Tag: Fed

  • Dollar Steadies After Early Weakness, Focus Turns to Australia Jobs Data

    Dollar Steadies After Early Weakness, Focus Turns to Australia Jobs Data


    Dollar faced broad selling pressure throughout the Asian and European sessions but has since found some footing as markets transition into the US trading day. However, direction remains murky, with traders appearing undecided on whether to push the greenback higher or extend the recent pullback. A similar tone of uncertainty is mirrored in equities, as European indexes drift sideways and US futures show little conviction. With no major catalysts in the immediate pipeline, both FX and equity markets are likely to stay range-bound until fresh data offers clearer cues.

    Attention now turns to Thursday’s key releases, including Australia’s April employment report and the UK’s GDP figures. While Australia’s stronger-than-expected Q1 wage price index suggested some resilience in pay growth, the detail showed continued moderation in the private sector. This is unlikely to derail RBA’s expected rate cut next week, as the central bank remains focused on cushioning the economy from tariff-related risks. The upcoming April employment data will be more telling—especially if it deviates significantly from the expected 20.9k job growth and 4.1% unemployment rate. A downside surprise could fuel speculation of faster easing later this year.

    Technically, AUD/USD has struggled to establish momentum, despite a supportive risk-on backdrop. Even if a short-term rally resumes, 61.8% retracement of 0.6941 to 0.5913 at 0.6548 is likely to provide strong resistance to bring at least a near term pullback.

    In Europe, at the time of writing, FTSE is up 0.09%. DAX is down -0.18%. CAC is down -0.29%. UK 10-year yield is up 0.039 at 4.715. Germany 10-year yield is up 0.005 at 2.686. Earlier in Asia, Nikkei fell -0.14%. Hong Kong HSI rose 2.30%. China Shanghai SSE rose 0.86%. Singapore Strait Times fell -0.26%. Japan 10-year JGB yield rose 0.008 to 1.457.

    Fed’s Goolsbee urges patience amid ‘dusty’ data and tariff uncertainty

    Chicago Fed President Austan Goolsbee cautioned against overinterpreting April’s softer inflation data, noting on NPR that it’s still too early to gauge the true impact of rising US import tariffs.

    While recent consumer price figures suggest inflation may be easing, Goolsbee stressed that Fed needs more clarity before making firm policy judgments, describing the current environment as one filled with “a lot of dust in the air.”

    He acknowledged that the data so far “suggest that it’s going okay,” but emphasized the difficulty of drawing long-term conclusions amid ongoing short-term volatility.

    “It’s just not realistic,” he said, “to expect businesses or central banks to be jumping to conclusions” in such an uncertain setting.

    ECB’s Nagel stresses Dollar’s global role, cautious on tariff impact ahead of June decision

    German ECB Governing Council member Joachim Nagel emphasized the continued importance of the Dollar as a global reserve currency during remarks today. At the same time, he expected that Euro would gradually play a stronger role in the international financial system over the coming years.

    Looking ahead to ECB’s June policy meeting, Nagel reiterated that the interest rate decision will be guided by incoming data. He acknowledged the uncertainty surrounding the impact of US tariffs on inflation and growth within the Eurozone.

    The updated ECB staff projections, due next month, would be essential in shaping the decision. Nagel also stressed that central banks must increasingly adapt to operating in an environment characterized by persistent geopolitical and policy-driven uncertainty.

    BoE hawk Mann: Labor market resilient, and firms yet to lose pricing power

    BoE MPC member Catherine Mann explained her notable policy shift during an interview with CNBC, revealing why she moved from backing a 50bps rate cut in February to voting for a hold at last week’s meeting.

    Mann cited the UK labor market’s resilience as a key factor in her reassessment. While recent data suggest some moderation “a slowing labor market”, she argued that “it is not a non-linear adjustment.”

    Mann also flagged a new risk emerging from tariffs. She warned that rising US tariffs on countries like China could lead to an influx of diverted exports into markets such as the UK. While this could temporarily ease goods prices at the border, she cautioned that domestic retailers may use the opportunity to rebuild profit margins, keeping upward pressure on consumer price inflation rather than alleviating it.

    Crucially, Mann emphasized the need to see a broad-based “loss of pricing power” in firms. “I need to see that firms are starting to be much more moderate in setting their prices across a broad range of products,” she added. “Goods price inflation is actually going up, not down.”

    Japan’s PPI rises 4% yoy in April, record high for 8th straight month

    Japan’s PPI rose 4.0% year-on-year in April, easing slightly from 4.3% yoy in March and matching market expectations. Despite the modest slowdown, the index climbed to a fresh record high of 126.3, marking the eighth consecutive month of new highs, highlighting persistent cost pressures at the wholesale level.

    However, the data also showed little immediate impact from the sweeping US tariffs announced in early April, thanks in part to the 90-day suspension.

    Japan’s Yen-based import price index fell sharply by -7.2% yoy in April, following a -2.4% yoy decline in March. The drop suggests that Yen’s appreciation during the market turmoil have helped shield Japanese importers from some of the price shocks, at least for now.

    Australian wage growth accelerates to 3.4% yoy in Q1, led by public sector

    Australia’s Wage Price Index rose by 0.9% qoq in Q1, slightly above market expectations of 0.8% qoq. Public sector saw a stronger 1.0% qoq gain, outpacing the 0.9% qoq rise in private sector.

    On an annual basis, wages grew by 3.4%, up from 3.2% in the previous quarter, marking the first uptick in annual wage growth since mid-2024.

    The uptick in annual wage growth was driven primarily by the public sector, which saw a notable increase to 3.6% yoy from 2.9% yoy in Q4. Private sector wage growth was steady at 3.3% yoy.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.8367; (P) 0.8415; (R1) 0.8442; More….

    Intraday bias in USD/CHF remains neutral for the moment. On the downside, firm break of 0.8333 resistance turned support will argue that corrective rebound from 0.8038 has completed at 0.8475, after rejection by 38.2% retracement of 0.9200 to 0.8038 at 0.8482. Intraday bias will be back on the downside for 0.8184, and then retest of 0.8038 low. However, sustained trading above 0.8482 will dampen this bearish view and target 61.8% retracement at 0.8756 next.

    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 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Apr 4.00% 4.00% 4.20% 4.30%
    01:30 AUD Wage Price Index Q/Q Q1 0.90% 0.80% 0.70%
    06:00 EUR Germany CPI M/M Apr F 0.40% 0.40% 0.40%
    06:00 EUR Germany CPI Y/Y Apr F 2.10% 2.10% 2.10%
    12:30 CAD Building Permits M/M Mar -4.10% 1.00% 2.90% 4.90%
    14:30 USD Crude Oil Inventories -2.0M -2.0M

     



    Source link

  • Fed Cut Bets Recede Ahead of US CPI, Dollar Approaches Key Resistance

    Fed Cut Bets Recede Ahead of US CPI, Dollar Approaches Key Resistance


    Global equity markets surged overnight in response to the breakthrough US-China tariff truce, with risk appetite roaring back across the board. DOW jumped more than 1100 points, while S&P 500 and NASDAQ surged 3.26% and 4.35%, respectively. The relief rally extended into Europe, where Germany’s DAX surged to a new record high, reflecting broad optimism that trade tensions have eased significantly—at least for now. In Asia, Japan’s Nikkei jumped nearly 1.8% in early trading as it played catch-up, though the boost faded in Hong Kong where HSI turned lower, signaling some regional caution.

    In the currency markets, however, the initial momentum has slowed. Dollar remains the strongest currency for the week so far, supported by rising Treasury yields and expectations that Fed will maintain its high interest rate longer. Commodity currencies like the Australian, Canadian, and New Zealand Dollars are also holding firm, buoyed by improved risk sentiment. Meanwhile, Yen and European majors continue to lag.

    The attention now shifts to today’s US April CPI release, which will be the first major inflation print since the April tariff escalation and the subsequent truce. Although the immediate impact of tariffs may not be fully visible yet, any upside surprise could reinforce Fed’s message of caution. While that may further support Dollar, it’s unlikely to significantly dampen the broader risk-on mood, given that markets have already recalibrated expectations following the trade deal.

