Tag: Japan

  • USD/JPY falls toward 144.00 ahead of key US-Japan trade talks

    USD/JPY falls toward 144.00 ahead of key US-Japan trade talks


    • USD/JPY edges lower on broad-based US Dollar weakness.
    • Tariff threats reemerge ahead of upcoming talks between the United States and Japan.
    • The G7 meeting in Canada on Sunday sets the stage for USD/JPY’s next big move.

    The Japanese Yen (JPY) and the US Dollar (USD) share a complex relationship, with the interests of the two global powerhouses intertwined in the USD/JPY pair.

    With USD/JPY currently trading at a critical juncture around the 144.00 psychological level, 0.65% down on Thursday, tensions between the two nations have come into focus.

    While USD/JPY is one of the most widely traded forex pairs, Thursday’s price action appears to be driven more by underlying geopolitical sentiment than by technical factors alone.

    As the largest foreign holder of US Treasuries, Japan has opposed US President Trump’s tariff policies, which include 50% duties on steel and aluminum imports and 25% tariffs on automobiles and auto parts. High tariffs on Japan’s key exports, including steel, aluminum, and car parts, are placing pressure on the Japanese economy, contributing to rising inflation. 

    With the two nations preparing for the Group of Seven (G7) meeting in Canada, talks are expected to take place in an effort to reach some form of trade agreement.

    With the two nations preparing for the Group of Seven (G7) meeting in Canada, talks are expected to take place in an effort to reach some form of trade agreement. 

    During a testimony before the House Ways on Wednesday, US Treasury Secretary Scott Bessent stated that “There are 18 important trading partners — we are working toward deals on those — and it is highly likely that those countries that are … negotiating in good faith, we will roll the date forward.” Japan has been mentioned as one of the countries with which the US is actively negotiating. 

    Although Trump continues to express the need for other countries to make a deal with the US, Japanese Prime Minister Shigeru Ishiba remains committed to ensuring that Japan gets a fair deal. Ryosei Akazawa, the chief trade negotiator for Ishiba, is anticipated to head to North America later this week for the sixth round of talks with his counterparts.

    On Thursday, Bloomberg reported comments made by Ishiba in Tokyo at a meeting where Japanese leaders gathered to discuss the situation with the US. 

    “If there’s progress before I meet the president, that’s in and of itself good,” he stated. 

    He followed up by stating, “What’s important is to achieve an agreement that’s beneficial to both Japan and the US. We won’t compromise Japan’s interests by prioritizing a quick deal.”

    For USD/JPY, the recent weakness in the pair can be attributed to a rise in USD outflows that have favoured alternative currencies. With trade talks in focus, these negotiations could contribute to the pair’s near-term move, especially if Japan uses its holdings in US Treasuries as a negotiating tool against the US.

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.



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  • Dollar Crushed as Dovish Inflation Data and Trade Tensions Weigh; Euro Surges to Multi-Year High

    Dollar Crushed as Dovish Inflation Data and Trade Tensions Weigh; Euro Surges to Multi-Year High


    Dollar accelerated its broad-based selloff in early US trading, plunging to its lowest level against Euro since 2021. The latest catalyst came from softer-than-expected May PPI data, which followed Wednesday’s downside surprise in CPI. The tandem inflation prints have further calmed fears of immediate tariff-driven price pass-through, at least for now, and are reinforcing expectations that Fed is moving closer to resume policy easing.

    As a result, market expectations for Fed easing have firmed up. Fed funds futures are now pricing in an 80% chance of a rate cut in September, up from around 75% just a week ago before the two inflation releases. The tone of both upstream and downstream price measures—despite the tariff backdrop—has strengthened the market’s conviction that Fed will deliver a cut before the fourth quarter, particularly as labor market data has also started to show signs of softening.

    Adding to Dollar’s woes is renewed uncertainty over US trade policy. While Treasury Secretary Scott Bessent floated the possibility of extending the current 90-day tariff truce with “good faith” trading partners, President Donald Trump struck a starkly different tone. Trump dismissed the need for any extension and hinted that countries would be unilaterally informed of their new tariff terms in the coming weeks. This reinforces fears that the US may revert to aggressive, one-sided trade actions just as the 90-day tariff truce nears expiration.

    In the currency markets, Dollar is clearly the weakest performer of the day, followed by Loonie and Aussie. In contrast, safe-haven demand has lifted Swiss Franc to the top of the board, with Euro and Yen close behind. Euro in particular continues to draw support from a series of ECB officials signaling that the rate-cut cycle is nearing completion. That divergence—between a Fed leaning dovish and an ECB shifting toward a pause—is now starkly reflected in EUR/USD price action.

    Sterling and Kiwi are trading in the middle of the pack, with the Pound underperforming its European peers. UK GDP contracted more than expected in April, reinforcing expectations for a BoE rate cut in August. Despite some signs of resilience in the broader three-month growth trend, momentum has clearly slowed, leaving BoE less justification to hold rates elevated for much longer.

    Technically, Gold is also bouncing on Dollar weakness, and focus is back on 3403.49 resistance. Firm break there will resume the rally from 3120.34, and revive the case that correction from 3499.79 high has completed. Further rally should then be seen to retest 3499.79.

    In Europe, at the time of writing, FTSE is up 0.18%. DAX is down -0.87%. CAC is down -0.43%. UK 10-year yield is down -0.063 at 4.488. Germany 10-year yield is down -0.059 at 2.478. Earlier in Asia, Nikkei fell -0.65%. Hong Kong HSI fell -1.36%. China Shanghai SSE rose 0.01%. Singapore Strait Times rose 0.08%. Japan 10-year JGB yield fell -0.001 to 1.460.

    US initial jobless claims unchanged at 248k, match expectations

    US initial jobless claims were unchanged at 248k in the week ended June 7, slightly below expectation of 251k. Four-week moving average of initial claims rose 5k to 240k, highest since August 26, 2023.

    Continuing claims rose 54k to 1956k in the week ending May 31, highest sine November 13, 2021. Four-week moving average of continuing claims rose 20k to 1915k, highest since November 27, 2021.

    US PPI up 0.1% mom, 2.6% yoy in May

    US PPI rose 0.1% mom in May, below expectation of 0.2% mom. PPI services rose 0.1% mom, while PPI goods rose 0.2% mom. PPI less food, energy and trade services rose 0.1% mom.

    For the 12 months period, PPI rose from 2.5% yoy to 2.6% yoy, matched expectations. PPI less food, energy and trade services rose 2.7% yoy.

    ECB Schnabel: Monetary easing nears end as Europe embraces stronger Euro and fiscal support

    ECB Executive Board Member Isabel Schnabel signaled today that the central bank’s monetary easing cycle is “coming to an end,” citing stable medium-term inflation forecasts and improving macroeconomic conditions.

    Speaking with notable confidence, Schnabel downplayed the expected dip in inflation—projected at just 1.6% in 2026—as a “temporary deviation” caused by energy base effects and a stronger euro.

    Schnabel painted a relatively constructive picture of the Eurozone economy, stating that growth remains “broadly stable” even as global trade tensions intensify. Private consumption continues to provide a key pillar of support, while both manufacturing and construction sectors are showing signs of recovery. She also highlighted that “Additional defense and infrastructure spending counteract tariff shock on growth”.

    In her view, these structural shifts, combined with a resilient Euro and outperforming equity markets, reflect a “new European growth narrative” that could elevate the region’s economic standing.

