightly above expectations of 2.3% yoy, marking the third consecutive month of unchanged headline inflation.

    However, underlying inflation measures moved higher, with CPI excluding volatile items and holiday travel rising to 2.8% yoy from 2.6% yoy. Trimmed mean CPI also tickd up from 2.7% yoy to 2.8% yoy.

    These developments suggest that while headline inflation appears stable, price pressures beneath the surface remain persistent.

    Key contributors to the annual inflation rate included food and non-alcoholic beverages (+3.1%), recreation and culture (+3.6%), and housing (+2.2%).

    BoJ’s Ueda highlights focus on short- and medium-term rates

    BoJ Governor Kazuo Ueda told parliament today that shifts in short- and medium-term interest rates have a more pronounced impact on economic activity than movements in super-long yields.

    He explained that corporate and household debt is more concentrated in those shorter maturities, making the economy more sensitive to changes in that segment of the yield curve.

    However, Ueda also acknowledged the spillover effects of volatility in super-long bond yields, noting that sharp moves in that part of the curve can ripple through to shorter maturities and influence overall financial conditions.

    “We’ll carefully watch market developments and their impact on the economy, he emphasized.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8214; (P) 0.8247; (R1) 0.8306; More….

    Range trading continues in USD/CHF and intraday bias stays neutral. Another fall is in favor as long as 0.8305 minor resistance holds. Below 0.8187 will target a retest on 0.8038 low first. Firm break there will resume larger down trend. Nevertheless, sustained break of 0.8305 will argue that pullback from 0.8475 has completed, and turn bias back to the upside to extend the pattern from 0.8038 with another rising leg.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD Monthly CPI Y/Y Apr 2.40% 2.30% 2.40%
    02:00 NZD RBNZ Interest Rate Decision 3.25% 3.25% 3.50%
    03:00 NZD RBNZ Press Conference
    06:45 EUR France Consumer Spending M/M Apr 0.30% 0.80% -1%
    06:45 EUR France GDP Q/Q Q1 F 0.10% 0.10% 0.10%
    07:55 EUR Germany Unemployment Change Apr 34K 10K 4K
    07:55 EUR Germany Unemployment Rate Apr 6.30% 6.30% 6.30%
    08:00 CHF UBS Economic Expectations May -22 -51.6
    18:00 USD FOMC Minutes

     



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  • USD/CAD extends gains above 1.3800 with all eyes on the FOMC Minutes

    USD/CAD extends gains above 1.3800 with all eyes on the FOMC Minutes


    • The US Dollar remains firm, drawing support from the positive US Consumer Confidence data and easing trade war fears.
    • The CAD remains on the defensive amid lower Oil prices and hopes of further BoC cuts.
    • Later today, the tone of the FOMC minutes is likely to confirm the US Dollar’s near-term direction.

    The US Dollar is showing a moderate advance on Wednesday, extending gains after Tuesday’s rebound. Upbeat US Consumer Confidence data and easing fears about trade wars are supporting the Greenback, with the release of the Fed minutes on focus.

    The Conference Board’s Consumer Confidence reading beat expectations on Wednesday with a 12.3 point rebound to a 98.0 reading, after having deteriorated steadily during the last five months, on the back of tariff uncertainty.

    Upbeat US data sends debt fears to the background

    The same survey revealed improving expectations on income, business conditions, and employment, while the percentage of consumers fearing an economic recession in the next 12 months declined, compared to the previous month.

    These figures offset a significant decline in US Durable Goods orders, which fell by 6.3% in April, on the back of lower demand for aircraft. Likewise, the risk-on sentiment pushed government debt fears to the back seat, at least for now.

    The Canadian Dollar, on the other hand, remains on the defensive, with Oil prices ticking lower, weighed by expectations that OPEC+ countries will increase supply from July. Furthermore, last week’s data strengthened the case for further BoC easing in June, adding selling pressure on the Loonie. 

    Today, the focus is on the minutes of the latest Fed meeting, which are expected to shed some more light on the bank’s upcoming monetary policy decisions. The tone of the minutes is likely to determine the US Dollar’s reaction until Friday’s PCE inflation release.

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
    When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
    When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
    The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
    It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.



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  • Dollar Rides Optimism Wave; RBNZ Lifts Kiwi, Aussie Ignores CPI Surprise

    Dollar Rides Optimism Wave; RBNZ Lifts Kiwi, Aussie Ignores CPI Surprise


    Dollar’s broad-based rebound gained further momentum in Asian session today. The turnaround in risk appetite has been key in lifting the greenback, which had come under pressure amid recent tariff tensions and soft economic signals. The rebound is also visible across asset classes, US equities have reversed losses tied to US-EU trade fears, and the 10-year yield has returned to levels seen before last week’s Treasury selloff.

    This shift in tone followed US President Donald Trump’s decision to postpone the implementation of a 50% tariff on EU goods until July 9. Trump further noted overnight that the EU had reached out to set up meeting dates, describing the latest developments as “positive.”

    Elsewhere, Kiwi saw a jump following RBNZ’s 25bps rate cut to 3.25%. What surprised markets was the internal division within the committee, as one member dissented and preferred no change. The minutes revealed a genuine debate on the merits of holding rates steady to better assess trade-related uncertainties and their inflationary implications. The signal was clear: while more easing is possible, the path ahead will not be automatic.

    Aussie, by contrast, showed a muted response to stronger-than-expected monthly CPI data. Although core inflation edged higher, it remains comfortably within the RBA’s 2–3% target band. As such, the print is unlikely to alter RBA’s policy course. With quarterly inflation data due on July 30, the central bank is expected to wait until its August meeting to make a more informed decision on the next move, likely another 25bps cut.

    In terms of performance, Dollar is currently leading for the week, followed by Sterling and then Euro. Yen is the weakest major, pressured by falling long dated Japanese government bond yields. Aussie and Swiss Franc are also lagging. Kiwi and Loonie sit in the middle of the pack.

    Technically, AUD/NZD is extending the near term fall from 1.0920 today. For now, without clear downside momentum, this decline is still seen as a corrective move. Break of 1.0848 resistance will argue that rebound from 1.0649 is ready to resume through 1.0920 resistance. However, clear break of the lower channel support will argue that the cross is accelerating downward. That would raise the chance that it’s actually resume the larger down trend through 1.0649 low.