    Indeed, Fed fund futures have responded decisively to the latest developments. A week ago, markets were pricing in a 74% chance of a July rate cut. That probability has now dropped sharply to 41% in the wake of the tariff truce. This suggests that traders have already priced in a “higher for longer” Fed policy stance, reducing the likelihood of any sudden repricing unless inflation data comes in meaningfully above expectations.

    Technically, with yesterday’s strong rally, DXY will enter into a key resistance zone ahead, between 55 D EMA (now at 102.07) and 38.2% retracement of 110.17 to 97.92 at 102.60. For now, rebound from 97.92 is still seen as part of a correction to the fall from 110.17. Hence, strong resistance should be seen from 102.07/60 to limit upside, at least on first attempt. However, sustained break of this zone will raise the chance of reversal, and target 61.8% retracement at 105.49 next.

    In Asia, at the time of writing, Nikkei is up 1.79%. Hong Kong HSI is down -1.67%. China Shanghai SSE is up 0.08%. Singapore Strait Times is up 0.43%. Japan 10-year JGB yield is up 0.07 at 1.459. Overnight, DOW rose 2.81%. S&P 500 rose 3.26%. NASDAQ rose 4.35%. 10-year yield rose 0.082 to 4.457.

    Looking ahead, UK employment data and German ZEW economic sentiment will be the main feature in European session. Later in the day, US CPI is the center of focus.

    Fed’s Goolsbee warns tariff truce still carries stagflation risk

    Chicago Fed President Austan Goolsbee welcomed the weekend’s US-China tariff agreement as a step in the right direction but cautioned that its limited scope offers only modest relief.

    In an interview with the New York Times, he said the temporary 90-day reduction in tariffs would be “less impactful stagflationarily than the path they were on.”

    But that still represents a significant burden on the economy. With tariffs remaining three to five times higher than pre-trade war levels, Goolsbee warned the deal would still “make growth slower and make prices rise”, hallmarks of a stagflationary environment.

    Given the persistent uncertainty surrounding US trade policy, Goolsbee reiterated his support for a wait-and-see approach on interest rates. He noted that the Trump administration’s statements acknowledge the temporary nature of the current truce. “It’s going to be revisited in the near future,” he said.

    BoE’s Taylor defends 50bps cut, cites perilous trade climate and weak demand

    BoE MPC member Alan Taylor explained his decision to vote for a 50bps rate cut last week, warning that both global and domestic conditions have deteriorated significantly.

    He pointed to a “quite perilous” international trade environment, driven in large part by broader-than-expected US tariffs. Also, “the erosion of confidence that we saw has continued”, he added, with low readings in business surveys like the PMI and REC, along with signs of increased precautionary saving and delayed investment.

    Taylor also called the recent UK-US trade deal “quite slender,” noting that most British exports will still face a 10% tariff, offering little near-term relief for exporters.

    Taylor warned that waiting for complete confirmation that all inflation pressures had eased before easing policy further could leave BoE behind the curve.

    ECB officials signal cautious path to June cut

    Latvian ECB Governing Council member Martins Kazaks indicated overnight that a rate cut in June remains a “pretty possible step,” aligning with market expectations, provided upcoming data confirms progress toward anchoring inflation around the 2% target.

    Kazaks added that “gradual cautious cuts could come upon the anchoring of inflation to around the 2% target.”

    Meanwhile, German and Spanish ECB members Joachim Nagel and Jose Luis Escriva added a note of caution in a joint interview, warning that US President Donald Trump’s aggressive tariff policies have clouded the economic outlook.

    “Regarding monetary-policy decisions, it is important to be cautious and not to overreact by overemphasizing specific announcements that could change shortly afterwards,” Nagel emphasized.

    BoJ’s Uchida sees temporary inflation pause, but wage growth to persist

    BoJ Deputy Governor Shinichi Uchida said today that while Japan’s underlying inflation and medium- to long-term inflation expectations may “temporarily stagnate”, wage growth is expected to remain firm as “Japan’s job market is very tight.”

    He added that companies are likely to continue “passing on rising labour and transportation costs by increasing prices”.

    Uchida also stressed that BoJ will assess the economic impact of US trade policy “without pre-conception,” acknowledging the high degree of uncertainty surrounding the global outlook.

    BoJ opinions: Sees tariff risks but maintains flexible rate-hike stance

    BoJ’s Summary of Opinions from its April 30–May 1 meeting revealed a generally cautious view on the impact of US tariffs, with board members acknowledging the potential economic damage but not seeing it as enough to derail the pursuit of the 2% inflation target.

    One member noted that BoJ may enter a “temporary pause” in rate hikes due to weaker US growth. But it’s emphasized that “it shouldn’t be too pessimistic”.

    The member emphasized that rate hikes could resume if conditions improve or US policy shifts.

    Other opinions highlighted the high level of uncertainty facing Japan’s economic and price outlook, driven largely by global trade tensions. One board member noted the policy path “may change at any time.”

    Another reaffirmed that there has been “no change to the BoJ’s rate-hike stance”, as projections continue to show inflation reaching the 2% target and real interest rates remain deeply negative.

    Australian Westpac consumer sentiment rises to 92.1, weak confidence supports RBA cut

    Australia’s Westpac Consumer Sentiment Index rose 2.2% to 92.1 in May, partially recovering from April’s sharp decline triggered by trade-related uncertainty.

    Westpac attributed the modest rebound to stronger financial markets and a decisive outcome in the Federal election. However, sentiment remains subdued, with the index still 3.9% below its March level and firmly in pessimistic territory.

    With all key inflation measures now back within the 2–3% target range, Westpac expects RBA to cut the cash rate by another 25bps to 3.85%. The combination of soft domestic sentiment and a more “unsettled and threatening global backdrop” strengthens the case for further easing.

    Australia’s NAB business conditions weaken to 2, profit pressures mount

    Australia’s NAB Business Confidence Index edged up from -3 to -1 in April. However, the underlying Business Conditions Index slipped from 3 to 2. Trading conditions eased from 6 to 5, while profitability dropped sharply from 0 to -4, highlighting the ongoing strain on margins.

    Purchase cost growth accelerated to 1.7% in quarterly equivalent terms, up from 1.4%. Labor cost growth remained elevated at 1.6%. Rising input costs appear to be eroding profitability, with businesses struggling to pass through the full extent of these increases. This was reflected in modest increases in final product and retail price growth, which rose to 0.8% and 1.4% respectively—still below the pace of input cost growth.

    NAB Chief Economist Sally Auld noted that weaker profitability was at the core of the drop in business conditions, aligning with the uptick in purchase costs and softer trading performance.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8367; (P) 0.8421; (R1) 0.8512; More….

    USD/CHF’s rebound from 0.8038 is still seen as a corrective move. Strong resistance is expected from 38.2% retracement of 0.9200 to 0.8038 at 0.8482 to limit upside. Break of 0.8330 resistance turned support will turn intraday bias will turn bias back to the downside. Further break of 0.8184 will bring retest of 0.8038 low. However, sustained trading above 0.8482 will dampen this bearish view and target 61.8% retracement at 0.8756 next.

    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 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BoJ Summary of Opinions
    23:50 JPY Money Supply M2+CD Y/Y Apr 0.50% 0.60% 0.80%
    00:30 AUD Westpac Consumer Confidence May 2.20% -6%
    01:30 AUD NAB Business Conditions Apr 2 4
    01:30 AUD NAB Business Confidence Apr -1 -3
    06:00 GBP Claimant Count Change Apr 22.3K 18.7K
    06:00 GBP ILO Unemployment Rate (3M) Mar 4.50% 4.40%
    06:00 GBP Average Earnings Including Bonus 3M/Y Mar 5.20% 5.60%
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Mar 5.70% 5.90%
    09:00 EUR Germany ZEW Economic Sentiment May 9.8 -14
    09:00 EUR Germany ZEW Current Situation May -77 -81.2
    09:00 EUR Eurozone ZEW Economic Sentiment May -4.4 -18.5
    10:00 USD NFIB Business Optimism Index Apr 94.5 97.4
    12:30 USD CPI M/M Apr 0.30% -0.10%
    12:30 USD CPI Y/Y Apr 2.40% 2.40%
    12:30 USD CPI Core M/M Apr 0.30% 0.10%
    12:30 USD CPI Core Y/Y Apr 2.80% 2.80%

     



    Source link

  • New tariffs are certainly less stagflationary than previous path

    New tariffs are certainly less stagflationary than previous path


    Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee took a cautionary stance on the ever-evolving trade stance of the Trump administration on Monday. According to Goolsbee’s interview with The New York Times, constantly-changing tariffs and trade strategies from the White House have thrown a very large wrench in plans for hiring and investment for many industries, pinning the Fed in a wait-and-see mode on interest rates.