    Still, Schnabel acknowledged the risks posed by escalating trade tensions, particularly in the form of inflation volatility and financial market uncertainty. She warned that tariffs can be amplified through global value chains, posing upside risks to inflation. At the same time weaponisation of raw materials threatens to further strain supply chains.

    ECB Villeroy and Šimkus emphasize flexibility as policy hits neutral zone

    Comments from two ECB Governing Council members today reinforced a cautious stance as the easing cycle appears to have reached a natural pause, following eight consecutive rate cuts.

    French member Francois Villeroy de Galhau emphasized flexibility, telling Franceinfo radio that future policy will depend on how inflation evolves, stressing a preference for “pragmatism and agility.”

    Lithuanian member Gediminas Šimkus echoed a similar tone, stating that policy has now reached a “neutral level”. It is critical for ECB to maintain the freedom, “not to commit to one direction or another”. He warned of growing uncertainty, particularly around upcoming US trade decisions as the 90-day tariff truce nears expiry on July 9.

    UK GDP contracts -0.3% mom in April, as services drag

    The UK economy contracted -0.3% mom in April, a sharper decline than the expected -0.1%. The main drag came from the services sector, which fell -0.4% mom and contributed most to the monthly GDP drop. Production also shrank -0.6% mom. In contrast, construction provided a rare bright spot, rising 0.9% mom, though not enough to offset broader weakness.

    Despite the poor April print, the broader picture remains more constructive. GDP expanded 0.7% in the three months to April compared to the prior three-month period, with services up 0.6%, production up 1.1%, and construction up 0.5%.

    Japanese business confidence sours amid tariff fears and profit warnings

    Business sentiment in Japan deteriorated sharply in Q2, with the Ministry of Finance’s survey revealing a broad-based loss of confidence across industries.

    The overall index for large firms slipped into negative territory at -1.09, down from Q1’s modest 2.0. Large manufacturers saw sentiment weaken further from -2.4 to -4.8, while large non-manufacturers experienced a steep drop from 5.2 to -5.7, suggesting that economic uncertainty is spreading beyond export-heavy sectors.

    The survey also highlighted a growing sense of earnings pessimism. Large manufacturers now expect recurring profits to decline -1.2% in the fiscal year ending March 2026, a downgrade from the -0.6% fall seen in the previous survey. Particularly alarming is the auto sector’s outlook, with automakers and parts suppliers projecting a severe -19.8% drop in profits.

    This highlights the mounting concern over the impact of steep US tariffs, which threaten to hit Japan’s flagship export industry hard and weigh on broader economic momentum.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1429; (P) 1.1465; (R1) 1.1524; More…

    EUR/USD’s rally from 1.0176 resumed by accelerating through 1.1572 resistance. Intraday bias stays on the upside at this point. Next target is 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, below 1.1504 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 1.1604 support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance May -8% -3% -3%
    23:50 JPY BSI Large Manufacturing Index Q2 -4.8 0.8 -2.4
    01:00 AUD Consumer Inflation Expectations Jun 5.00% 4.10%
    06:00 GBP GDP M/M Apr -0.30% -0.10% 0.20%
    06:00 GBP Industrial Production M/M Apr -0.60% -0.40% -0.70%
    06:00 GBP Industrial Production Y/Y Apr -0.30% -0.20% -0.70%
    06:00 GBP Manufacturing Production M/M Apr -0.90% -0.80% -0.80%
    06:00 GBP Manufacturing Production Y/Y Apr 0.40% 0.40% -0.80%
    06:00 GBP Goods Trade Balance (GBP) Apr -23.2B -20.8B -19.9B
    12:30 USD PPI M/M May 0.10% 0.20% -0.50% -0.20%
    12:30 USD PPI Y/Y May 2.60% 2.60% 2.40% 2.50%
    12:30 USD PPI Core M/M May 0.10% 0.30% -0.40% -0.20%
    12:30 USD PPI Core Y/Y May 3.00% 3.00% 3.10% 3.20%
    12:30 USD Initial Jobless Claims (Jun 6) 248K 251K 247K 248K
    14:30 USD Natural Gas Storage 108B 122B

     



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  • Sterling Slides on Poor UK GDP, While Dollar Struggles Under Trade Uncertainty

    Sterling Slides on Poor UK GDP, While Dollar Struggles Under Trade Uncertainty


    Sterling came under renewed pressure at the start of European session, triggered by a deeper-than-expected contraction in UK GDP for April. Services sector, the economy’s dominant component, posted its first monthly decline since October. Nine out of 14 services subsectors registered falls, pointing to broad-based weakness. It’s a disappointing start to Q2 and follows weaker-than-expected labor data earlier in the week.

    The string of soft UK economic releases is likely to reinforce BoE’s case for policy easing. Market expectations for a rate cut in August are now firming, with investors betting that the BoE will continue its gradual loosening cycle. While the central bank has maintained a cautious stance thus far, the data flow increasingly supports action sooner rather than later, especially if core inflation continues to moderate alongside cooling wages and tepid output growth.

    Meanwhile, Dollar remains the worst-performing major currency this week, despite receiving a brief reprieve from a strong 10-year Treasury auction on Wednesday. Market attention is now on today’s 30-year auction, which could provide further clues about investor confidence in US fiscal stability. A solid reception would help calm nerves around rising debt issuance.

    However, the broader macro backdrop, particularly trade uncertainty, continues to weigh heavily on the greenback. Hopes that this week’s US-China talks would deliver material de-escalation were dashed after no tariffs were rolled back as part of the so-called framework deal. Instead, the absence of concrete outcomes, coupled with hints that the US may further delay its self-imposed 90-day tariff review deadline, has left markets in limbo.

    Testifying before Congress, US Treasury Secretary Scott Bessent struck a more conciliatory tone, suggesting that Washington may extend the negotiation window with key trading partners—including the EU—if they are seen to be acting in “good faith”. While this may avert immediate tariff escalation, it also signals that trade talks could drag on well into the second half of the year. That lack of resolution is weighing on sentiment and feeding into a mild risk-off tone across markets.

    In terms of weekly currency performance, Euro is the clear outperformer, while Yen and Swiss Franc are also benefiting from safe-haven flows. At the other end of the spectrum, Dollar leads the laggards, followed by the Aussie and Sterling. The Loonie and Kiwi are trading more neutrally. Overall, markets are showing a tilt toward risk aversion.

    Technically, an immediate focus is now on 38.2% retracement of 0.8737 to 0.8354 at 0.8500. in EUR/GBP. Decisive break there will suggest that fall from 0.8737 has completed at 0.8354. Even as a corrective bounce, rise from there would target 61.8% retracement at 0.8591.

    In Asia, Nikkei closed down -0.65%. Hong Kong HSI is down -0.89%. China Shanghai SSE is up 0.03%. Singapore Strait Times is up 0.21%. Japan 10-year JGB yield fell -0.002 to 1.458. Overnight, DOW closed down -0.00%. S&P 500 fell -0.27%. NASDAQ fell -0.50%. 10-year yield fell sharply by -0.062 to 4.412.

    UK GDP contracts -0.3% mom in April, as services drag

    The UK economy contracted -0.3% mom in April, a sharper decline than the expected -0.1%. The main drag came from the services sector, which fell -0.4% mom and contributed most to the monthly GDP drop. Production also shrank -0.6% mom. In contrast, construction provided a rare bright spot, rising 0.9% mom, though not enough to offset broader weakness.