    In Asia, at the time of writing, Nikkei is up 0.52%. Hong Kong HSI is down -0.43%. China Shanghai SSE is up 0.03%. Singapore Strait Times is up 0.44%. Japan 10-year JGB yield is up 0.033 at 1.499. Overnight, DOW rose 1.78%. S&P 500 rose 2.05%. NASDAQ rose 2.47%. 10-year yield fell -0.75 to 4.434.

    RBNZ cuts OCR to 3.25%, one member favors holding steady

    RBNZ lowered the Official Cash Rate by 25 basis points to 3.25%, in line with market expectations. The decision was not unanimous, passed by a 5-1 vote.

    The central bank emphasized that inflation is now within the target band and is “well placed” to respond to both domestic and international developments.

    Meeting minutes revealed that some committee members favored holding the rate steady at 3.50%, citing a desire to monitor elevated global uncertainty and potential inflation risks stemming from recent tariff increases.

    Maintaining the OCR, they argued, could have helped anchor inflation expectations more firmly around the 2% midpoint.

    In its accompanying Monetary Policy Statement, RBNZ revised down its rate path projections slightly. The OCR is now expected to fall to 3.12% by September 2025 (previously 3.23%), and to 2.87% by June 2026 (previously 3.10%).

    Australia’s monthly CPI unchanged 2.4%, core inflation edges higher

    Australia’s monthly CPI held steady at 2.4% yoy in April, slightly above expectations of 2.3% yoy, marking the third consecutive month of unchanged headline inflation.

    However, underlying inflation measures moved higher, with CPI excluding volatile items and holiday travel rising to 2.8% yoy from 2.6% yoy. Trimmed mean CPI also tickd up from 2.7% yoy to 2.8% yoy.

    These developments suggest that while headline inflation appears stable, price pressures beneath the surface remain persistent.

    Key contributors to the annual inflation rate included food and non-alcoholic beverages (+3.1%), recreation and culture (+3.6%), and housing (+2.2%).

    BoJ’s Ueda highlights focus on short- and medium-term rates

    BoJ Governor Kazuo Ueda told parliament today that shifts in short- and medium-term interest rates have a more pronounced impact on economic activity than movements in super-long yields.

    He explained that corporate and household debt is more concentrated in those shorter maturities, making the economy more sensitive to changes in that segment of the yield curve.

    However, Ueda also acknowledged the spillover effects of volatility in super-long bond yields, noting that sharp moves in that part of the curve can ripple through to shorter maturities and influence overall financial conditions.

    “We’ll carefully watch market developments and their impact on the economy, he emphasized.

    Fed’s Williams stresses need for vigilance on inflation expectations

    New York Fed President John Williams emphasized the importance of acting decisively to prevent inflation from becoming entrenched, warning that delayed responses risk making price pressures permanent.

    Speaking at a conference in Tokyo, Williams noted, “you want to avoid inflation becoming highly persistent because that could become permanent”.

    “And the way to do that is to respond relatively strongly” when inflation begins to deviate from target.

    He also highlighted the sensitivity of inflation expectations, cautioning that any significant shift could be “detrimental” to economic stability.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 142.83; (P) 143.64; (R1) 145.17; More…

    USD/JPY’s break of 144.31 resistance suggests that fall from 148.64 might have completed as a correction at 142.10. Intraday bias is back on the upside for 55 D EMA (now at 145.83). Sustained break there will affirm this case and target 148.64 resistance and above. Nevertheless, break of 142.10 will turn bias back to the downside for 139.87 low instead.

    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
    01:30 AUD Monthly CPI Y/Y Apr 2.40% 2.30% 2.40%
    02:00 NZD RBNZ Interest Rate Decision 3.25% 3.25% 3.50%
    03:00 NZD RBNZ Press Conference
    06:45 EUR France Consumer Spending M/M Apr 0.80% -1%
    06:45 EUR France GDP Q/Q Q1 F 0.10% 0.10%
    07:55 EUR Germany Unemployment Change Apr 10K 4K
    07:55 EUR Germany Unemployment Rate Apr 6.30% 6.30%
    08:00 CHF UBS Economic Expectations May -51.6
    18:00 USD FOMC Minutes

     



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  • Yen Crushed as Super-Long JGB Yields Plunge on Supply Cut Speculation

    Yen Crushed as Super-Long JGB Yields Plunge on Supply Cut Speculation


    Yen is under intense selling pressure today, dragged down by a sharp plunge in super-long JGB yields. The 30-year yield closed at 2.836%, down significantly from 3.165% just days ago. This abrupt move followed a Reuters report suggesting that the Ministry of Finance may reduce super-long bond issuance as part of a potential tweak to its bond program. Discussions with market participants are expected to conclude by mid- to late-June, after which the MOF will formalize its decision.

    The reported consideration comes in response to a surge in super-long yields to multi-decade highs, which had mirrored global trends, particularly a selloff in US long bonds. A reduction in supply could help stabilize Japan’s long-end, which has come under additional pressure amid political calls for fiscal stimulus ahead of July’s upper house elections. Prime Minister Shigeru Ishiba faces growing demands for tax cuts and expansive spending measures, both of which could further exacerbate Japan’s already heavy debt load and add pressure on government financing costs.

    This bond market adjustment has compounded Yen weakness, particularly as global risk appetite revives. European equities are rallying, with DAX hitting a fresh record high, and US equity futures are pointing higher as well. This upswing in sentiment is fueling a rebound in Dollar, while Euro and Sterling are also firming against most peers. In contrast, the Swiss franc is underperforming, second only to Yen on the downside today. However, commodity currencies like Aussie, Kiwi and Loonie are showing muted reactions, failing to capitalize on the improved mood.

    Technically, one focus now is whether EUR/CHF’s rebound from 0.9291 could extend through 0.9419 resistance. In this case, that would signal resumption of rise from 0.9218. Next near term target will be 100% projection of 0.9218 to 0.9445 from 0.9291 at 0.9518.

    In Europe, at the time of writing, FTSE is up 0.72%. DAX is up 0.70%. CAC is up 0.09%. UK 10-year yield is down -0.005 at 4.678. Germany 10-year yield is down -0.018 at 2.544. Earlier in Asia, Nikkei rose 0.51%. Hong Kong HSI rose 0.43%. China Shanghai SSE fell -0.18%. Singapore Strait Times rose 0.53%. Japan 10-year JGB yield fell -0.03 to 1.466.