    Key highlights

    On the US-China tariff reduction: It is definitely less impactful stagflationarily than the path they were on.

    Yet it’s three to five times higher than what it was before, so it is going to have a stagflationary impulse on the economy. It’s going to make growth slower and make prices rise.

    The way that we’re doing this is not free for the economy.

    On hiring and investment by business contacts: the risk of trade agreements and tariff suspensions lapsing is preventing businesses from taking the leap.

    Business’ statements are coming with explicit recognition that this isn’t permanent and that it’s going to be revisited in the near future.

    Part of those business announcements are explicitly putting off into the future major decisions.

    If we could get the dust out of the air, it would make sense to think that rates would be going down.

    The bar for action has to be high when there’s so much uncertainty.



    Source link

  • EUR/USD plummets as US-China trade truce strengthens US Dollar

    EUR/USD plummets as US-China trade truce strengthens US Dollar


    • EUR/USD slides below 1.1100 as the US Dollar rallies after the US and China agreed to lower tariffs by 115% for 90 days.
    • The US-China temporary trade truce is expected to tame elevated consumer inflation expectations.
    • ECB Schnabel sees no need to lower interest rates further.

    EUR/USD is down over 1% near 1.1100 during North American trading hours on Monday. The major currency pair faces an intense selling pressure as the US Dollar (USD) rallies after the United States (US) and China, in a joint statement, announced a higher-than-expected reduction in tariffs for 90 days imposed in April.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surges to near 101.60.

    In a scheduled briefing during the European trading session on Monday, the US and China have agreed to lower tariffs by 115%. Tariffs on the US and China have dropped to 10% and 30%, respectively. Import duties on China still carry the burden of a 20% fentanyl levy. However, Washington has assured that it could be resolved soon. “Two sides are having constructive conversations on the issue of fentanyl,” US Trade Representative Jamieson Greer said. Additionally, US Treasury Secretary Scott Bessent said, “If China acts, perhaps the fentanyl tariff could come down,” Reuters reported.

    Ahead of the US-China trade talks in Geneva over the weekend, US President Donald Trump stated on Friday that he could lower tariffs on China to 80% through a post on Truth. Social. “80% Tariff on China seems right! It’s up to Scott Bessent,” Trump said.

    The next trigger for the US Dollar will be commentary from Federal Reserve (Fed) officials on the monetary policy outlook in the wake of de-escalation in the Sino-US trade war. Fed officials are expected to revise their outlook on interest rates as the averted tariff war would diminish elevated consumer inflation expectations.

    Last week, Fed Chair Jerome Powell warned in the press conference after the central bank’s decision to keep interest rates unchanged that tariffs announced were “significantly bigger than expected” and we will see “higher inflation, and lower employment” if large increases in tariffs as announced are “sustained”.

    Daily digest market movers: EUR/USD plunges on absence of progress in US-EU trade talks

    • EUR/USD plunges on Monday as the US Dollar surges after the US and China lowered tariffs. The Euro (EUR) trades lower against other currencies, while investors seek cues on how the temporary US-China trade truce will influence the Eurozone economic outlook. 
    • Ahead of the Sino-US trade talks, financial market participants anticipated that the trade war between the two largest world economic countries would be unfavorable for the shared continent, assuming that Beijing would move to other markets to sell its products to offset the impact of a trade war with Washington. Given China’s low-cost competitive advantage, its products could be disruptive for the global economy.
    • After the US unveiled a 90-day tariff pause with China, a bilateral deal with the UK, and progress in trade talks with Japan, India, and other nations, no announcement regarding trade discussions with the European Union (EU) is also weighing on the Euro. Investors are seeing the scenario as unfavorable for the Eurozone economic outlook, assuming that the confidence of market participants will diminish in the economy if uncertainty prevails.
    • Meanwhile, firm expectations that the European Central Bank (ECB) could continue the monetary policy expansion cycle in the wake of easing inflationary pressures are also acting as a tailwind for the Euro. A string of ECB officials has signaled that more interest rate cuts are needed amid trade tensions with the US, while remaining confident that the disinflation trend is intact.
    • Contrary to several officials supporting more interest rate cuts, ECB board member Isabel Schnabel has signaled that there is no need to reduce interest rates further. “The appropriate course of action is to keep rates close to where they are today – that is, firmly in neutral territory,” Schnabel said in a conference at Stanford University on Friday. Schnabel warned of risks to inflation exceeding the central bank’s 2% target in the medium term amid global economic turmoil.
    • On the economic front, the EUR/USD pair will be influenced by the US Consumer Price Index (CPI) data for April, which will be released on Tuesday. The inflation data is expected to show that the headline CPI rose steadily by 2.4% YoY. 

    Euro PRICE Today

    The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.

    USD EUR GBP JPY CAD AUD NZD CHF
    USD 1.15% 0.82% 1.15% 0.67% 0.35% 0.71% 0.95%
    EUR -1.15% -0.20% 0.54% 0.01% -0.16% 0.05% 0.28%
    GBP -0.82% 0.20% 0.94% 0.21% 0.05% 0.17% 0.48%
    JPY -1.15% -0.54% -0.94% -0.49% -1.41% -1.29% -0.43%
    CAD -0.67% -0.01% -0.21% 0.49% -0.05% 0.04% 0.27%
    AUD -0.35% 0.16% -0.05% 1.41% 0.05% 0.11% 0.41%
    NZD -0.71% -0.05% -0.17% 1.29% -0.04% -0.11% 0.21%
    CHF -0.95% -0.28% -0.48% 0.43% -0.27% -0.41% -0.21%

    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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

    Technical Analysis: EUR/USD slides below 200-period EMA

    EUR/USD declines on Monday after a breakdown of the 1.1200-1.1440 range formed in the last 20 trading days. The major currency pair extends its downside move below the 200-period Exponential Moving Average (EMA), which is around 1.1200, indicating a bearish trend.

    The 14-period Relative Strength Index (RSI) slides below 40.00, suggesting that a fresh bearish momentum has been triggered.

    Looking up, the April 28 high of 1.1425 will be the major resistance for the pair. Conversely, the March 27 low of 1.0733 will be a key support for the Euro bulls.



    Source link

  • Sterling and Dollar Lead as Trade Deal Grabs Attention

    Sterling and Dollar Lead as Trade Deal Grabs Attention


    Last week was dominated by developments out of the US and UK, not just because of monetary policy decisions, but also the unexpected announcement of a US-UK trade deal. Fed’s hold and BoE’s cut were were largely overshadowed by the surprise trade breakthrough.

    Importantly, the structure of the agreement offered valuable insights into the US administration’s trade strategy which could set the template for negotiations with other key partners.

    Despite the significance of the agreement, market reactions were relatively restrained. Major US stock indexes and the UK’s FTSE 100 closed slightly lower. Investors remain cautious about the deal’s practical impact and the broader global developments.

    Still, the news did provide meaningful support to the currencies involved: Sterling and Dollar emerged as the week’s top performers. Japanese Yen took third place

    In contrast, Loonie underperformed at the bottom. Kiwi and Swiss Franc also lagged. Euro and Aussie ended in the middle of the pack.

    Historic Pact, Modest Reaction: Investors Cautious Despite US-UK Trade Breakthrough

    While the US-UK trade deal marked a diplomatic milestone, the first bilateral agreement since the sweeping tariff measures enacted in April, financial markets responded with notable indifference. Equities initially rallied on Thursday following the announcement, but the enthusiasm quickly faded. All three major US indexes reversed earlier gains and ended the week in the red, with S&P 500 falling -0.5%, NASDAQ down -0.3%, the DOW slipping -0.2%.