    Despite the poor April print, the broader picture remains more constructive. GDP expanded 0.7% in the three months to April compared to the prior three-month period, with services up 0.6%, production up 1.1%, and construction up 0.5%.

    Japanese business confidence sours amid tariff fears and profit warnings

    Business sentiment in Japan deteriorated sharply in Q2, with the Ministry of Finance’s survey revealing a broad-based loss of confidence across industries.

    The overall index for large firms slipped into negative territory at -1.09, down from Q1’s modest 2.0. Large manufacturers saw sentiment weaken further from -2.4 to -4.8, while large non-manufacturers experienced a steep drop from 5.2 to -5.7, suggesting that economic uncertainty is spreading beyond export-heavy sectors.

    The survey also highlighted a growing sense of earnings pessimism. Large manufacturers now expect recurring profits to decline -1.2% in the fiscal year ending March 2026, a downgrade from the -0.6% fall seen in the previous survey. Particularly alarming is the auto sector’s outlook, with automakers and parts suppliers projecting a severe -19.8% drop in profits.

    This highlights the mounting concern over the impact of steep US tariffs, which threaten to hit Japan’s flagship export industry hard and weigh on broader economic momentum.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1429; (P) 1.1465; (R1) 1.1524; More…

    EUR/USD’s rise from 1.1064 resumed by breaking through 1.1494 and intraday bias is back on the upside for 1.1572 high. Strong resistance could be seen there to bring another fall, to extend the near term consolidation pattern. Firm break of 1.1404 support will turn intraday bias back to the downside for 1.1209 first. However, decisive break of 1.1572 will resume whole rise from 1.0176.

    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 1.0894) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance May -8% -3% -3%
    23:50 JPY BSI Large Manufacturing Index Q2 -4.8 0.8 -2.4
    01:00 AUD Consumer Inflation Expectations Jun 5.00% 4.10%
    06:00 GBP GDP M/M Apr -0.30% -0.10% 0.20%
    06:00 GBP Industrial Production M/M Apr -0.60% -0.40% -0.70%
    06:00 GBP Industrial Production Y/Y Apr -0.30% -0.20% -0.70%
    06:00 GBP Manufacturing Production M/M Apr -0.90% -0.80% -0.80%
    06:00 GBP Manufacturing Production Y/Y Apr 0.40% 0.40% -0.80%
    06:00 GBP Goods Trade Balance (GBP) Apr -23.2B -20.8B -19.9B
    12:30 USD PPI M/M May 0.20% -0.50%
    12:30 USD PPI Y/Y May 2.60% 2.40%
    12:30 USD PPI Core M/M May 0.30% -0.40%
    12:30 USD PPI Core Y/Y May 3.00% 3.10%
    12:30 USD Initial Jobless Claims (Jun 6) 251K 247K
    14:30 USD Natural Gas Storage 108B 122B

     



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  • Japan Business Confidence Weakens In Q2

    Japan Business Confidence Weakens In Q2


    Sentiment among Japanese large companies declined sharply in the second quarter, survey data from the Ministry of Finance showed Thursday.

    The business survey index for all industries slid to -1.9 from +2.0 in the first quarter.

    The BSI for large manufacturers deteriorated to -4.8 in the second quarter from -2.4 in the preceding quarter. At the same time, the indicator for large non-manufacturers registered -0.5, down from 4.1 in the prior period.

    Further, the survey showed that all companies expect profits to fall 2.1 percent in the fiscal year 2025.

    Investment in software and that in plant and machinery are forecast to grow 7.3 percent in the fiscal year 2025.

    For comments and feedback contact: editorial@rttnews.com

    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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  • Dollar Drops on CPI Miss; Trade Optimism Offers Limited Support

    Dollar Drops on CPI Miss; Trade Optimism Offers Limited Support


    Dollar fell broadly following weaker-than-expected US inflation report for May, reinforcing the narrative that consumer prices have not yet felt the full brunt of tariff pressures. The data offered some relief that the feared pass-through from tariffs to end consumers hasn’t materialized, at least not yet.

    However, it wasn’t enough to shift expectations for the June and July Fed meetings, where markets still overwhelmingly anticipate the central bank to hold steady. What did shift slightly was the probability of a September rate cut. According to fed funds futures, the odds of a cut in Q3 have now climbed above 55%. Nonetheless, the Fed is unlikely to act preemptively without more confirmation.

    On trade, President Trump declared this week’s talks with China a success, albeit with no rollback of existing tariffs. While the 55% tariff rate remains in place, Trump noted that China has committed to supplying key items such as magnets and rare earths “up front,” with the US reciprocating on non-economic terms like student access.

    In the broader FX market, Dollar is now the weakest performer for the week, followed by Sterling and Yen. The Pound remains weighed down by soft UK labor market data. On the other hand, Euro is gaining the upper hand, while commodity Aussie and Kiwi are benefiting from improved risk sentiment. Swiss Franc and Loonie sit in the middle.

    In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.41%. CAC is up 0.10%. UK 10-year yield is up 0.008 at 4.552. Germany 10-year yield is down -0.006 at 2.521. Earlier in Asia, Nikkei rose 0.55%. Hong Kong HSI rose 0.84%. China Shanghai SSE rose 0.52%. Singapore Strait Times fell -0.37%. Japan 10-year JGB yield fell -0.019 to 1.461.

    US CPI ticks up to 2.4%, core unchanged at 2.8%, undershoot expectations

    US consumer inflation data for May came in softer than expected, offering some relief to markets concerned about price pressures from tariffs and broader cost pass-throughs.

    Headline CPI rose just 0.1% mom, below consensus of 0.2% mom. Core CPI, which excludes food and energy, also surprised to the downside with a 0.1% mom rise against an expected 0.3% mom. The gains in overall prices were primarily driven by shelter (0.3% mom) and food (0.3% mom), while energy posted a -1.0% monthly drop.

    On an annual basis, headline CPI rose slightly from 2.3% yoy to 2.4% yoy, still undershooting the forecasted 2.5% yoy. Core CPI held steady at 2.8% yoy, also missing expectations of 2.9% yoy.

    ECB’s Lane: Last week’s rate cut aimed at anchoring expectations, avoiding prolonged undershoot

    ECB Chief Economist Philip Lane emphasized that last week’s rate cut was a strategic step to ensure inflation remains on track toward the 2% target over the medium term. He argued that, without this move, the “projected negative inflation deviation” over the next 18 months could have risked becoming entrenched.

    In a speech today, Lane also stressed the importance of clarity in ECB’s reaction function. By cutting the deposit facility rate to 2.00%, the central bank signaled that “we are determined to make sure that inflation returns to target in the medium term”. This helps “underpin inflation expectations and avoid an unwarranted tightening in financial conditions.”

    On the other hand, holding the rate at 2.25% could have sent the wrong signal, Lane warned, potentially triggering a market repricing that would reinforce a “more pronounced and longer-lasting undershoot of the inflation target.”

    ECB’s Kazaks: Further fine-tuning cuts likely

    Latvian ECB Governing Council member Martins Kazaks signaled openness to further interest rate cuts, suggesting that while ECB has already delivered significant easing, “fine-tuning” adjustments could be needed depending on how the economy evolves.

    He noted that current market pricing for one more cut is “not out of the realm of the baseline,” but stressed that any additional moves must be carefully calibrated to keep inflation anchored near the 2% target.