    US durable goods orders fall -6.3% mom, but core shows resilience

    US durable goods orders fell sharply by -6.3% mom in April to USD 296.3B, driven primarily by a steep -17.1% mom drop in transportation equipment. The headline decline, while severe, was less than the expected -8.0%.

    Orders excluding defense also posted a significant decline of -7.5% mom to USD 279.3B.

    However, the underlying picture was somewhat more stable. Orders excluding the often-volatile transportation component rose by 0.2% mom to USD 197.5B, beating expectations of a flat reading.

    This suggests that while large-ticket and defense-related items dragged the headline figure lower, private sector investment in capital goods is holding up better than feared.

    Fed’s Kashkari leans cautious on tariff shock, favors holding rates to anchor inflation expectations

    Speaking at the IMES conference in Japan, Minneapolis Fed President Neel Kashkari addressed the growing internal debate within Fed over how to respond to the inflationary effects of new US tariffs.

    He noted that some policymakers advocate “looking through” these price shocks, viewing them as “transitory”, akin to a one-time upward shift in the price level rather than persistent inflation. That approach would favor cutting interest rates to support economic activity during the adjustment period.

    However, Kashkari expressed skepticism toward this lenient view. He emphasized that trade negotiations are “unlikely to be resolved quickly”., warning of a prolonged period of elevated uncertainty and the risk of retaliatory measures.

    Tariffs on intermediate goods could lead to delayed but persistent inflationary pressure as cost increases pass through to final goods over time.

    Given these risks, Kashkari said he finds the case for holding rates steady more persuasive, especially in light of the need on “defending long-run inflation expectations”.

    While current policy is likely “only modestly restrictive”, he argued that caution is warranted until the full effects of tariffs become clearer.

    ECB’s Holzmann: Should pause rate cut until at least September

    Austrian ECB Governing Council member Robert Holzmann cautioned against further rate cuts in the near term, citing heightened uncertainty from the US-EU trade conflict and a belief that monetary policy is no longer the main drag on economic activity.

    Arguing that “moving further south would be more risky than staying where we are,” Holzmann said there is no justification for easing in June or July and suggested waiting until at least September before reassessing the need for further action.

    Holzmann also pointed to a notable rise in estimates of the neutral interest rate since early 2022, stating that ECB’s current policy stance is already “at least at the neutral level.”

    In his view, lower rates would provide little economic benefit, as lingering uncertainty, not borrowing costs, is the key factor suppressing growth.

    ECB’s Villeroy and Simuks Signal June rate cut

    Comments from ECB Governing Council members today reinforced expectations for a rate cut in June, as inflation continues to moderate across the Eurozone.

    French central bank chief François Villeroy de Galhau noted that policy normalization is “probably not complete,” and hinted that the upcoming ECB meeting is likely to deliver further action. He pointed to France’s May inflation reading of just 0.6% as a “very encouraging sign of disinflation in action”

    Separately, Lithuania’s Gediminas Šimkus struck a dovish tone, stating that the balance of inflation risks has shifted to the downside, citing trade frictions with the US and a stronger Euro as deflationary forces. He added that current borrowing costs sit at the upper bound of the neutral range, leaving room for more rate reductions.

    German Gfk consumer sentiment edges higher to -19.9, mood remains extremely low

    Germany’s GfK Consumer Sentiment rose for the third straight month, reaching -19.9 in June, its highest reading since November 2024, but slightly below expectations of -19.7. In May, income expectations surged 6.1 pts to 10.4, the best since October last year. Economic expectations climbed 2.9 pts to 13.1, their highest since April 2023.

    According to Rolf Bürkl of the NIM, the mood remains “extremely low,” with uncertainty still elevated due to global trade tensions, stock market volatility, and persistent fears of another year of economic “stagnation”. These concerns are encouraging households to prioritize saving over spending.

    BoJ’s Ueda highlights persistent food inflation and trade uncertainty

    In his remarks at the BoJ-IMES Conference, BoJ Governor Kazuo Ueda highlighted a fresh wave of price pressures, particularly from food, has emerged in Japan recently. Rice prices nearly doubling year-on-year and broader non-fresh food categories climbing 7%.

    While BoJ expects the latest food-driven inflation spike to be transitory, Ueda acknowledged that underlying inflation now hovers closer to the 2% mark than in previous years, warranting heightened vigilance.

    BoJ retains its baseline scenario that underlying inflation will gradually return to the 2% target over time. However, given the evolving backdrop of supply-driven shocks and heightened global uncertainty, Ueda reiterated that any adjustment in the degree of monetary easing will hinge on incoming data.

    “Considering the extremely high uncertainties, it is important for us to judge whether the outlook will be realized, without any preconceptions,” Ueda emphasized.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 142.35; (P) 142.72; (R1) 143.20; More…

    USD/JPY recovered notably today but stays below 144.31 minor resistance. Intraday bias remains neutral first. On the upside, firm break of 144.31 will argue that fall from 148.64 has completed as a corrective pullback. Intraday bias will be turned back to the upside for 148.64 resistance next. Nevertheless, rejection by 144.31 will keep risks on the downside. Below 142.10 will target a retest on low.

    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
    23:01 GBP BRC Shop Price Index Y/Y May -0.10% 0.00% -0.10%
    23:50 JPY Corporate Service Price Index Y/Y Apr 3.10% 3.00% 3.10% 3.30%
    06:00 CHF Trade Balance (CHF) Apr 6.36B 5.55B 6.35B 6.29B
    06:00 EUR Germany GfK Consumer Sentiment Jun -19.9 -19.7 -20.6 -20.8
    09:00 EUR Eurozone Economic Sentiment May 94.8 94 93.6
    09:00 EUR Eurozone Industrial Confidence May -10.3 -11 -11.2 -11
    09:00 EUR Eurozone Services Sentiment May 1.5 1.4
    09:00 EUR Eurozone Consumer Confidence May F -15.2 -15.2 -15.2
    12:30 USD Durable Goods Orders Apr -6.30% -8.00% 7.50%
    12:30 USD Durable Goods Orders ex Transport Apr 0.20% 0.00% -0.40%
    13:00 USD S&P/CS Composite-20 HPI Y/Y Mar 4.50% 4.50%
    13:00 USD Housing Price Index M/M Mar 0.20% 0.10%
    14:00 USD Consumer Confidence May 87.1 86

     



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

    Risk Appetite Returns After Trump Backs Off Immediate EU Tariff Threat


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

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

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

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

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

    Fed Kashkari: Uncertainty to delay policy at least until September

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0858) holds.