    The structure of the agreement reveals much about the current US approach to trade. The UK, given its trade surplus with the US and its unparalleled security ties, likely received the most favorable terms Washington is willing to offer. If this is the best-case scenario, expectations for more comprehensive or lenient agreements, even with regions like the EU or Japan, may need to be tempered.

    A 10% blanket tariff remains on virtually all UK exports to the US. That is likely the floor for future negotiations with other partners. This baseline may not only serve as a protective measure but also as a consistent revenue stream to fund Trump’s domestic agenda, including tax cuts. Though minor exemptions may be granted, such as on UK automobiles and metals, they are expected to be case-specific rather than systemic.

    What sets this agreement apart is the emphasis on expanding market access for US companies in the UK, particularly in agriculture and industries. It suggests that future trade arrangements will be designed less to eliminate tariffs wholesale and more to create bilateral corridors of opportunity favoring U.S. exporters, negotiated country by country.

    In that context, the muted market response becomes clearer. Investors recognize that this agreement doesn’t signify a return to pre-tariff global trade norms. With 90 days remaining in the current tariff truce, the road ahead includes complex negotiations not only with China and the EU but also within supply chains deeply impacted by the new tariff regime. Optimism about progress must be balanced against the reality that a systemic overhaul is still underway, and clarity will be slow to emerge.

    Technically, DOW’s rebound from 36611.78 is seen as the second leg of the corrective pattern from 45073.63 high. Further rise is in favor as long as 40759.41 support holds. However, DOW could start to lose momentum more apparently above 61.8% retracement of 45073.63 to 36611.78 at 41841.20. Break of 40759.41 will indicate short term topping, and bring pullback first.

    June Fed Cut Going Off the Radar, July Doubtful, Dollar Extends Modest Rise

    Fed held its benchmark interest rate unchanged at 4.25–4.50% last week, as widely anticipated. The key message from Fed Chair Jerome Powell was one of restraint: rate cuts are not imminent. Powell emphasized that with the current level of uncertainty surrounding US trade policy and tariffs, “it’s not a situation where we can be preemptive.” He reiterated that if the current size and scale of tariffs remain in place, the US could face the dual challenge of rising inflation and unemployment.

    Cleveland Fed President Beth Hammack’s comments from an interview published on Friday is worth a mention. She noted that the breadth of tariff measures already discussed and implemented raises “real questions” about their ultimate economic impact. As such, she suggested it may take longer before Fed can confidently begin to ease rates.

    Crucially, Hammack pointed out that there won’t be much new data between now and the next FOMC meeting in June, limiting the Fed’s ability to reassess the situation. Her comments align with current market pricing, which assigns just a 17.2% probability to a June rate cut.

    Looking ahead, July is now the more likely inflection point, though conviction is still weak. Market-implied odds for a 25bps cut in July stand at around 60%. Investors remain far from convinced a rate move is locked in.

    Dollar Index gyrated higher last week, partly supported by expectations that Fed interest rate will stay high for longer, and partly support by improved appetite on US assets as trade negotiations made progress.

    Technically, corrective rise from 97.92 could extend higher towards 55 D EMA (now at 102.08). But strong resistance should be seen from 38.2% retracement of 110.17 to 97.92 at 102.60 limit upside. On the downside, break of 99.17 support would argue that the corrective recovery has completed earlier than expected, and bring retest of 97.92 low next.

    BoE Vote Split Surprises, Top Mover GBP/CAD’s Rally Limited

    BoE delivered a 25bps rate cut to 4.25% as widely anticipated, but the composition of the vote took markets by surprise. The Monetary Policy Committee split three ways: five members supported the cut, two hawkish voices—Catherine Mann and Chief Economist Huw Pill—voted for no change, while Swati Dhingra and Alan Taylor pushed for a deeper 50bps reduction. The presence of two hawkish hold votes gave the overall decision a more cautious tone than markets had anticipated Market expectations for a gradual 25bps-per-quarter path remain intact.

    BoE Governor Andrew Bailey addressed the impact of global trade tensions in a speech following the decision, and raised an interesting perspective. He highlighted how different global tariff scenarios could affect the UK economy in divergent ways. Most notably, Bailey stressed that a demand-driven downside—where both inflation and activity fall—would require a stronger monetary response compared to a supply-driven upside shock, where inflation rises but growth slows. The key distinction lies in the trade-off: when inflation and activity move in opposite directions, policy decisions become more complex and risk-laden, requiring a more delicate balance.

    British Pound ended the week as the strongest major currency. GBP/CAD was the top mover, rising 1.13%. Still, price action in GBP/CAD doesn’t show clear strength. The bounce even failed to break the prior week’s high of 1.8598.

    Technically, GBP/CAD is seen as in consolidation pattern from 1.8777, with current rise from 1.7980 as the second leg. Further rally might be seen but upside should be limited by 1.8777.

    On the downside, break of 1.8280 support will argue that the third has started. Deeper fall should then follow to 1.7980, or even to channel support at around 1.7700.

    AUD/USD Weekly Report

    AUD/USD retreated after edging higher to 0.6511 last week, but downside is contained above 0.6364 support so far. Initial bias stays neutral this week first. On the upside, break of 0.6511 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, considering bearish divergence condition in 4H MACD, break of 0.6364 support should confirm short term topping. Intraday bias will be turned back to the downside for 38.2% retracement of 0.5913 to 0.6511 at 0.6283.

    In the bigger picture, as long as 55 W EMA (now at 0.6443) holds, down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

    In the long term picture, prior rejection by 55 M EMA (now at 0.6764) is taken as a bearish signal. But for now, fall from 0.8006 is still seen as the second leg of the corrective pattern from 0.5506 long term bottom (2020 low). Hence, in case of deeper decline, strong support should emerge above 0.5506 to contain downside to bring reversal.



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    ECB’s Simkus and Rehn warn of growth risks

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

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

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

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

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

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

    Japan wage growth slows while Real incomes shrink, but spending rebounds

    Japan’s wage data for March showed a softening trend. Nominal total cash earnings rose 2.1% yoy, below expectations of 2.4% yoy and down from February’s 2.7% yoy. This marked the 39th consecutive month of nominal wage growth, but the pace is clearly losing momentum.

    More concerning was the continued decline in inflation-adjusted real wages, which fell -2.1% yoy, down for a third straight month, highlighting the squeeze on household purchasing power as consumer prices remained elevated at 4.2% yoy, particularly for food staples like rice.

    Base salaries (regular pay) grew 1.3% yoy, unchanged from February, suggesting underlying wage trends remain stable but not accelerating. However, overtime pay, often viewed as a proxy for labor demand, fell -1.1% yoy, marking its first decline since September and the sharpest drop since April last year.

    Despite the income pressures, household spending surprised to the upside. It rose 2.1% yoy, far exceeding the expected 0.2% yoy and marking the first increase in two months. On a seasonally adjusted month-on-month basis, spending climbed 0.4%. The increase was largely driven by higher electricity bills and rising education-related expenses.

    China’s exports surge 8.1% yoy in April, ASEAN shipments jump 20.8% yoy, US slide -21% yoy

    China’s exports surged 8.1% yoy to USD 315.7B in April, far exceeding expectations of 1.9% yoy. However, the headline strength masks key shifts in trading patterns.

    Exports to the US tumbled by -21% yoy, a sharp reversal from March’s 9.1% yoy gain, reflecting the drag from elevated tariffs. In contrast, shipments to the ASEAN bloc jumped 20.8% yoy, with Vietnam, often seen as a transshipment route for Chinese goods, seeing a 22.5% yoy rise.

    Yet, with the US now eyeing a steep 46% tariff on Vietnamese imports and imposing a 10% baseline levy, this channel for China could soon come under pressure.

    Elsewhere, exports to the European Union also improved, rising 8.3% yoy.

    Imports dipped just -0.2% yoy, a much smaller contraction than the expected -5.9% yoy. As a result, trade surplus narrowed from USD 102.6B to USD 96.2B, above the expected USD 94.3B.