    Kazaks warned against complacency, highlighting risks of a persistent inflation undershoot. While not yet leaning toward accommodative territory, he emphasized the importance of vigilance, particularly amid the uncertain impact of global trade tensions. So far, deflationary effects seem to dominate, but the final outcome remains highly uncertain and must be watched closely.

    Japan’s CGPI cools to 3.2% in May, but food inflation continue to rise

    Japan’s corporate goods price index slowed more than expected in May, easing from 4.1% to 3.2% yoy, versus the anticipated 3.5% yoy. The decline reflects the broader disinflationary trend in upstream prices, aided by the recent rebound in Yen. Yen-based import price index plunged -10.3% yoy, a sharper drop than April’s -7.3% yoy.

    Falling raw material costs were evident across sectors, with steel prices down -4.8% yoy, chemicals -3.1% yoy, and non-ferrous metals -2.1% yoy

    However, consumer-related categories showed more persistence in inflation. Prices of food and beverages accelerated to 4.2% yoy from April’s 4.0% yoy, suggesting that inflationary stickiness in essential goods remains a challenge despite broader producer-side cooling.

    AUD/USD Mid-Day Report

    Daily Pivots: (S1) 0.6497; (P) 0.6515; (R1) 0.6540; More…

    Intraday bias in AUD/USD is mildly on the upside with breach of 0.6536 resistance. Rise from 0.5913 could be resuming for 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, considering bearish divergence condition in 4H MACD, break of 0.6478 support will turn bias back to the downside for 55 D EMA (now at 0.6410) and possibly below.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6443) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fall through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y May 3.20% 3.50% 4.00% 4.10%
    12:30 CAD Building Permits M/M Apr -6.60% 0.30% -4.10% -5.30%
    12:30 USD CPI M/M May 0.10% 0.20% 0.20%
    12:30 USD CPI Y/Y May 2.40% 2.50% 2.30%
    12:30 USD CPI Core M/M May 0.10% 0.30% 0.20%
    12:30 USD CPI Core Y/Y May 2.80% 2.90% 2.80%
    14:30 USD Crude Oil Inventories -2.4M -4.3M

     



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  • Fragile Trade Progress and CPI Ahead Keep Risk Appetite in Check

    Fragile Trade Progress and CPI Ahead Keep Risk Appetite in Check


    Asian equities edged modestly higher on Wednesday, lifted by the announcement that US and Chinese officials reached a “framework” to implement the Geneva trade consensus and advance commitments made in the latest Trump-Xi phone call. While officials from both sides struck an optimistic tone, the agreement remains preliminary, lacking substantive details on thornier issues.

    US Commerce Secretary Howard Lutnick confirmed that the deal would still require presidential approval on both sides before moving forward. One of the key elements of the framework involves China’s rare-earth exports, a pivotal issue as the US seeks to stabilize supply chains. Lutnick said the US expects export restrictions to be eased, with reciprocal rollback of recent US technology export bans to China.

    However, the broader market reaction was muted. The US Court of Appeals allowed Trump’s contested tariffs to remain in place pending further legal review, undermining hopes of swift tariff rollback. The ruling enables the continued enforcement of “Liberation Day” tariffs, which apply to imports from major partners. This legal backdrop, coupled with still-fragile diplomatic progress, reinforces the market’s caution.

    In the currency markets, the overall tone is mixed, with Swiss Franc and Dollar leading as the day’s strongest performers so far, followed by Loonie. On the other end, risk-sensitive currencies Kiwi and Aussie are softer, alongside Sterling. Euro and Yen are positioning in the middle of the pack. Despite modest equity gains, this is far from a full-fledged risk-on environment.

    Attention now shifts to two major US events: US CPI report and 10-year Treasury note auction. The inflation data will serve as a critical barometer for how much of the tariff impact is bleeding into consumer prices. Simultaneously, the Treasury auction will test investor appetite for government debt amid lingering concerns over deficits, erratic trade policies, and rising issuance needs.

    In Asia, at the time of writing, Nikkei is up 0.50%. Hong Kong HSI is up 0.92%. China Shanghai SSE is up 0.55%. Singapore Strait Times is down -0.51%. Japan 10-year JGB yield is down -0.017 at 1.463. Overnight, DOW rose 0.25%. S&P 500 rose 0.55%. NASDAQ rose 0.63%. 10-year yield fell -0.008 to 4.474.

    Inflation data and treasury auction pose twin tests for US Bond Market

    Two major events in the US are closely watched today. The May CPI report and the USD 39B 10-year Treasury auction converge to test sentiment in the bond market.

    The May CPI will offer the clearest signal yet of whether tariffs are beginning to filter through to consumer prices. Economists expect a 0.2% mom gain, with annual headline inflation accelerating to 2.5%. Core CPI, is projected to rise 0.3% mom and accelerate to 2.9% yoy.

    While today’s CPI reading will provide an initial glimpse, the real acceleration in prices may come in June as tariffs ripple through supply chains. The unpredictability of Trump’s trade strategy, frequent shifts between escalation and truce, could delay the impact but increasing its persistence. Fed’s challenge is not only identifying if inflation is returning, but determining whether it’s sticky enough to warrant policy action beyond holding rates steady.

    Meanwhile, the 10-year Treasury auction will act as a referendum on fiscal credibility. With swelling deficits, an uncertain trade outlook, and ballooning spending commitments—including the administration’s touted “big, beautiful” infrastructure and defense budgets—investors will be watching bid-to-cover ratios and indirect bidder participation for signs of strain. A weak auction could rekindle fears of waning demand for US debt, driving yields higher and possibly stoking volatility across asset classes.

    Technically, the 10-year yield has remained within a broad range since peaking at 4.997 in 2023. While it spiked to 4.629% in May following Moody’s downgrade of the US credit rating, the move was limited and quickly retraced. As long as the 4.809 resistance level caps upside attempts, the bond market appears relatively calm—though not immune to future shocks.

    Japan’s CGPI cools to 3.2% in May, but food inflation continue to rise

    Japan’s corporate goods price index slowed more than expected in May, easing from 4.1% to 3.2% yoy, versus the anticipated 3.5% yoy. The decline reflects the broader disinflationary trend in upstream prices, aided by the recent rebound in Yen. Yen-based import price index plunged -10.3% yoy, a sharper drop than April’s -7.3% yoy.

    Falling raw material costs were evident across sectors, with steel prices down -4.8% yoy, chemicals -3.1% yoy, and non-ferrous metals -2.1% yoy

    However, consumer-related categories showed more persistence in inflation. Prices of food and beverages accelerated to 4.2% yoy from April’s 4.0% yoy, suggesting that inflationary stickiness in essential goods remains a challenge despite broader producer-side cooling.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3650; (P) 1.3689; (R1) 1.3711; More…

    Intraday bias in USD/CAD remains neutral at this point. Considering bullish convergence condition in 4H MACD, firm break of 1.3741 will indicate short term bottoming at 1.3633. Intraday bias will turn back to the upside for stronger rebound to 1.4014 resistance, as a correction to fall from 1.4791. Nevertheless, decisive break of 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603 will pave the way to 100% projection at 1.3349.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y May 3.20% 3.50% 4.00% 4.10%
    12:30 CAD Building Permits M/M Apr 0.30% -4.10%
    12:30 USD CPI M/M May 0.20% 0.20%
    12:30 USD CPI Y/Y May 2.50% 2.30%
    12:30 USD CPI Core M/M May 0.30% 0.20%
    12:30 USD CPI Core Y/Y May 2.90% 2.80%
    14:30 USD Crude Oil Inventories -2.4M -4.3M

     



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  • Sterling Slumps as UK Jobs Data Fuels August BoE Rate Cut Bets

    Sterling Slumps as UK Jobs Data Fuels August BoE Rate Cut Bets


    Sterling is sold off notably today after dismal UK labor market data intensified expectations of a BoE rate cut in August. The most striking element was the -109k drop in payrolled employment—the largest non-pandemic decline since records began in 2014—coupled with a rise in the unemployment rate to its highest level since mid-2023.