    Economic Indicators Update

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

     



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

    Dollar Drops as Tariff Confusion Reignites and Trade Talks Drag On


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

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

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

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

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

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

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

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

    Fed Kashkari: Uncertainty to delay policy at least until September

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

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

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

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

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

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

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

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

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

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

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

    Here are some highlights for the week:

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

    GBP/USD Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Japanese Yen stands firm near two-week top against USD on BoJ rate hike bets, safe-haven demand

    Japanese Yen stands firm near two-week top against USD on BoJ rate hike bets, safe-haven demand


    • The Japanese Yen attracted some dip-buyers following upbeat domestic data.
    • BoJ rate hike bets and reviving safe-haven demand also lend support to the JPY.
    • The prevalent USD selling bias further exerts downward pressure on USD/JPY.

    The Japanese Yen (JPY) retains its positive bias through the Asian session and trades near a two-week high touched against a broadly weaker US Dollar (USD) earlier this Thursday. Japan’s upbeat Machinery Orders data countered recession fears and boosted hopes for an economic recovery. This, along with the growing acceptance that the Bank of Japan (BoJ) will hike interest rates again in 2025, turns out to be a key factor that continues to act as a tailwind for the JPY.

    Meanwhile, US President Donald Trump’s proposed sweeping tax bill fueled concerns about the US government’s fiscal health. Adding to this, renewed US-China tensions weigh on investors’ sentiment and further underpin the traditional safe-haven JPY. The USD, on the other hand, remains depressed amid worries about the deteriorating US fiscal outlook and bets for further rate cuts by the Federal Reserve (Fed). This further contributes to the USD/JPY pair’s decline.

    Japanese Yen bulls retain control amid BoJ rate hike bets, weaker risk sentiment

    • Data released earlier this Thursday showed that Japan’s Core Machinery Orders – a key leading indicator of capital spending over the next six to nine months – rose 13.0% in March, defying forecasts for a 1.6% decline. This marks the highest level in nearly two decades and assists the Japanese Yen to attract dip-buyers.
    • The Bank of Japan recently showed a willingness to hike interest rates further this year amid signs of broadening inflation in Japan. Moreover, investors expect that rising wages could lead to a significant increase in consumption, which, in turn, should allow the central bank to continue on its path of policy normalization.
    • Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and top foreign exchange official, said early Thursday the US did not discuss FX levels at the finance ministers’ meeting. Mimura does not believe that there is any gap in understanding with the US and reaffirmed that forex should be determined by the market.
    • Investors remain hopeful about progress in trade negotiations between the US and Japan and the possibility of an eventual deal. Japan’s Trade Minister Ryosei Akazawa is expected to attend the upcoming third round of ministerial-level talks with US Trade Representative Jamieson Greer. Moreover, US Treasury Secretary Scott Bessent is also likely to take part in the trade negotiations.
    • US President Donald Trump’s dubbed “One Big, Beautiful Bill” is expected to come to the House floor for a vote sometime on Thursday, and if passed, will add $3 trillion to $5 trillion to the federal deficit over the next ten years. This adds to worries about a deteriorating US fiscal outlook and weighs on investors’ sentiment.
    • China accused the US of abusing export control measures and violating Geneva trade agreements after the US issued guidance warning companies not to use Huawei’s Ascend AI chips. China’s Commerce Ministry said on Wednesday that US measures on advanced chips are ‘typical of unilateral bullying and protectionism.’
    • Federal Reserve officials expressed concerns over economic and business sentiment in the wake of the uncertainty tied to the Trump administration’s trade policies. Adding to this, a weak 20-year Treasury bond sale reinforced the view that investors are shying away from US assets and kept the US Dollar depressed.
    • Trump reportedly told European leaders that Russian President Vladimir Putin isn’t ready to end the war with Ukraine, as he thinks he is winning. Meanwhile, Israel’s military continued to pound the Gaza Strip and block desperately needed food aid. This keeps geopolitical risks in play and further benefits the safe-haven JPY.
    • Thursday’s release of flash PMIs could provide a fresh insight into the global economic health. Moreover, trade developments should influence the broader risk sentiment. Adding to this, the US macro data – the usual Weekly Initial Jobless Claims and Existing Home Sales – might provide some impetus to the USD/JPY pair.

    USD/JPY consolidates near 61.8% Fibo. retracement level before the next leg down

    From a technical perspective, the USD/JPY pair’s intraday move up on Thursday falters near the 144.40 region. The said area nears a confluence support breakpoint – comprising the 50% retracement level of the April-May rally and the 200-period Simple Moving Average (SMA) on the 4-hour chart – and should act as a key pivotal point. A sustained strength beyond could trigger a short-covering move, though it is likely to attract fresh sellers near the 145.00 psychological mark. This should cap spot prices near the 145.35-145.40 region, or the 38.2% Fibo. retracement level, which, if cleared decisively, might shift the near-term bias in favor of bullish traders.

    Meanwhile, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the USD/JPY pair remains to the downside. However, the Relative Strength Index (RSI) on the 4-hour chart has moved on the verge of breaking into oversold territory, making it prudent to wait for some near-term consolidation before positioning for the next leg of a downfall. That said, acceptance below the 143.20 area, or the 61.8% Fibo. retracement level, might prompt some technical selling and drag spot prices below the 143.00 round figure, to the next relevant support near the 142.40-142.35 area en route to the 142.00 mark.

    Bank of Japan FAQs

    The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

    The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

    The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

    A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.



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  • Forex Today: It’s PMI-day!!!

    Forex Today: It’s PMI-day!!!



    The US Dollar (USD) maintained its weekly leg lower well in place, weakening to new two-week lows on the back of rising concerns over the US fiscal position in light of President Trump’s tax bill and worries over the performance of the US economy.



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  • Dollar Selloff Accelerates on Fiscal, Trade, and FX Policy Risks

    Dollar Selloff Accelerates on Fiscal, Trade, and FX Policy Risks


    Dollar came under broad selling pressure in Asian session, with fresh technical signals suggesting that the near-term recovery has already run its course. Also, the selloff appears to be gathering pace on a range of fundamental concerns.