    EUR/USD Mid-Day Outlook

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

    Intraday bias in EUR/USD remains mildly on the downside for the moment. Corrective fall from 1.1572 is still in progress to 38.2% retracement of 1.0176 to 1.1572 at 1.1039. But strong support should be seen there to bring rebound. On the upside, break of 1.1380 will suggest that the correction has completed, and bring retest of 1.1572.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0808) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Mar 2.10% 2.40% 2.70%
    23:30 JPY Household Spending Y/Y Mar 2.10% 0.20% -0.50%
    03:00 CNY Trade Balance (USD) Apr 96.2B 94.3B 102.6B
    05:00 JPY Leading Economic Index Mar P 107.7 107.4 107.9
    12:30 CAD Net Change in Employment Apr 7.4K 4.1K -32.6K
    12:30 CAD Unemployment Rate Apr 6.90% 6.80% 6.70%

     



    Source link

  • AUD/USD flattens around 0.6420 as US Dollar struggles for more gains

    AUD/USD flattens around 0.6420 as US Dollar struggles for more gains


    • AUD/USD wobbles around 0.6420 as the US Dollar struggles to extend its upside despite the Fed guiding no rush for interest rate cuts.
    • Fed Powell warns that risks to higher inflation and unemployment have risen.
    • Investors await US-China trade talks in Switzerland on Saturday.

    The AUD/USD pair trades flat around 0.6420 during North American trading hours on Thursday. The Aussie pair struggles for direction, while the US Dollar (USD) gives up initial gains.

    The US Dollar Index (DXY) rose to near 100.20 earlier in the day, on signals from the Federal Reserve (Fed) that monetary policy adjustments are not appropriate amid uncertainty over the United States (US) economic outlook under the leadership of President Donald Trump. However, the USD Index has flattened around 99.90 at the press time.

    The guidance from the Fed that there is no rush for interest rate cuts came after the central bank left them steady in the range of 4.25%-4.50% for the third meeting in a row.

    Fed Chair Jerome Powell warned that “risks to inflation and unemployment have skewed to the upside”. Powell said that tariffs so far are “significantly bigger-than-expected” and we will see “higher inflation and lower employment” if large increases in tariffs as announced are “sustained”.

    Meanwhile, investors look for trade discussions between the US and China, which are scheduled for Saturday in Switzerland. The meeting of US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer with their Chinese counterparts aims to de-escalate the trade war, not to negotiate a trade deal. Tariffs and counter-tariffs imposed by both nations on each other are very high, and a trade deal cannot be initiated without lowering them.

    Any positive outcome from the US-China trade talks will be favorable for both the US and the Australian Dollar (AUD). Given that Australia is the leading trading partner of Beijing, an improvement in China’s economic outlook will strengthen the Aussie Dollar.

     

    US Dollar FAQs

    The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
    Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

    The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
    When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

    In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

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

     

     



    Source link

  • Sterling in Focus as BoE Decision and US-UK Trade Deal Speculation Loom

    Sterling in Focus as BoE Decision and US-UK Trade Deal Speculation Loom


    Trading in the forex markets remains subdued. Fed’s policy announcement overnight triggered minimal market reaction, as it delivered a widely expected hold at 4.25–4.50%. While Fed acknowledged that risks of both higher unemployment and higher inflation have increased, Chair Jerome Powell made it clear that rate cuts are not imminent.

    “It’s not a situation where we can be preemptive,” Powell emphasized, reinforcing Fed’s data-dependent stance amid ongoing uncertainty from US tariff policies and their impacts.

    As attention shifts away from Fed, focus turns squarely to the UK, where the BoE is expected to cut rates by 25 bps. Beyond the cut itself, traders will be parsing the vote split and updated economic projections for signals on the pace of future easing.

    Adding a geopolitical dimension to the day’s event risk, there are growing market whispers that a US-UK trade deal will be announced. US President Donald Trump hinted in social media at a “MAJOR TRADE DEAL” to be announced today. While no country was named, sources cited by The Guardian said the deal involves the UK.

    If formalized, it would be the first bilateral agreement by the current US administration since its sweeping tariff actions last month. A deal with Britain is seen as relatively straightforward, especially compared to more contentious and prolonged negotiations expected with the EU and China. For markets, such a development could inject fresh direction into an otherwise stagnant environment.

    In terms of weekly performance, Yen continues to lead, followed by the Pound and Swiss Franc. On the other end, the Loonie is the weakest, followed by Aussie and Dollar. Euro and Kiwi sit in the middle. However, it should be emphasized that the overall mood remains indecisive, with major pairs and crosses largely trapped within last week’s ranges.

    In Asia, at the time of writing, Nikkei is up 0.53%. Hong Kong HSI is up 0.62%. China Shanghai SSE is up 0.21%. Singapore Strait Times is down -0.26%. Japan 10-year JGB yield is up 0.023 at 1.324. Overnight, DOW rose 0.70%. S&P 500 rose 0.43%. NASDAQ rose 0.27%. 10-year yield fell -0.033 to 4.275.

    Looking ahead, BoE rate decision is the main focus in European session. Later in the day, US will release jobless claims and non-farm productivity.

    BoE to cut, watch vote split and forecasts for dovish signals

    BoE is widely expected to deliver a 25 bps rate cut today, bringing the Bank Rate down to 4.25%. Governor Andrew Bailey and fellow policymakers have consistently emphasized a cautious approach to cutting rates, and that tone is expected to persist amid lingering uncertainties.

    Most economists surveyed by Reuters anticipated BoE will stick to a quarterly pace of easing, suggesting Bank Rate ends the year at 3.75%. However, market participants are slightly more dovish. Traders are now fully pricing in three more cuts by the end of 2025, projecting a rate of 3.50% at year-end.

    There might be some hints on how dovish BoE is leaning to, from today’s vote split and updated economic projections. In particular, focus will fall on whether known dove Swati Dhingra would push for a larger 50bps reduction, and whether there are material downgrades to both growth and inflation forecasts.

    From a market perspective, EUR/GBP will be closely watched for signals on investor sentiment following the decision.

    EUR/GBP is currently testing support at 55 D EMA (now at 0.8460). Strong rebound from current level would keep rally from 0.8239 alive. A break above 0.8539 resistance should confirm that fall from 0.8737, while deep, has completed as a correction. Retest of 0.8737 should be seen next.

    On the flip side, sustained break below the 55 D EMA would raise the risk of near-term bearish reversal, and open the path back toward the 0.8221/0.8239 support zone.

    RBNZ flags global growth risks as tariffs echo COVID-era disruptions

    RBNZ Governor Christian Hawkesby warned today that rising global tariffs are having a clear and negative impact on global economic activity, prompting the central bank to revise down its projections for global growth.

    Speaking to a parliamentary committee, Hawkesby called the effects of the tariff wave “unambiguously” harmful. He added that while New Zealand’s exposure to a 10% US tariff on exports poses challenges, the softer New Zealand Dollar may help cushion some of the blow. Nonetheless, weaker demand from key trading partners is now a growing concern for the country’s outlook.

    Hawkesby drew a stark comparison between the supply-side disruptions caused by current tariffs and those seen during the COVID-19 pandemic, stressing that both are capable of delivering long-lasting economic distortions.

    “We know from our experience, from the COVID experience, that supply side impacts are significant, and that are long-lasting and can create real challenges,” he said.

    He added that the situation remains fluid, with considerable uncertainty about how the structural dynamics of the global economy will adjust to this new trade regime.

    BoJ minutes: Caught between global uncertainty and domestic price pressures

    Minutes from BoJ’s March meeting revealed growing concern among policymakers over the external risks posed by US tariff policies.

    One member warned that downside risks from these policies had “rapidly heightened” and could significantly harm Japan’s real economy, suggesting BoJ should “be particularly cautious when considering the timing for the next rate hike.”

    However, not all board members advocated for a cautious stance. Another member stressed that even amid heightened uncertainty, BoJ should not automatically default to a cautious stance, stating that BOJ “might face a situation where it should act decisively”.

    A third voice on the board emphasized the importance of incorporating inflation expectations, upside risks to prices, and progress in wage growth into BoJ’s policy deliberations. Domestic developments could still justify tightening if conditions shift meaningfully.