    While wage growth remains elevated, its slowdown reinforces the view that inflationary pressures are easing. With signs that labour market cooling is gaining momentum, markets are increasingly pricing in not just an August rate cut, but a follow-up move in November. Traders will, however, closely monitor Chancellor Rachel Reeves’ fiscal statement tomorrow, which may influence expectations depending on the scale and orientation of policy shifts.

    Elsewhere, markets are also eyeing the second day of US-China trade talks in London. Ahead of the meeting, U.S. Commerce Secretary Howard Lutnick said that he expected a full day meeting today, while the negotiations are “going well”. Both sides are expected to issue updates later in the day.

    Overall in the currency markets, Sterling is currently the worst performer, followed by Swiss Franc, and then Dollar. Loonie is the best, followed by Aussie, and then Euro. Yen and Aussie are positioning in the middle.

    Technically, focus is now on 1.1045 support in GBP/CHF with today’s dip. Firm break there will complete a head and shoulder top pattern, which suggest that rise from 1.0610 has completed, at 1.1200. Deeper decline should then be seen to 38.2% retracement of 1.0610 to 1.1200 at 1.0975, and possibly further to 61.8% retracement at 1.0835.

    In Europe, at the time of writing, FTSE is up 0.53%. DAX is down -0.40%. CAC is up 0.01%. UK 10-year yield is down -0.094 at 4.543. Germany 10-year yield is down -0.035 at 2.535. Earlier in Asia, Nikkei rose 0.32%. Hong Kong HSI fell -0.08%. China Shanghai SSE fell -0.44%. Singapore Strait Times fell -0.06%. Japan 10-year JGB yield rose 0.002 to 1.480.

    ECB’s Villeroy: Favorable 2 and 2 zone is not static

    French ECB Governing Council member Francois Villeroy de Galhau said in a conference today that ECB is now in a favorable “2 and 2 zone. That means, inflation is forecast at 2% this year, while deposit rate is also at 2%.

    Nevertheless, he warned that with current uncertainties, this zone “does not mean a comfortable zone or a static zone”. “We will remain pragmatic and data-driven, and as agile as necessary,” Villeroy added.

    Separately, Finnish ECB policymaker Olli Rehn warned that as inflation is projected to stay below 2% this year, the central must be mind of “not slipping towards the zero lower bound.”

    “We must not grow overconfident — instead we must stay vigilant and monitor the risks in both directions,” Rehn said. “The ECB team must remain alert and ready to act with agility as and if needed.”

    Eurozone Sentix surges back into positive territory, recession fears recede

    Investor sentiment in the Eurozone turned notably upbeat in June, as Sentix Investor Confidence index climbed from -8.1 to +0.2—its first positive reading since June 2024 and well above expectations of -6. Current Situation Index also improved markedly from -19.3 to -13.0, while Expectations Index jumped from 3.8 to 14.3.

    Germany led the improvement, with its overall Sentix index rising to -5.9, the highest since March 2022. Expectations climbed by 12 points to 17.5, while current conditions advanced for the fourth consecutive month to -26.8.

    According to Sentix, fears of a recession triggered by the US tariff shock in April have largely dissipated, and the economic outlook for the Eurozone is now tilted toward a cyclical upswing.

    With economic momentum building and the Sentix inflation barometer showing signs of easing price pressures, ECB may view its policy as being in a “comfort zone.” While another rate cut isn’t off the table, any such move could be delayed if the upswing continues to solidify over the summer.

    UK labor market softens as unemployment rises to 4.6% and wage growth slows

    UK labor market data released today point to gradual cooling. In May, payrolled employment dropped by -109k, or -0.4% mom. Claimant count rose sharply by 33.1k, well above the expected 4.5k increase. Wage pressures are also easing, with median monthly pay rising by 5.8% yoy, down from 6.2% previously, though still within a relatively tight band seen this year.

    For the three months to April, unemployment rate ticked up to 4.6% as expected, while both average earnings measures came in softer than forecast. Regular pay (excluding bonuses) rose 5.2% yoy, and total pay increased 5.3% yoy, both under the 5.5% consensus.

    BoJ’s Ueda reaffirms gradual tightening path, cites limited room for rate cuts

    BoJ Governor Kazuo Ueda reiterated to parliament today that interest rate hikes will continue, though cautiously, once the central bank gains “more conviction that underlying inflation will approach 2% or hover around that level”.

    Ueda explained that BoJ still maintains negative real interest rates to support inflation momentum and ensure price growth remains both stable and sustained.

    However, Ueda also flagged a significant limitation in policy space should economic conditions deteriorate. With the short-term policy rate still only at 0.5%, the BoJ has “limited room” to cut rates in response to any sharp downturn in growth.

    Australia’s Westpac consumer sentiment edges higher as rate cuts clash with growth worries

    Australia’s Westpac Consumer Sentiment index rose a modest 0.5% mom in June to 92.6, reflecting a population still mired in what Westpac called a “holding pattern of cautious pessimism.”

    The data reveal “two clear opposing forces” shaping household attitudes: easing inflation and RBA’s May rate cut have improved perceptions around major purchases. On the other hand, sluggish domestic growth and global trade uncertainties continue to weigh heavily on expectations.

    Looking ahead, attention turns to the RBA’s next meeting on July 7–8. With economic data remaining mixed and labor market tightness still evident, Westpac expects the central bank to proceed with caution and keep the cash rate on hold. Nonetheless, a fresh round of economic projections in August could pave the way for another 25 basis point cut, as RBA recalibrates its stance amid still-sluggish growth.

    Australia’s NAB business confidence lifts to 2, but employment conditions erode

    Australia’s NAB Business Confidence index turned positive in May, rising from -1 to 2. However, the improvement in confidence was not matched by underlying business conditions, which weakened further. Business Conditions index slipped from 2 to 0, with trading conditions dipping slightly from 6 to 5, profitability remaining in the red at -4, and employment conditions dropping from 4 to 0 — all pointing to a stagnating environment.

    On the inflation front, cost indicators presented a mixed picture. Labor cost growth remained firm at a quarterly equivalent pace of 1.7%. Purchase cost and final product price growth eased to 1.1% and 0.5%, respectively. Retail price growth held steady at 1.2%, suggesting persistent margin pressures.

    NAB Chief Economist Sally Auld emphasized that business conditions are still weak and warned that continued softness could cap any recovery in confidence. She also flagged the labor market as a key area to monitor, with the employment index now below average.

    EUR/GBP Mid-Day Outlook

    Daily Pivots: (S1) 0.8419; (P) 0.8424; (R1) 0.8433; More…

    EUR/GBP’s rebound from resumed by breaking through 0.8448 resistance, and intraday bias is back on the upside for 38.2% retracement of 0.8737 to 0.8354 at 0.8500. Strong resistance could be seen from 0.8500 to complete the corrective bounce. On the downside, break of 0.8413 support will bring retest of 0.8354 low. However, firm break of 0.8500 will pave the way to 61.8% retracement at 0.8591 instead.