    One focus is on Capitol Hill, where the House of Representatives is expected to vote on a multitrillion-dollar spending and tax package backed by US President Donald Trump. The bill is projected by nonpartisan analysts to add US 3 to 5 Trillion to the national debt, further exacerbating fiscal sustainability concerns in the wake of the Moody’s downgrade last Friday.

    Simultaneously, ongoing trade negotiations with major partners — including the EU, Japan, and China — have hit apparent roadblocks, reintroducing geopolitical friction into already cautious markets.

    Adding to Dollar’s vulnerability is the backdrop of the G7 finance ministers’ meeting underway in Canada. With concerns that US officials may be quietly welcoming a weaker Dollar to cushion trade headwinds and debt concerns, any perceived shift in post-meeting communiqué could further undermine confidence in the greenback.

    In the currency markets, risk-off tone is building up. Swiss Franc leads as the strongest performer this week so far, followed by Euro and Yen. The Dollar is the weakest, with Loonie and Aussie close behind. Sterling and Kiwi are hovering in the middle.

    Technically, Gold’s rally accelerates along with the selloff in the greenback. The break of 3265.74 resistance solidifies the case that correction from 3499.79 has completed with three waves down to 3120.34. Further rise is expected as long as 55 4H EMA (now at 3215.81) holds. Retest of 3434.76/3499.79 resistance zone should be seen next.

    In Asia, at the time of writing, Nikkei is down -0.21%. Hong Kong HSI is up 0.50%. China Shanghai SSE is up 0.39%. Singapore Strait Times is down -0.31%. Japan 10-year JGB yield is up 0.006 at 1.529. Overnight, DOW fell -0.27%. S&P 500 fell -0.39%. NASDAQ fell -0.38%. 10-year yield rose 0.006 to 4.481.

    Looking ahead, UK CPI is the main focus in European session. Later in the day, Canada will release new housing price index.

    Fed’s Musalem warns tariffs still a threat despite US-China truce

    St. Louis Fed President Alberto Musalem cautioned that even with the 90-day trade truce between the US and China, the current level of tariffs could still have “significant” short-term effects on the economy.

    In a speech overnight, he warned that tariffs are likely to “dampen economic activity” and further weaken the labor market. At the same time, tariffs could raise inflation both directly, through higher import prices, and indirectly, by triggering broader cost increases in domestic goods and services.

    Musalem outlined two potential monetary policy responses depending on how persistent the inflationary effects of tariffs prove to be.

    If the price impacts are temporary and inflation remains controlled, then it may be appropriate for the Fed to “look through” the short-term inflation spike and consider easing policy to cushion the labor market.

    However, if inflation proves stickier and starts to unanchor long-term expectations, Musalem argued that restoring price stability should take precedence, even at the cost of weaker growth and higher unemployment.

    “History tells us that restoring price stability is more costly for the public… if inflation expectations are not well anchored,” Musalem said.

    Fed’s Bostic: Tariff impact to surface as front-running shielding fades

    Atlanta Fed President Raphael Bostic warned that the economic effects of recent tariffs may be set to emerge more visibly, as businesses begin to exhaust their earlier stockpiling and “front-running” strategies.

    Speaking on the sidelines of a conference, Bostic said that “a lot of the tariff impact to date has actually not shown up in the numbers yet,” but the strategies used to insulate against cost shocks — such as building up inventories — “are starting to run their course.”

    As these buffers fade, Bostic expects that changes in prices could follow soon, offering a clearer view of how tariffs will impact both inflation and consumer behavior. “We’re about to see some changes in prices, and then we’re going to learn how consumers are going to respond to that,” he noted.

    Given the heightened uncertainty, Bostic maintained a cautious tone on policy. “We should wait and see where the economy is going before we do anything definitive,” he said.

    Japan’s US-bound exports fall -1.8% yoy as tariffs and strong Yen Bite

    .Japan’s export growth slowed to just 2.0% yoy in April, marking the weakest pace since October 2024.

    Notably, shipments to the US fell -1.8% yoy — the first decline in four months — as demand for automobiles, steel, and ships weakened. Exports of automobiles alone dropped -4.8% yoy by value, impacted by a stronger Yen and reduced demand for high-end models.

    The decline coincides with the imposition of 25% US tariffs on Japanese auto, steel, and aluminum exports, alongside the 10% blanket levy applied to most trade partners under the current US trade regime.

    Trade with Asia remained more resilient, with exports rising 6.0% yoy. However, shipments to China dipped -0.6% yoy.

    On the import side, Japan saw a -2.2% yoy contraction, resulting in a trade deficit of JPY -115.8B.

    Seasonally adjusted figures show a -2.7% mom drop in exports and a -1.4% mom drop in imports, with the adjusted trade deficit widening to JPY -409B.

    Australia’s leading index falls to 0.2%, growth pulse fades

    Australia’s Westpac Leading Index slowed from 0.5% to 0.2% in April, signaling a loss in growth momentum.

    According to Westpac, the above-trend growth seen earlier this year has “all but disappeared,” primarily due to rising global trade uncertainty and weaker commodity prices.

    While these external pressures dominate, domestic factors such as a slowing labor market and only modest support from interest rate cuts are also contributing to the loss of momentum.

    The overall picture suggests a stalling in the already tepid recovery, with GDP growth expected to reach just 1.9% by the end of 2025, well below historical averages.

    Following RBA’s recent 25bps rate cut to 3.85%, Westpac expects a cautious pause at the next policy meeting on July 7–8. The central bank is likely to await further clarity from the Q2 inflation data due at the end of July before considering additional easing.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8256; (P) 0.8309; (R1) 0.8337; More….

    USD/CHF’s downside accelerations suggests that corrective recovery from 0.8038 has already completed with three waves up to 0.8475. Intraday bias is back on the downside, and break of 0.8184 support will solidify this bearish case. Further break of 0.8038 will resume larger down trend to 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757 next. On the upside, above 0.8347 minor resistance will delay the bearish case and turn intraday bias neutral again first.