    Separately, BoJ Governor Kazuo Ueda reinforced this message in his remarks to parliament today, acknowledging that while food price volatility, particularly for rice, remains elevated, these pressures would ease over time.

    Nonetheless, Ueda emphasized the importance of monitoring price developments closely, given the elevated uncertainty in the global economic environment.

    GBP/USD Daily Outlook

    Daily Pivots: (S1) 1.3254; (P) 1.3318; (R1) 1.3357; More…

    Range trading continues in GBP/USD and intraday bias remains neutral at this point. On the downside, firm break of 1.3232 support will indicate short term topping and rejection by 1.3433 key resistance. Intraday bias will be back on the downside for deeper pullback to 55 D EMA (now at 1.3051) and possibly below. On the upside, decisive break of 1.3433 key resistance will confirm larger up trend resumption.

    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
    23:01 GBP RICS Housing Price Balance Apr -3% -4% 2%
    23:50 JPY BoJ Minutes
    06:00 EUR Germany Industrial Production M/M Feb 3.00% 0.80% -1.30%
    06:00 EUR Germany Trade Balance (EUR) Mar 21.1B 18.8B 17.7B
    11:00 GBP BoE Interest Rate Decision 4.25% 4.50%
    11:00 GBP MPC Official Bank Rate Votes 0–9–0 0–1–8
    12:30 USD Initial Jobless Claims (May 2) 235K 241K
    12:30 USD Nonfarm Productivity Q1 P -0.40% 1.50%
    12:30 USD Unit Labor Costs Q1 P 5.30% 2.20%
    14:00 USD Wholesale Inventories Mar F 0.50% 0.50%
    14:30 USD Natural Gas Storage 103B 107B

     



    Source link

  • US yields slip as Powell signals patience, US Dollar pulls back from highs

    US yields slip as Powell signals patience, US Dollar pulls back from highs


    • Treasury yields ease after Powell says the Fed can be patient and policy remains appropriate.
    • DXY edges down to 99.51 after peaking at 99.63; the Greenback is under pressure from falling yields.
    • Powell warns tariffs may hinder progress on Fed’s goals, adding to uncertainty over policy path.

    US Treasury yields edged lower across the whole curve, falling by an average of two and a half to three basis points after plunging more than seven basis points earlier. However, when asked whether the Federal Reserve (Fed) is leaning toward one side of its dual mandate, Chair Jerome Powell stated that it is too early to predict.

    10-year yield falls to 4.27% after Chair Powell downplays urgency for action

    The US 10-year Treasury yield falls two and a half basis points to 4.271% at the time of writing, weighing on the Greenback, which has so far retreated from daily highs of 99.63, as depicted by the US Dollar Index (DXY).

    The DXY, which tracks the performance of the buck’s value against a basket of currencies, is at 99.51 up 0.12%.

    Chair Jerome Powell said that the Fed is in no hurry and can be patient. He noted that current monetary policy is appropriate and that if things develop, “we can move quickly as appropriate.” Powell added, “We won’t make progress on our goals this year if tariffs remain.”

    US 10-year yield daily chart

    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.



    Source link

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

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


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

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

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

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

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

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

    Eurozone retail sales fall -0.1% mom in March

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

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

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

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

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

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

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

    NZ employment grow 0.1% in Q1, wages growth cool

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

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

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

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

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

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

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

    USD/CHF Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    NZ employment grow 0.1% in Q1, wages growth cool

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

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

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

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

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

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

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

    EUR/USD Daily Outlook

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

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0808) holds.

    Economic Indicators Update

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

     



    Source link

  • Gold sticks to intraday losses; lacks follow-through amid geopolitical risks, ahead of FOMC

    Gold sticks to intraday losses; lacks follow-through amid geopolitical risks, ahead of FOMC


    • Gold price struggles to capitalize on its weekly gains registered over the past two days.
    • The optimism over US-China trade talks is seen weighing on the safe-haven commodity.
    • Investors now look to the crucial FOMC policy decision for a fresh directional impetus.

    Gold price (XAU/USD) recovers slightly from the Asian session low, around the $3,360 area, though maintains its offered tone amid the latest optimism over the announcement of the US-China trade talks in Switzerland this week. Apart from this, some repositioning trades ahead of the key central bank event risk assists the US Dollar (USD) to gain some positive traction, which is seen as another factor undermining the commodity.

    The USD bulls, however, seem reluctant to place aggressive bets and opt to wait for the outcome of the highly-anticipated two-day FOMC policy meeting. Furthermore, persistent geopolitical risks stemming from the protracted Russia-Ukraine war, conflicts in the Middle East, and a military escalation along the India-Pakistan border act as a tailwind for the safe-haven bullion. This, in turn, warrants some caution for the XAU/USD bears.

    Daily Digest Market Movers: Gold price bears seem non-committed amid geopolitical risks, ahead of FOMC decision

    • US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet their Chinese counterparts in Switzerland on Saturday to discuss trade and economic issues. This marks the first direct talks since the US imposed tariffs on China and a step toward resolving a trade war between the world’s two largest economies.
    • Meanwhile, US President Donald Trump said on Tuesday that he and top administration officials will review potential trade deals over the next two weeks to decide which ones to accept. This, however, counters Trump’s earlier statement that his administration could announce trade deals with some countries as soon as this week.
    • Furthermore, Trump had announced 100% tariffs on movies produced outside the US and also indicated that he plans to announce fresh tariffs on pharmaceutical imports over the next two weeks. This keeps investors on the edge and might continue to act as a tailwind for the safe-haven Gold price amid rising geopolitical risks.
    • A Kremlin spokesman says Russia will stick to its plans for a unilaterally-imposed ceasefire between 8 and 11 May but warned that an appropriate response will be given immediately if Ukraine does not also halt the fire. Meanwhile, Russia and Ukraine swapped 205 prisoners of war each in an exchange mediated by the United Arab Emirates.
    • Israel’s security Cabinet unanimously approved a plan to widen the military offensive in Gaza. The plan involves the Israel Defense Forces (IDF) invading and gradually seizing control of Gaza territory. Although no formal details were announced, officials said the operation would not begin until after Trump’s visit to the Middle East next week.
    • Investors keenly await the Federal Reserve’s decision later this Wednesday. The accompanying monetary policy statement and Fed Chair Jerome Powell’s comments at the post-meeting press conference will be scrutinized for cues about the future rate-cut path. This will drive the US Dollar demand and influence the non-yielding yellow metal.

    Gold price needs to break below the $3,360 area to support prospects for a further intraday depreciating move

    From a technical perspective, the overnight sustained breakout through the $3,360-3,365 horizontal barrier and a subsequent move beyond the $3,400 mark was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart are holding comfortably in positive territory, suggesting that the path of least resistance for the Gold price is to the upside. However, the strong uptrend witnessed since the beginning of this week falters near the $3,430-3,435 resistance. The said area should now act as a pivotal point, above which the XAU/USD could aim to challenge the all-time peak touched in April and conquer the $3,500 psychological mark.

    On the flip side, weakness below the $3,365-3,360 area could find some support near the $3,328-3,327 region ahead of the $3,300 round figure. Failure to defend the said support levels would negate the near-term positive outlook and make the Gold price vulnerable. The downward trajectory might then drag the XAU/USD pair to the $3,265-$3,260 intermediate support en route to the $3,223-3,222 region and the last week’s swing low, around the $3,200 neighborhood.

    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 Japanese Yen.

    USD EUR GBP JPY CAD AUD NZD CHF
    USD 0.12% 0.12% 0.52% 0.10% 0.16% 0.09% 0.35%
    EUR -0.12% 0.00% 0.42% -0.01% 0.05% -0.03% 0.24%
    GBP -0.12% -0.00% 0.42% -0.01% 0.05% -0.03% 0.24%
    JPY -0.52% -0.42% -0.42% -0.43% -0.37% -0.39% -0.15%
    CAD -0.10% 0.01% 0.00% 0.43% 0.07% -0.01% 0.25%
    AUD -0.16% -0.05% -0.05% 0.37% -0.07% -0.08% 0.17%
    NZD -0.09% 0.03% 0.03% 0.39% 0.01% 0.08% 0.27%
    CHF -0.35% -0.24% -0.24% 0.15% -0.25% -0.17% -0.27%

    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).