    In the bigger picture, price actions from 0.8221 medium term bottom are merely forming a corrective pattern. Nevertheless, there is no clear momentum to break through 0.8201 key support (2022 low) yet. Hence, range trading is expected between 0.8221/8737 for now.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Retail Sales Monitor Y/Y May 0.60% 2.70% 6.80%
    23:50 JPY Money Supply M2+CD Y/Y May 0.60% 0.50%
    00:30 AUD Westpac Consumer Confidence Jun 0.50% 2.20%
    01:30 AUD NAB Business Confidence May 2 -1
    01:30 AUD NAB Business Conditions May 0 2
    06:00 JPY Machine Tool Orders Y/Y May 3.40% 7.70%
    06:00 GBP Claimant Count Change May 33.1K 4.5K 5.2K -21.2K
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Apr 5.20% 5.50% 5.60% 5.50%
    06:00 GBP Average Earnings Including Bonus 3M/Y Apr 5.30% 5.50% 5.50% 5.60%
    06:00 GBP ILO Unemployment Rate (3M) Apr 4.60% 4.60% 4.50%
    08:30 EUR Eurozone Sentix Investor Confidence Jun 0.2 -6 -8.1
    10:00 USD NFIB Business Optimism Index May 98.8 95.9 95.8

     



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  • Japan Business Confidence Weakens In Q2

    Japan Machine Tool Orders Rise 3.4%


    Japan’s machine tool orders increased for the eighth straight month in May, though at a slower pace amid weaker domestic demand, preliminary data from the Japan Machine Tool Builders Association, or JMTBA, showed on Tuesday.

    Machine tool orders climbed 3.4 percent year-on-year in May, after rising 7.7 percent in the previous month.

    Foreign orders grew 6.7 percent from last year, while domestic demand was down by 5.2 percent.

    On a monthly basis, machine tool orders fell 11.2 percent, following a 13.8 percent plunge in April.

    For comments and feedback contact: editorial@rttnews.com

    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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  • Aussie Firmer in Quiet Markets as US-China Trade Talks Continue

    Aussie Firmer in Quiet Markets as US-China Trade Talks Continue


    Global markets remain in a state of cautious anticipation as high-level trade negotiations between the US and China continue for a second day in London. While there’s no definitive outcome yet, mild optimism lingers. Asian equities reflected that mood, with Japan’s Nikkei and Hong Kong’s Hang Seng Index both trading slightly higher. Yet the prevailing sense is one of hesitation, with limited conviction behind the moves. Investors are still waiting for substantive developments before making bolder positioning decisions.

    In the currency markets, Kiwi and Aussie continue to outperform for the week so far, buoyed by broad risk resilience and perhaps early hopes that renewed dialogue could reduce global trade frictions. However, upside momentum in both currencies has been sluggish. At the other end, Loonie is trading as the weakest, followed by Swiss Franc and Japanese Yen. Dollar, Euro, and British Pound are largely directionless, trading in the middle of the weekly performance board.

    The London meetings between US and Chinese officials mark the second day of high-stakes negotiations aimed at resolving the fallout from earlier tariff escalations. While Monday’s talks yielded no breakthrough, the inclusion of Commerce Secretary Howard Lutnick in this round is notable. His agency oversees export controls, signaling the centrality of rare earths in the ongoing discussions. These magnets, vital to EV production and defense equipment, have become a leverage point for Beijing as it holds a near-monopoly over global supply.

    Markets are not pricing in a full resolution just yet. Most expectations center around a tentative agreement on technical issues or interim concessions, such as expanded export licenses. However, structural divisions persist, particularly over technology and national security. Without more substantive signs of compromise, the fragile sentiment boost from the talks could quickly fade, especially if either side issues a combative post-meeting statement.

    Technically, EUR/AUD is now pressing 1.7460 support as the decline from 1.7705 extends. Firm break there will argue that choppy recovery from 1.7245 has completed as a correction, ahead of 38.2% retracement of 1.8554 to 1.7245. That would also suggest that fall from 1.8854 is ready to resume through 1.7245 low.

    In Asia, at the time of writing, Nikkei is up 0.89%. Hong Kong HSI is up 0.15%. China Shanghai SSE is down -0.13%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is down -0.002 at 1.476. Overnight, DOW closed down -0.00%. S&P 500 rose 0.09%. NASDAQ rose 0.31%. 10-year yield fell -0.028 to 4.482.

    BoJ’s Ueda reaffirms gradual tightening path, cites limited room for rate cuts

    BoJ Governor Kazuo Ueda reiterated to parliament today that interest rate hikes will continue, though cautiously, once the central bank gains “more conviction that underlying inflation will approach 2% or hover around that level”.

    Ueda explained that BoJ still maintains negative real interest rates to support inflation momentum and ensure price growth remains both stable and sustained.

    However, Ueda also flagged a significant limitation in policy space should economic conditions deteriorate. With the short-term policy rate still only at 0.5%, the BoJ has “limited room” to cut rates in response to any sharp downturn in growth.

    Australia’s Westpac consumer sentiment edges higher as rate cuts clash with growth worries

    Australia’s Westpac Consumer Sentiment index rose a modest 0.5% mom in June to 92.6, reflecting a population still mired in what Westpac called a “holding pattern of cautious pessimism.”

    The data reveal “two clear opposing forces” shaping household attitudes: easing inflation and RBA’s May rate cut have improved perceptions around major purchases. On the other hand, sluggish domestic growth and global trade uncertainties continue to weigh heavily on expectations.

    Looking ahead, attention turns to the RBA’s next meeting on July 7–8. With economic data remaining mixed and labor market tightness still evident, Westpac expects the central bank to proceed with caution and keep the cash rate on hold. Nonetheless, a fresh round of economic projections in August could pave the way for another 25 basis point cut, as RBA recalibrates its stance amid still-sluggish growth.

    Australia’s NAB business confidence lifts to 2, but employment conditions erode

    Australia’s NAB Business Confidence index turned positive in May, rising from -1 to 2. However, the improvement in confidence was not matched by underlying business conditions, which weakened further. Business Conditions index slipped from 2 to 0, with trading conditions dipping slightly from 6 to 5, profitability remaining in the red at -4, and employment conditions dropping from 4 to 0 — all pointing to a stagnating environment.

    On the inflation front, cost indicators presented a mixed picture. Labor cost growth remained firm at a quarterly equivalent pace of 1.7%. Purchase cost and final product price growth eased to 1.1% and 0.5%, respectively. Retail price growth held steady at 1.2%, suggesting persistent margin pressures.