    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 0.8765) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Trade Balance (NZD) Apr 1426M 500M 970M 794M
    23:50 JPY Trade Balance (JPY) Apr -0.41T -0.19T -0.23T -0.29T
    01:00 AUD Westpac Leading Index M/M Apr -0.01% -0.11% -0.15%
    06:00 GBP CPI M/M Apr 1.10% 0.30%
    06:00 GBP CPI Y/Y Apr 3.30% 2.60%
    06:00 GBP Core CPI Y/Y Apr ` 3.60% 3.40%
    06:00 GBP RPI M/M Apr 1.50% 0.30%
    06:00 GBP RPI Y/Y Apr 4.20% 3.20%
    12:30 CAD New Housing Price Index M/M Apr 0.10% 0.00%
    14:30 USD Crude Oil Inventories -0.9M 3.5M

     



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  • Fed policy is well-positioned, but tariffs could impact inflation

    Fed policy is well-positioned, but tariffs could impact inflation


    Federal Reserve (Fed) Bank of St Louis President Alberto Musalem added his voice to the chorus of Fedspeakers warning that US trade policy under the guidance of the Trump administration is poised to not only weigh on growth, but could also exacerbate price volatility, one of the Fed’s favorite stand-in phrases for inflation.

    Key highlights

    Monetary policy currently well-positioned.

    A balanced response to higher inflation and unemployment is feasible if inflation expectations stay anchored.

    If inflation expectations become de-anchored, Fed policy should prioritize price stability.

    US economy has underlying strength, labor market stable, inflation has eased but above 2% goal.

    Economic policy uncertainty is unusually high.

    Even after May 12th de-escalation, tariffs likely to lead to labor market softening and higher prices.

    Tariffs as likely to have temporary as persistent effect on inflation.

    If trade tensions are durably de-escalated, inflation could head back to target, labor market remain resilient, and current monetary policy would remain appropriate.

    Long-term inflation expectations remain anchored.

    Hearing businesses and households are holding back from decisions amid uncertainty.

    If decisions have been somewhat paused, I’d expect it to affect the economic outlook.

    Impact of uncertainty on economic activity tends to be pretty meaningful.

    The labor force has continued to grow even with decrease in immigration.

    I hear there is some scarcity of some types of workers in some industries.



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    NZ BNZ services slips to 48.5, sector remains under pressure

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

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

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

    EUR/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Moody’s Downgrade Disrupts Calm from Tariff Truce, Dollar Faces New Test

    Moody’s Downgrade Disrupts Calm from Tariff Truce, Dollar Faces New Test


    Just as markets were finding their footing following a series of positive trade developments, Moody’s delivered a late-week shock by downgrading the US sovereign credit rating from Aaa to Aa1. The move overshadowed the optimism sparked by the US-China tariff truce and the broader de-escalation of trade tensions.

    The trade outlook appears less volatile in the near term, with more agreements possibly in the pipeline. Markets may enjoy a reprieve from tariff headlines until early July for non-China partners, and until mid-August for China.

    However, that stability could be abruptly shaken by Moody’s downgrade. The timing of the downgrade coincides with fragile improvements in sentiment, raises the risk of renewed selling in both Treasuries and Dollar.

    In the currency markets, performance was mixed last week, a hallmark of broader consolidation. Dollar finished as the strongest currency but notably failed to build on its early-week strength. Aussie followed as the second-best performer, buoyed by strong domestic job data and risk appetite, while Sterling also held firm with support from strong UK GDP. However, gains were limited overall. On the weaker side, Euro posted the poorest performance, followed by Swiss Franc and Kiwi. Yen and Loonie ended the week in the middle.

    Wall Street Surges on Trade Truce, Even Though Soaring Inflation Expectations Reinforce Fed Patience

    US equity markets wrapped up the week with strong gains, driven by renewed optimism over global trade and investor resilience, despite worrying economic signals. S&P 500 surged 5.3%, DOW added 3.4%, and NASDAQ Composite outperformed with a 7.2% jump. The rally was initially sparked by the surprising outcome of the US-China trade meeting. Both sides agreed to a 90-day truce and rolled back a significant portion of the tariffs, though not fully returning to pre-conflict levels.

    Investors looked past several downside risks and pushed stock prices higher, even as economic data pointed to potential trouble ahead. Markets absorbed weak consumer sentiment and sharply rising inflation expectations without flinching. This reflects a broader hope that trade normalization will continue to offset macro headwinds, at least in the short term.

    The University of Michigan’s preliminary consumer sentiment report for May, released Friday, highlighted growing public anxiety. The headline index dropped to 50.8, its second-lowest reading on record. Year-ahead inflation expectations surged from 6.5% to 7.3%, the highest since 1981.

    Importantly, the survey was conducted between April 22 and May 13. That timeframe includes the period after US President Donald Trump announced that reciprocal tariffs on all trading partners other than China would be scaled back to a 10% baseline. It also includes responses collected a day after the US-China truce was declared.

    In that context, the persistent collapse in sentiment and worsening inflation outlook suggest that consumers remain highly skeptical about the economic direction. Even the rollback of some tariffs was not enough to lift the mood or tame concerns about rising prices. Attention will now be on the final May release due May 30, to see if sentiment and expectations shift more positively as the trade truce sinks in.

    For Fed, the data likely reinforce a cautious stance, for holding back from another rate cut for longer. Fed funds futures now reflect just a 36% chance of a 25bps rate cut in July. Expectations rise to 75% for a September cut, followed by around 70% odds of another in December. That suggests markets believe only two rate cuts are likely this year, if any.

    Technically, S&P 500 gapped higher at the start of the week and extended its rally from 4835.04 low. The current rise is still viewed as the second leg in the medium-term corrective pattern from the 6147.43 high. Momentum should start to fade above 6000 psychological level. A break below 5720.10 gap support would indicate short-term topping. Sustained trading below 55 Day EMA (now at 5650.80) would suggest that the third leg of the correction has already begun.

    Moody’s Downgrade Casts Shadow Over Dollar and Treasuries

    Despite a strong weekly finish for Wall Street and Dollar, sentiment faces a fresh challenge after Moody’s downgraded the US sovereign credit rating on Friday. The move, announced after markets closed, cut the rating by one notch to Aa1 from Aaa—marking a rare loss of top-tier status. While the immediate market reaction was muted due to timing, the downgrade could cast a shadow over financial markets in the coming week, with pressure potentially building on both Dollar and US Treasuries.

    Notably, Dollar ended as the top-performing major currency last week, but it did so without conviction. After Monday’s initial surge, momentum faded quickly. By midweek, the greenback began to stall, showing little follow-through despite stronger inflation expectations. That suggests underlying demand may be fragile.