    Source link

  • GBP/USD catches some lift on hopes for a US-UK trade deal

    GBP/USD catches some lift on hopes for a US-UK trade deal


    • GBP/USD rallied on Tuesday, bolstered by headlines of an incoming US-UK trade agreement.
    • Specific details remain limited, but GBP markets were buoyed by hopes to avert US tariffs.
    • The Pound Sterling settled 0.4% higher against the Greenback after testing 1.3400.

    GBP/USD rose on Tuesday, climbing four-tenths of one percent on the day and testing the 1.3400 handle on headlines of a possible US-UK trade deal that would see the UK avoid the brunt of trade tariffs being actively pursued by the Trump administration.

    The Federal Reserve’s (Fed) upcoming rate call due on Wednesday still hangs over markets as the key market event of the week. Despite markets broadly anticipating another hold on Fed rates, investors will be taking a close look at policymaker comments, specifically Fed Chair Jerome Powell’s statement, for any signs that the Fed might be pivoting toward a rate-cutting cycle sooner rather than later.

    Fed, Boe double header due this week

    The Fed has come under pressure on multiple fronts to drop interest rates recently: market participants are always on the hunt for cheaper financing options, and the Trump administration has been incredibly vocal and adamant that the Fed’s job should be to lower interest rates in order to make US debt servicing cheaper. This runs largely opposite the Fed’s dual mandates of supporting full employment and keeping price volatility in check, however these key aspects of the Fed’s mandate are largely lost on US President Donald Trump.

    The Bank of England (BoE) will be following up Wednesday’s Fed action with its own rate call on Thursday. Unlike the Fed, the BoE is broadly expected to deliver another quarter-point rate trim, with the BoE’s Monetary Policy Committee (MPC) expected to vote nine-to-one in favor of delivering its fourth rate cut since August of last year.

    GBP/USD price forecast

    Despite a firm bullish performance on Tuesday, GBP/USD remains embroiled in a near-term consolidation range baked in between 1.3450 and 1.3250. Price action is leaning into the midrange, with technical oscillators showing momentum has largely drained out of Cable markets.

    GBP/USD is still well supported far above the 200-day Exponential Moving Average (EMA) near 1.2830, however further topside momentum will take a strong showing from bidders that have remained trapped below the 1.3400 handle for the time being.

    GBP/USD daily chart

    Pound Sterling FAQs

    The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
    Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

    The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
    When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
    When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

    Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
    A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

    Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
    If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.



    Source link

  • Japanese Yen bulls remain on the sidelines ahead of the crucial FOMC policy meeting

    Japanese Yen bulls remain on the sidelines ahead of the crucial FOMC policy meeting


    • The Japanese Yen attracts some intraday sellers on Tuesday, though the downside risk remains limited.
    • Trade-related uncertainties and geopolitical risks continue to act as a tailwind for the safe-haven JPY.
    • The divergent BoJ-Fed expectations further contribute to capping USD/JPY ahead of the FOMC meeting.

    The Japanese Yen (JPY) reverses an Asian session dip against its American counterpart and looks to build on the gains registered over the past two days. The uncertainty over US President Donald Trump’s trade policies and rising geopolitical tensions keep investors on edge, which, in turn, is seen lending some support to the safe-haven JPY. Furthermore, bets that the Bank of Japan (BoJ) will hike interest rates further in 2025, despite last week’s dovish pause, turn out to be another factor underpinning the JPY.

    However, the optimism over the potential de-escalation of the US-China trade war and easing concerns about a US recession hold back the JPY bulls from placing aggressive bets. Traders also seem reluctant and opt to wait for more cues about the Federal Reserve’s (Fed) rate cut path, which will play a key role in influencing the US Dollar (USD) and provide a fresh impetus to the USD/JPY pair. Hence, the market focus will remain glued to the outcome of a two-day FOMC meeting starting this Tuesday.

    Japanese Yen traders seem non-committed amid mixed cues, ahead of the crucial FOMC meeting

    • The Bank of Japan struck a cautious tone last week by slashing its growth and inflation forecasts, forcing investors to scale back their bets for the next rate hike in June or July. The central bank, however, reiterated that it remains committed to raising rates further if the economy and prices move in line with its forecasts.
    • US President Donald Trump’s erratic trade policies overshadow the optimism led by signs of easing US-China trade tensions and keep investors on edge. In fact, Trump on Sunday announced a 100% tariff on all movies produced in foreign countries. Moreover, geopolitical risks lend support to the safe-haven Japanese Yen.
    • Russia’s defense ministry said that Ukraine launched a drone attack targeting Moscow for the second night in a row on Monday. This follows reports of fresh attempts by Ukraine to cross into Russia’s Kursk region. This comes days after Russian President Vladimir Putin declared a three-day ceasefire over May 8-10.
    • Adding to this, Israel struck targets in Yemen in response to the Iranian-backed Houthis’ ballistic missile attack that hit Israel’s main airport on Sunday. The Houthis warned on Sunday that they could strike again and would impose a comprehensive air blockade on Israel by repeatedly targeting airports.
    • Meanwhile, Trump hinted at possible trade agreements with certain countries as early as this week and also signaled that he is open to lowering massive tariffs imposed on China. Furthermore, China’s Commerce Ministry said last Friday that it was evaluating the possibility of trade talks with the US.
    • On the economic data front, the Institute for Supply Management (ISM) survey showed on Monday that the growth in the US services sector picked up in April. Adding to this, signs of a still resilient US labor market help ease concerns about a US recession and act as a tailwind for the US Dollar.
    • Traders, however, seem reluctant to place aggressive bets and opt to move to the sidelines ahead of a two-day FOMC policy meeting starting this Tuesday. Investors will look for fresh cues about the Fed’s future interest rate-cut path, which, in turn, will influence the USD and the USD/JPY pair.

    USD/JPY remains vulnerable; last week’s failure near the 200-period SMA on H4 remains in play

    From a technical perspective, the USD/JPY pair last week struggled to find acceptance above the 50% Fibonacci retracement level of the March-April downfall and faced rejection near the 200-period Simple Moving Average (SMA) on the 4-hour chart. The subsequent decline and negative oscillators on daily/hourly charts suggest that the path of least resistance for spot prices is to the downside. Hence, any attempted recovery back above the 144.00 mark might still be seen as a selling opportunity near the 144.25-144.30 supply zone. A sustained strength beyond the latter, however, could trigger a short-covering rally and allow spot prices to reclaim the 145.00 psychological mark.

    On the flip side, weakness below the Asian session low, around the 143.55-143.50 area, has the potential to drag the USD/JPY pair to the 143.30 intermediate support en route to the 143.00 mark. The next relevant support is pegged near the 142.65 region, which if broken decisively would expose the 142.00 level before the currency pair eventually drops to the 141.60-141.55 zone and the 141.00 round figure.

    Economic Indicator

    Fed Interest Rate Decision

    The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).


    Read more.

    Last release:
    Wed Mar 19, 2025 18:00

    Frequency:
    Irregular

    Actual:
    4.5%

    Consensus:
    4.5%

    Previous:
    4.5%

    Source:

    Federal Reserve



    Source link

  • Dollar Slips in Holiday Trade, Fed and BoE in Focus This Week

    Dollar Slips in Holiday Trade, Fed and BoE in Focus This Week


    Dollar drifted lower in subdued trading, with many Asian markets closed for holidays. Movements in the currency markets elsewhere were mixed. Traditional safe havens like Yen and Swiss Franc inching higher. But at the same time, risk-sensitive currencies such as Australian and New Zealand Dollars also advanced. Overall risk sentiment lacking clear direction.

    This lack of coherence highlights the current state of indecision. Traders are reasonable to be hesitant to take firm positions ahead of key events later in the week, including Fed and BoE rate decisions. Nevertheless, today’s US ISM Services PMI might still inject some short-term volatility. The manufacturing sector in the US has held up better than expected despite tariff shocks. It’s time for the services sector to face its own resilience test.