    NAB Chief Economist Sally Auld emphasized that business conditions are still weak and warned that continued softness could cap any recovery in confidence. She also flagged the labor market as a key area to monitor, with the employment index now below average.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6496; (P) 0.6515; (R1) 0.6536; More…

    Intraday bias in AUD/USD remains neutral as it’s still staying below 0.6536 resistance. More consolidations could be seen, but even in case of another dip, further rise is in favor favor as long as 0.6406 support holds. On the upside, decisive break of 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6406 will turn bias to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6443) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fall through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Retail Sales Monitor Y/Y May 0.60% 2.70% 6.80%
    23:50 JPY Money Supply M2+CD Y/Y May 0.60% 0.50%
    00:30 AUD Westpac Consumer Confidence Jun 0.50% 2.20%
    01:30 AUD NAB Business Confidence May 2 -1
    01:30 AUD NAB Business Conditions May 0 2
    06:00 JPY Machine Tool Orders Y/Y May 7.70%
    06:00 GBP Claimant Count Change May 4.5K 5.2K
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Apr 5.50% 5.60%
    06:00 GBP Average Earnings Including Bonus 3M/Y Apr 5.50% 5.50%
    06:00 GBP ILO Unemployment Rate (3M) Apr 4.60% 4.50%
    08:30 EUR Eurozone Sentix Investor Confidence Jun -6 -8.1
    10:00 USD NFIB Business Optimism Index May 95.9 95.8

     



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  • Japan’s Kato says will conduct fiscal policy appropriately

    Japan’s Kato says will conduct fiscal policy appropriately


    Japanese Finance Minister Katsunobu Kato said on Tuesday that he will appropriately conduct fiscal policy.

    Key quotes

    Seeking more Japanese Government Bond holdings by domestic investors.

    Will make efforts toward appropriate Japanese Government Bonds management.

    Crucial to seek Japanese Government Bond holdings by diverse groups.

    Says will appropriately conduct fiscal policy.

    Need to broaden investors in Japanese Government Bonds.

    Need to start promoting domestic ownership of JGBs.

    It’s important for the government to make efforts to ensure a variety of investors buy and own government bonds, at a time when the Bank of Japan tapers its bond purchases.

    Market reaction  

    At the time of writing, the USD/JPY pair is trading 0.01% lower on the day at 144.53. 

    Japanese Yen FAQs

    The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

    One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

    Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

    The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.



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  • Markets Hold Breath as US-China Trade Talks Resume

    Markets Hold Breath as US-China Trade Talks Resume


    The cautious optimism in Asia failed to spill into European markets, as investors turned cautious ahead of today’s US-China trade talks in London. While no one expects a sweeping resolution to the broader trade conflict, hopes are centered on incremental progress—particularly around rare earths.

    Kevin Hassett, Director of the US National Economic Council, struck a pragmatic tone in his remarks today, emphasizing the goal of securing tangible commitments from China on resuming critical mineral exports. Hassett stated that the meeting’s purpose was to verify China’s seriousness, aiming for “a short meeting with a big, strong handshake.” He added that a mutual agreement could result in immediate easing of US export controls, clearing the path for further negotiations.

    Meanwhile, parallel trade efforts are underway between the US and Japan. Japan’s top trade envoy, Ryosei Akazawa, is reportedly planning his fourth US trip in as many weeks to engage in a sixth round of ministerial talks. While the discussions are said to be progressing, Akazawa conceded that the two sides have yet to reach a consensus. The urgency is growing ahead of the upcoming G7 summit in Canada, where a leaders’ meeting between the US and Japan may be on the agenda.

    In currency markets, Kiwi is leading gains today, followed by Aussie and Japanese Yen. On the other end, Swiss Franc is the weakest performer, trailed by Dollar and Euro. Sterling and Loonie are mixed in the middle.

    On the metals front, a divergence is forming between Gold and Silver. Gold is continuing its retreat, while Silver remains on a firm upward path. Technically, further rise in Silver is expected as long as 34.40 support holds, with focus on 100% projection of 28.28 to 33.66 from 31.65 at 37.03. Decisive break there could prompt further acceleration to 161.8% projection at 40.35.

    In Europe, at the time of writing, FTSE is down -0.24%. DAX is down -0.77% CAC is down -0.35%. UK 10-year yield is up 0.013 at 4.666. Germany 10-year yield is up 0.01 at 2.589. Earlier in Asia, Nikkei rose 0.92%. Hong Kong HSI rose 1.63%. China Shanghai SSE rose 0.43%. FTSE rose 0.05%. Japan 10-year JGB yield rose 0.019 to 1.479.

    ECB Kazimir: Likely at end of cuts, eyes summer data for fine-tuning

    Slovak ECB Governing Council member Peter Kazimir signaled a possible end to the current easing cycle, writing in an opinion piece today that “we’re nearly done with, if not already at the end of, the easing cycle.”

    While acknowledging the potential for weaker-than-expected economic growth in the eurozone, Kazimir emphasized the importance of staying focused on inflation to, which he warned could surprise to the upside.

    Looking ahead, Kazimir stressed the need for flexibility, noting that “incoming data throughout the summer will provide a clearer picture and guide our decisions on whether further fine-tuning is needed.”

    China’s CPI falls -0.1% yoy in May, negative for fourth month

    China’s headline CPI stayed in negative territory for the fourth consecutive month in May, coming in at -0.1% yoy, slightly better than the expected -0.2% yoy.

    The persistent softness in overall inflation was largely driven by a sharp -6.1% yoy decline in energy prices, which alone shaved off nearly half a percentage point from the annual CPI reading.

    On a monthly basis, CPI fell -0.2% mom, with energy again dragging down the figure through a -1.7% mom decline.

    In contrast, core inflation, which strips out food and energy prices, rose to 0.6% yoy, the highest level since January.

    Producer price pressures continue to weaken further, with PPI dropping to -3.3% yoy from -2.7% yoy previously, marking the deepest contraction in nearly two years. Wholesale prices have now been stuck in deflation since October 2022.

    China’s trade surplus widens to USD 103.2B in May, US exports slump -34.5% yoy

    China’s trade surplus widened to USD 103.2B in May, exceeding expectations of USD 101.3, even as headline export and import figures undershot forecasts. Exports rose 4.8% yoy, just shy of the 5.0% yoy consensus. Imports fell -3.4% yoy, a sharper drop than the anticipated -0.9% yoy.

    Exports to the US plunged -34.5% yoy, highlighting the entrenched trade tensions despite Washington’s partial tariff rollback in April. However, the impact was cushioned by robust growth in exports to ASEAN (15% yoy), the European Union (12% yoy), and Africa (33% yoy).

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1359; (P) 1.1409; (R1) 1.1445; More…

    No change in EUR/USD’s outlook and intraday bias stays neutral. Price actions from 1.1572 are seen as a corrective pattern to rally from 1.0716. While rebound from 1.1064 might extend, strong resistance should emerge from 1.1572 to limit upside. On the downside, break of 1.1356 support will argue that the correction is already in the third leg, and target 1.1209 support for confirmation.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0894) holds.


    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Manufacturing Sales Q1 5.10% 1.10% 3.00%
    23:50 JPY Bank Lending Y/Y May 2.40% 2.40% 2.40% 2.30%
    23:50 JPY Current Account (JPY) Apr 2.31T 2.59T 2.72T
    23:50 JPY GDP Q/Q Q1 F 0.00% -0.20% -0.20%
    23:50 JPY GDP Deflator Y/Y Q1 F 3.30% 3.30% 3.30%
    01:30 CNY CPI Y/Y May -0.10% -0.20% -0.10%
    01:30 CNY PPI Y/Y May -3.30% -3.00% -2.70%
    03:00 CNY Trade Balance (USD) May 103.2B 101.1B 96.2B
    05:00 JPY Eco Watchers Survey: Current May 44.4 43.9 42.6
    14:00 USD Wholesale Inventories M/M Apr F 0% 0%

     



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  • Japan’s GDP arrives at 0% QoQ in Q1 2025 vs -0.2% expected

    Japan’s GDP arrives at 0% QoQ in Q1 2025 vs -0.2% expected


    The Japanese economy showed no growth over the quarter in the first quarter (Q1) of 2025, the final reading released by Japan’s Cabinet Office showed on Monday. This reading came in above the market expectation and the previous estimate of -0.2%.