    Moody’s cited deteriorating fiscal outlook as the key reason for the downgrade, pointing to “successive US administrations and Congress” that have failed to reverse the trend of widening deficits and rising debt servicing costs. The agency also expressed skepticism that meaningful fiscal reforms are on the horizon, making clear that the downgrade reflects more than just short-term political risks. The downgrade reflects not only mounting fiscal stress, but also the political impasse that continues to hinder structural reforms.

    This backdrop is especially important given how markets reacted in early April, when sweeping reciprocal tariffs imposed by the US triggered a rally in Treasury yields and broad weakening of Dollar. That episode suggested investors may be reassessing traditional assumptions about the US’s role as the ultimate safe asset provider. A similar dynamic could resurface if the Moody’s downgrade gains traction with bondholders or sparks broader credit rating scrutiny.

    Technically, 10-year yield’s strong rise last week suggests that near term correction from 1.4592 has already completed at 4.124. Rise from 3.886 might be ready to resume. Further rally is now in favor as long as 55 D EMA (now at 4.3437) holds. Firm break of 4.592 would target 100% projection of 3.886 to 4.592 from 4.124 at 4.830 next.

    Dollar Index’s corrective recovery from 97.92 continued last week, but started to struggle ahead of 55 D EMA (now at 101.93). While another rise cannot be ruled out, upside should be limited by 38.2% retracement of 110.17 to 97.92 at 102.60. On the downside, break of 99.17 support will argue that larger down trend is ready to resume through 97.92 low.

    One asset that could benefit from renewed stress on the Dollar and Treasuries is Gold. Technically, Gold is now at an ideal level to complete the corrective pullback from 3499.79 high. Current levels include 55 D EMA (now at 3152.88) and 38.2% retracement of 2584.24 to 3499.79 at 3150.04. On the upside, firm break of 3262.74 resistance should bring stronger rally back to 3434.76/3499.79 resistance zone.

    EUR/USD Weekly Outlook

    EUR/USD dived further to 1.1064 last week but recovered ahead of 38.2% retracement of 1.0176 to 1.1572 at 1.1039. Initial bias remains neutral this week first. Strong support is still expected from 1.1039 to complete the correction from 1.1572. On the upside, above 1.1292 will bring stronger rise back to retest 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

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

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1300) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



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  • Markets Stuck in Ranges as Data Fail to Inspire

    Markets Stuck in Ranges as Data Fail to Inspire


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    NZ BNZ manufacturing rises to 53.9, recovery gains ground

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

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

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

    GBP/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Weak Data Overlooked as Yen Rises on Risk-Off Mood

    Weak Data Overlooked as Yen Rises on Risk-Off Mood


    Mild risk-off mood is helping Yen to extend its near-term rebound, despite fresh signs of economic weakness at home. Japan’s economy was already showing signs of strain even before the impact of US tariffs, with Q1 GDP contracting more sharply than expected. BoJ is left in an increasingly precarious position, wedged between deteriorating growth and persistent inflationary pressures.

    A recent Reuters poll taken between May 7 and 13 revealed a significant shift in market expectations, with 67% of economists now projecting that BoJ will hold its policy rate at 0.50% through the third quarter. That’s up sharply from just 36% a month ago, highlighting how tariff-related risks have changed expectations for near-term tightening.

    On the trade front, Japan is preparing a third round of negotiations with the US, as it seeks to secure exemptions from tariffs on automobiles and auto parts. In return, Tokyo is reportedly considering a set of concessions, including increased imports of US corn and soybeans, regulatory changes to auto inspection standards, and cooperation in shipbuilding technology.

    Chief negotiator Ryosei Akazawa is expected to travel to Washington as early as next week, though the timeline hinges on progress in working-level talks. Meanwhile, Finance Minister Katsunobu Kato will travel to Canada for G7 meetings, where he may hold bilateral discussions with US Treasury Secretary Scott Bessent on foreign exchange matters.

    Overall for the week so far, Yen is currently the top performer, followed by Sterling and then Dollar. Kiwi is the weakest, trailed by Euro and Swiss Franc. Loonie and Aussie sit in the middle of the pack. The overall tone in the currency markets remains mixed.

    Technically, Gold has bounced from key cluster support around 3150, including 55 D EMA (now at 3151.09) and 38.2% retracement of 2584.24 to 3499.79 at 3150.04. It’s possible that correction from 3499.79 has completed already. Firm of 3265.74 will reinforce this bullish case, and suggest that larger up trend is ready to resume. If realized, that should be accompanied by another round of selloff in Dollar. However, sustained break of 3150 will dampen this view and bring deeper fall to 61.8% retracement at 2933.98.

    In Asia, at the time of writing, Nikkei is down -0.06%. Hong Kong HSI is down -0.40%. China Shanghai SSE is down -0.34%. Singapore Strait Times is down -0.20%. Japan 10-year JGB yield is down -0.016 at 1.463. Overnight, DOW rose 0.65%. S&P 500 rose 0.41%. NASDAQ fell -0.18%. 10-year yield fell -0.073 to 4.455.

    Looking ahead, Eurozone trade balance in the main feature in European session. Later in the day, US will release housing starts and building permits, and import prices. But attention will be on U of Michigan consumer sentiment and inflation expectations.

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

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

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

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

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

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

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

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

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

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

    NZ BNZ manufacturing rises to 53.9, recovery gains ground

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

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

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

    Fed’s Barr: Solid economy faces threats from tariff-driven supply disruptions

    Fed Governor Michael Barr highlighted solid growth, low unemployment, and continued progress on disinflation in the US economy. However, he flagged growing concern over rising trade-related uncertainty, which has begun to weigh on consumer and business sentiment.

    In a speech overnight, Barr specifically pointed to the vulnerability of small businesses, which are more exposed to “disruptions to supply chains and distribution networks”.

    These firms are integral to broader production networks, and failures in this segment could trigger cascading effects across the economy.

    Drawing a parallel to the pandemic, Barr noted that “disruptions can have large and lasting effects on prices, as well as output,” leading to lower growth and higher inflation ahead.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 145.13; (P) 145.97; (R1) 146.53; More…

    Intraday bias in USD/JPY remains neutral and more consolidations could be seen below 148.64. . Further rally is expected as long as 144.02 resistance turned support holds. As noted before, fall from 158.86 could have completed 139.87 already. Above 148.64 will target 61.8% retracement of 158.86 to 139.87 at 151.60 next. However, firm break of 144.02 will bring retest of 139.87 low instead.