    On the trade front, US President Donald Trump announced a new 100% tariff on foreign-produced films, citing what he called a “very fast death” of the US film industry due to global competition. He also signaled that new tariff decisions on select countries could be announced in the coming weeks if negotiations stall.

    Meanwhile, Australian Prime Minister Anthony Albanese celebrated a landslide reelection and confirmed a “positive” conversation with Trump. Albanese reiterated continued engagement on AUKUS and tariff matters. However, despite the friendly rhetoric, markets remain wary of what’s next on the trade front.

    Oil sinks as OPEC+ ramps up output again, WTI heading back to 4-yr low

    Oil prices opened the week with a sharp gap lower, as traders responded to OPEC+’s weekend agreement to accelerate output increases for a second straight month. WTI crude is now heading back toward the four-year low of $55.20 set in April.

    OPEC+ will raise June production by 411k barrels per day. That brings the total additional supply from April to June to nearly one million barrels per day, representing 44% rollback of the group’s 2022-era production cuts.

    This shift has stoked concerns that global oil markets may soon swing into surplus. The broader concern is that OPEC+ may fully unwind voluntary production cuts by October unless compliance among members improves. Such a move would flood the market with more supply just as global demand outlooks remain clouded by trade tensions.

    Technically, prior rejection by 65.24 support turned resistance keeps WTI’s long term down trend intact. Further decline is now expected as long as 60.16 resistance holds. Firm break of 55.20 low will confirm down trend resumption. WTI could then decline through 50 psychological level to 100% projection of 72.37 to 55.20 from 65.32 at 48.20.

    Fed to hold, BoE to cut, and more global data

    Two major central banks will meet this week: Fed and BoE.

    Fed is widely expected to leave interest rates unchanged at 4.25–4.50%, a view fully priced in by markets with over 97% probability. As a result, there’s little room for surprise in the policy decision itself. Instead, attention will be on Chair Jerome Powell’s guidance—particularly on whether he hints at a rate cut in June.

    However, following last week’s solid non-farm payroll report, expectations have already tempered, with the probability of a June cut slipping to just 35%. Also, the US is in a 90-day tariff truce. Negotiations are said to be progressing. But any major developments, positive or negative, may not materialize until closer to early July.

    Given this backdrop, Powell is expected to reiterate that Fed is not in a rush to cut rates again, maintaining a data-dependent and cautious stance, especially while inflation expectations remain sticky and labor markets resilient.

    In the UK BoE is expected to proceed with a 25 bps rate cut, lowering its Bank Rate to 4.25%. Governor Andrew Bailey has recently emphasized the downside risks from global trade tensions, particularly after the IMF revised down UK and global growth forecasts.

    Yet while rhetoric has turned more cautious, markets will be looking to BoE’s updated projections for confirmation on how these concerns are turning into numbers. Inflation progress and growth expectations will be critical in assessing whether BoE will stick to a steady quarterly cutting path.

    Beyond the central banks, markets will be watching a series of key economic data. Highlights include US ISM Services PMI, employment data from Canada and New Zealand, Japan’s wage growth and household spending, Swiss CPI, and China’s trade balance.

    Here are some highlights for the week:

    • Monday: Swiss CPI; US ISM services.
    • Tuesday: China Caixin PMI services; Swiss unemployment rate; EUrozone PMI services final, PPI; UK PMI services final; Canada trade balance; US trade balance.
    • Wednesday: New Zealand employment; Germany factory orders; Swiss foreign currency reserves; UK PMI construction; Eurozone retail sales; FOMC rate decision.
    • Thursday: BoJ minutes; Germany industrial production, trade balance; BoE rate decision; US jobless claims, non-farm productivity.
    • Friday: Japan average cash earnings, household spending; China trade balance; Swiss SECO consumer climate; Canada employment.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6384; (P) 0.6427; (R1) 0.6484; More…

    Intraday bias in AUD/USD remains on the upside for the moment. Rise from 0.5913 should continue to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. On the downside, though, break of 0.6364 support will indicate short term topping, and turn bias to the downside for 55 D EMA (now at 0.6325) and below.

    In the bigger picture, as long as 55 W EMA (now at 0.6443) holds, the down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:00 AUD TD-MI Inflation Gauge M/M Apr 0.60% 0.70%
    06:30 CHF CPI M/M Apr 0.20% 0.00%
    06:30 CHF CPI Y/Y Apr 0.30%
    08:30 EUR Eurozone Sentix Investor Confidence May -14.9 -19.5
    13:45 USD Services PMI Apr F 51.4 51.4
    14:00 USD ISM Services PMI Apr 50.6 50.8

     



    Source link

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Weekly Outlook

    EUR/USD gyrated lower last week but recovered after hitting 1.1265. Initial bias remains neutral this week first. On the downside, below 1.1265 will resume the corrective fall from 1.1572 short term top. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039. On the upside, break of 1.1424 will suggest that the correction has completed and bring retest of 1.1572 high.

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

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



    Source link

  • Dow Jones soars 600 points as NFP data calms recession fears, weekly gains top 3%

    Dow Jones soars 600 points as NFP data calms recession fears, weekly gains top 3%


    • April Nonfarm Payrolls beat consensus at 177K; Unemployment Rate steady at 4.2%, easing recession concerns.
    • Trump pressures Fed to cut rates despite upbeat data; CBOT shows 88 bps of easing priced in.
    • Apple and Amazon fall on China sales miss and cloud growth slowdown despite beating EPS forecasts.

    The Dow Jones Industrial Average (DJIA) rallied over 600 points, or over 1.65%, on Friday following a solid US jobs report that brushed aside fears that the largest economy in the world is tied into a recession. The Dow is set to end the week with gains of over 3% and, at the time of writing, hovers past the 41,300 mark after rebounding off the daily low of 40,658.

    DJIA rallies past 41,300 as solid NFP data boosts sentiment, even as Fed rate cut expectations hold steady

    US Nonfarm Payrolls in April increased by 177K, down from the downwardly revised number of 185K in March, but exceeding estimates of 130K. Earlier in the week, a dismal ADP National Employment Change report suggested that companies were hiring fewer people than the NFP revealed.

    Also, the Unemployment Rate remained unchanged at 4.2%, aligned with forecasts, which might prevent the Federal Reserve (Fed) from easing policy.

    Karen Georges, an equity fund manager at Ecofi in Paris, said, “These good numbers are not likely to fuel inflation, but this is no game changer for the Federal Reserve and Jerome Powell.”

    US President Donald Trump took advantage of the good figures and slammed Fed Chair Jerome Powell in a post on his Truth Social network, demanding the Fed lower interest rates.

    US Factory Orders in March rose by 4.3% MoM, up from 0.5% the previous month but slightly below the 4.5% foreseen.

    Stocks related news

    In the meantime, Apple (APPL) and Amazon (AMZN) shares are down 3.5% and 1%,  respectively, with the former hit by a miss in sales in China and concern over tariffs. Apple revealed its earnings for Q1 2025, with earnings per share (EPS) coming at $1.65, above estimates of $1.62, and revenue of $95.36 billion, up from the $94.53 billion expected.

    Amazon’s stock edged down as cloud revenue growth disappointed. In its earnings report for Q1 2025, EPS rose to $1.59, up from the $1.38 forecast, and revenue increased by $155.7 billion above forecasts of $154.88. 

    Fed expected to cut rates

    Data from the Chicago Board of Trade (CBOT) shows the swaps market expects 88 basis points of easing toward the end of the year, as revealed by the December 2025 fed funds rate futures contract.

    Dow Jones price forecast

    The Dow Jones remains downwardly biased, though traders are testing the 50-day Simple Moving Average (SMA) at 41,271. A daily close above the latter could extend the recovery past the 42,000 figure, with bulls targeting the 200-day SMA at 42,281.

    Conversely, if the Dow tumbles below 41,000, the first support would be the 40,000 mark ahead of the 20-day SMA of 39,705. Once cleared the next support would be the April 23 low of 39,486, ahead of the April 22 high of 39,271 that would close the gap witnessed between April 22 and 23.

    Dow Jones FAQs

    The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

    Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

    Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

    There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.



    Source link