    The Japan’s Gross Domestic Product (GDP) fell at an annual rate of 0.2% in Q1, compared to -0.7% in the previous reading.

    Market reaction to Japan’s GDP data

    At the press time, USD/JPY trades 0.13% lower on the day at 144.68.

    GDP FAQs

    A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
    Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

    A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
    When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

    When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.



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  • Markets Eye NFP as Trump-Xi Call Fails to Lift Sentiment

    Markets Eye NFP as Trump-Xi Call Fails to Lift Sentiment


    There was a fleeting uptick in sentiment overnight after US President Donald Trump spoke by phone with Chinese President Xi Jinping, calling the conversation “very positive” and announcing renewed lower-level trade talks. However, the initial optimism quickly faded, with major US indexes reversing early gains to end the session lower.

    The Chinese readout was more cautious, stressing that the US should “withdraw negative measures” and warning Washington to handle Taiwan “prudently.” The divergence in tone reinforces the sense that the two sides remain far apart. The agreement to more talks appears to be little more than a tactical delay rather than genuine progress.

    Elsewhere, US Treasury called on BoJ to continue policy tightening to support a normalization of Yen and correct bilateral trade imbalances. The statement, part of the Treasury’s semiannual currency report, suggested Tokyo had more to do on the policy front.

    However, Japan’s Finance Minister Katsunobu Kato offered a restrained response, reiterating that monetary decisions lie with the BOJ and avoiding direct comment on the US call for further tightening. Yen, meanwhile, barely reacted, continuing its technical consolidation as it drifts slightly lower against Dollar.

    In currency markets, Dollar remains the worst performer of the week heading into Friday’s crucial non-farm payrolls release. With a string of weak labor-related indicators earlier this week—ADP, ISM employment components, and initial claims—markets are bracing for a soft headline. Yen and Swiss Franc are also lagging this week, underperforming alongside the greenback

    On the other hand, Kiwi leads the pack, while Aussie and Sterling also posted modest gains Euro and Loonie Dollar are positioning in the middle. However, all these standings remain subject to sharp realignment depending on the tone of the upcoming US employment data and its interplay with broader market sentiment.

    In Asia, at the time of writing, Nikkei is up 0.51%. Hong Kong HSI is down -0.09%. China Shanghai SSE is down -0.06%. Singapore Strait Times is up 0.16%. Japan 10-year JGB yield is flat at 1.462. Overnight, DOW fell -0.25%. S&P 500 fell -0.53%. NASDAQ fell -0.83%. 10-year yield rose 0.029 to 4.394.

    Looking ahead, Germany will release industrial production and trade balance in European session. Swiss will publish foreign currency reserves while Eurozone will release retail sales and GDP revision. Later in the day, Canada will also release job data along with US non-farm payrolls.

    US NFP: Muted Hiring or Major Miss?

    Markets are awaiting today’s US non-farm payrolls release, with little doubt that hiring had slowed meaningfully in May amid heightened tariff threats and elevated uncertainty. The key question now is just how sharp the slowdown was.

    Consensus forecasts see NFP at 130K, unemployment steady at 4.2%, and average hourly earnings rising 0.3% mom. Recent labor indicators have painted a dismal picture. ADP private employment came in at just 37k, a stark miss. ISM Manufacturing employment stayed subdued at 46.8 and the Services component barely rose back into expansion territory at 50.7. Meanwhile, 4-week average of jobless claims has crept up to 235k.

    While a modest softening in job growth would likely be tolerated as a natural response to macro headwinds, any significant downside surprise could reignite recession fears. An NFP reading below 100K could provoke a sharp risk-off response in equities. However, such a result would likely weigh further on Dollar, as markets would begin pricing in earlier Fed rate cuts in response to labor market deterioration.

    Technically, S&P 500 extended the near term rise from 4835.04 this week, but continued to lose upside momentum as seen in D MACD. This rise is seen as the second leg of the corrective pattern from 6147.43. Hence, while further rise cannot be ruled out, given that S&P 500 is now close to 6000, upside potential is limited. On the other hand, break of 5767.41 support will signal that a short term top was already formed. Deeper pull back should be seen back to 38.2% retracement of 4835.04 to 5999.70 at 5554.79, with risk of bearish reversal.

    Fed’s Kugler: Tariffs may entrench inflation via expectations, pricing power, and productivity

    Fed Governor Adriana Kugler cautioned that disinflation “has slowed” and that tariffs are beginning to exert upward pressure on prices, a trend she expects to continue into 2025. Speaking overnight, Kugler emphasized that the balance of risks has tilted, with “greater upside risks to inflation” now emerging, even as downside risks to employment and growth loom on the horizon. As a result, she reaffirmed support for holding the current policy rate steady.

    Kugler outlined three channels through which tariffs could entrench inflationary pressures. First, she noted that rising short-term inflation expectations may grant businesses “more leeway to raise prices”, thereby increasing inflation persistence.

    Second, she flagged the risk of “opportunistic pricing”, where firms use tariff headlines as cover to hike prices even on unaffected goods. This, combined with higher costs on intermediate goods, could generate “second-round effects” on inflation.

    The third concern relates to “lower productivity”. As firms contend with elevated input costs and weaker demand, they may reduce capital investment and resort to less efficient production methods, reinforcing inflationary pressure through lower productivity.

    Fed’s Schmid: Tariff impact uncertain, policy must stay nimble

    Kansas City Fed President Jeff Schmid acknowledged in a speech overnight that monetary theory may suggest to “looking through a one-time price shock”, he would be “uncomfortable staking the Fed’s reputation and credibility on theory alone.”

    Despite the expected drag from tariffs, Schmid remains “optimistic” about the economy’s momentum. However, he acknowledged that both the inflationary and growth implications of tariffs are highly uncertain.

    As a result, he argued that Fed will “need to remain nimble”, and be prepared to adjust its stance as needed to maintain both price stability and maximum employment.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3645; (P) 1.3665; (R1) 1.3694; More…

    Intraday bias in USD/CAD stays on the downside as decline from 1.4791 is in progress. . Next target is 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. Firm break there will pave the way to 100% projection at 1.3349. On the upside, above 1.3741 minor resistance will turn intraday bias neutral and bring consolidations first.

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

    Economic Indicators Update

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

     



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  • Japan Business Confidence Weakens In Q2

    Japan Household Spending Sinks 1.8% In April


    The average of household spending in Japan was down a seasonally adjusted 1.8 percent on month in April, the Ministry of Internal Affairs and Communications said on Friday – coming in at 325,717 yen.

    That missed forecasts for a decline of 0.8 percent following the 0.4 percent increase in March.

    On a yearly basis, household spending dipped 0.1 percent – again missing estimates for an increase of 1.5 percent and down from 2.1 percent in the previous month.

    The average of monthly income per household stood at 589,528 yen, roughly unchanged from the previous year.

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    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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

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


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

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

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

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

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

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

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

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

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

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

    ECB cuts 25bps, downgrades inflation forecasts

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

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

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

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

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

    Eurozone PPI slumps -2.2% mom on energy prices

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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

    Markets Unshaken by Weak US Data, Await Guidance from ECB


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    USD/CAD Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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