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

     



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  • Cautious Trade as APEC Cuts Growth View, Key UK and US Releases Awaited

    Cautious Trade as APEC Cuts Growth View, Key UK and US Releases Awaited


    Activity in the global stock markets remained relatively subdued, with US posting a mixed close overnight and Asian markets slipping modestly lower today. Despite China’s 50bps Reserve Requirement Ratio cut taking effect, expected to inject over USD 138B into the banking system, investor reaction has been muted. The cautious tone reflects lingering concerns over the global trade outlook, which continues to overshadow stimulus measures and upbeat economic data.

    Trade-related uncertainty remains a key drag on sentiment, with APEC group issuing a stark warning about the deteriorating outlook. At its 2025 trade ministers meeting in South Korea, APEC projected regional exports to grow by just 0.4% this year, sharply down from 5.7% in 2024. The group also downgraded its regional economic growth forecast to 2.6%, from 3.3% previously, citing weakening external demand, particularly in manufacturing and consumer goods, as well as rising policy uncertainty across trade and services sectors.

    In the currency markets, Yen and Swiss Franc are the strongest performer today so far, benefiting from mild pullback in risk-on sentiment and likely some short covering after recent weakness. Aussie is gaining ground as well, lifted by a stronger-than-expected employment report, which suggests that while the Reserve Bank of Australia is still on track for a rate cut next week, a more aggressive easing path may be off the table for now.

    Conversely, Dollar is the weakest major today, although the downside lacks conviction so far. Loonie and Kiwi are also under some mild pressure. Euro and Pound are holding steady, awaiting further catalysts, with the UK GDP report due in the European session.

    Technically, GBP/USD’s rebound from 1.3138 stalled well ahead of 1.3442 resistance. But for now, correction from 1.3442 is still seen as completed. Another rise would be in favor as long as 1.3138 holds. Retest of 1.3442 should be seen next, and firm break there will resume larger up trend.

    In Asia, at the time of writing, Nikkei is down -1.01%. Hong Kong HSI is down -0.25%. China Shanghai SSE is down -0.42%. Singapore Strait Times is up 0.41%. Japan 10-year JGB yield is up 0.023 at 1.48. Overnight, DOW fell -0.21%. S&P 500 rose 0.10%. NASDAQ rose 0.72%. 10-year yield rose 0.029 to 4.528.

    Looking ahead, UK GDP data will be the main focus in European session. Swiss PPI, Eurozone GDP revision and industrial production will also be released. Later in the day, US retail sales and PPI will take center stage. Jobless claims, Empire state manufacturing, Philly Fed manufacturing, industrial production will also be released.

    Fed’s Daly: Economy doing fairly well, patience key amid uncertainties

    At an event overnight, San Francisco Fed President Mary Daly said Fed is in a “good position” to respond to evolving conditions and uncertainties. She emphasized, “patience is the word of the day,”

    “We’ve got solid growth, a solid labor market and declining inflation,” she said. Despite lingering uncertainties, overall sentiment remains constructive, with people feeling the economy is performing “fairly well.”

    “It’s just a matter of resolving the uncertainty so we can continue to do very well,” Daly added.

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

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

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

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

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3928; (P) 1.3957; (R1) 1.4012; More…

    Intraday bias in USD/CAD remains neutral for the moment. Further rise is in favor with 1.3898 minor support intact. Above 1.4014 will resume the rebound from 1.3749 to 1.4150 cluster resistance (38.2% retracement of 1.4791 to 1.3749 at 1.4147). However, break of 1.3898 minor support will indicate that the rebound has completed, and bring retest of 1.3749.

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

     



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  • NZD/USD steadies near bottom of range as Dollar weakens on soft inflation and policy concerns

    NZD/USD steadies near bottom of range as Dollar weakens on soft inflation and policy concerns


    • The pair trades near the 0.5900 zone after trimming intraday losses amid mixed technical signals.
    • Weak US inflation and speculation of a soft-Dollar policy weigh on the Greenback.
    • Support at 0.5884; resistance seen at 0.5908 and 0.5928 with technicals pointing to possible rebound.

    The NZD/USD pair is hovering near the 0.5900 level after giving back earlier gains in Wednesday trading. The pair remains under modest pressure but shows signs of stabilization as price action consolidates near the lower end of the daily range. The subdued performance in the Kiwi comes as the US Dollar struggles across the board, weighed down by fresh speculation of a deliberate US Dollar weakening strategy and signs of a cooling inflation trend.

    Market focus remains on the broader narrative that the Trump administration may be supporting a weaker USD as part of its trade realignment push. Talks between US and South Korean officials regarding FX policy have triggered a wave of USD selling across Asia, adding pressure on the Greenback. The recent dip in US headline Consumer Price Index (CPI) to 2.3% year-over-year, the softest since February 2021, has also amplified rate cut expectations. Although the Fed is expected to remain on hold in the near term, swaps markets are still pricing in 75 basis points of easing over the next year, down from 125 bp last week.

    Meanwhile, New Zealand’s economic outlook remains clouded by expectations of a dovish shift from the Reserve Bank of New Zealand (RBNZ). Analysts widely anticipate the RBNZ to lower the Official Cash Rate (OCR) at its next policy meeting, citing weaker domestic growth prospects. With no major data from New Zealand this week, NZD price action is driven mostly by external developments, particularly the shifting sentiment around the US Dollar.

    Technical Analysis

    Technically, the NZD/USD pair is trading close to its daily low near 0.5896, within a broader range between 0.5884 and 0.5969. The Relative Strength Index (RSI) sits in neutral territory in the 50s, while the Moving Average Convergence Divergence (MACD) remains in negative territory, signaling downside momentum. However, Bull Bear Power is trending near the zero line, hinting at underlying buy conditions. The Stochastic Relative Strength Index (Stochastic RSI) – Fast also reflects a neutral posture. While the 20-day Simple Moving Average (SMA) points to continued bearishness, both the 100-day and 200-day Simple Moving Averages (SMAs) are aligned with a bullish bias, supported by the 30-day Exponential Moving Average (EMA) and 30-day SMA as well. Immediate support levels are seen at 0.5884, 0.5885, and 0.5885, while resistance lies at 0.5908, 0.5920, and 0.5928. With several long-term technical indicators signaling upside potential and the pair trading at a key support area, NZD/USD retains a mildly bullish bias, provided broader USD softness continues.



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