Tag: JPY

  • Euro Slips on Softer CPI, But Trading Largely Listless

    Euro Slips on Softer CPI, But Trading Largely Listless


    The currency markets remain largely listless today, with all major pairs and crosses still trapped within last week’s ranges. Euro edged slightly lower following the release of Eurozone CPI data, which showed inflation falling below the ECB’s 2% target for the first time since September last year. The core measure also softened notably, reinforcing the view that disinflationary pressures—particularly within services—are well entrenched. With inflation now comfortably back within target, markets have little doubt that ECB will proceed with a 25bps rate cut this Thursday.

    Uncertainty over tariffs continues to hover as a key wildcard. With little clarity on whether the US will escalate its trade actions further, markets are reluctant to commit. A July pause from ECB remains the base case, but further action could hinge on whether tariffs ultimately push inflation up through cost channels—or suppress demand and contribute to disinflation. This dilemma is front and center as policymakers navigate crosscurrents in growth and prices.

    Adding to the cautious mood, the OECD revised its global growth forecasts downward. It now sees world GDP expanding just 2.9% in both 2025 and 2026, citing increased trade barriers and lingering policy uncertainty as key drags. OECD Secretary General Mathias Cormann warned that a further 10 percentage point hike in US bilateral tariffs could shave 0.3% off global output over two years, while likely adding to inflation in affected countries.

    Technically, AUD/JPY continues to press 38.2% retracement of 86.03 to 95.63 at 91.96. Firm break of this fibonacci level will extend the correction from 95.63 to 100% projection of 95.63 to 91.64 from 93.85 at 89.86. Nevertheless, strong bounce from current level, followed by break of 93.85 resistance, will argue that rise from 86.03 is ready to resume through 95.63.

    In Europe, at the time of writing, FTSE is up 0.17%. DAX is up 0.16%. CAC is down -0.15%. UK 10-year yield is down -0.038 at 4.632. Germany 10-year yield is down -0.019 at 2.51. Earlier in Asia, Nikkei fell -0.06%. Hong Kong HSI rose 1.53%. China Shanghai SSE rose 0.43%. Singapore Strait times rose 0.10%. Japan 10-year JGB yield fell -0.27 to 1.482.

    BoE’s Bailey: Rate path still downward, but clouded by unpredictability

    BoE Governor Andrew Bailey told the Treasury Committee today that while the direction for interest rates remains downward, the outlook has become increasingly uncertain.

    Declining to pre-commit to a vote at the upcoming June meeting, Bailey said, “the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty.”

    He emphasized the role of external forces, noting that the Bank has revised its language to reflect the “unpredictable” nature of the current global environment.

    His comments were echoed by fellow policymakers Catherine Mann and Sarah Breeden, who both acknowledged that rates are likely headed lower but stressed the difficulty in forecasting the exact pace or scale of future cuts.

    Mann warned against assuming a fixed glide path, while Breeden said “there is uncertainty about how far, how fast.”

    Eurozone CPI falls to 1.9%, below ECB target for first time since Sep 2024

    Eurozone inflation dipped back below the ECB’s 2% target for the first time since September 2024. Headline CPI fell from 2.2% yoy to 1.9% yoy in May, undershooting expectations of 2.0%. Core CPI (ex-energy, food, alcohol & tobacco) also eased more than forecast to 2.3% from 2.7%.

    The disinflation was led by a sharp slowdown in services inflation, which dropped from 4.0% yoy to 3.2% yoy. Non-energy industrial goods remained unchanged at 0.6% yoy. Energy prices continued to contract at -3.6% yoy, reinforcing the broader downward pressure. Despite a slight uptick in food and alcohol inflation to 3.3% yoy, the overall picture confirms easing price momentum across key sectors.

    Swiss CPI falls to -0.1% yoy, first negative since 2021

    Swiss consumer inflation turned negative in May for the first time since March 2021, with headline CPI falling -0.1% yoy, down from 0.0% in April yoy. Core inflation, which strips out volatile components such as fresh food and energy, slipped to 0.5% yoy from 0.6% yoy previously.

    On a monthly basis, both headline and core CPI rose 0.1%, in line with expectations.

    The breakdown reveals that domestic product prices grew just 0.2% mom and decelerated to from 0.8% yoy to 0.6% yoy. Imported goods prices were flat on the month and fell -2.4% yoy, ticked up from -2.5% yoy.

    BoJ’s Ueda: Ready to hike if wage growth recovers from tariff drag

    BoJ Governor Kazuo Ueda told parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations.

    He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures. However, Ueda expressed confidence that wage momentum would eventually “re-accelerate”, helping to sustain a moderate growth in household consumption.

    Looking ahead, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy evolves in line with its projections. “If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates,” he said.

    However, he cautioned that uncertainty surrounding the economic outlook remains “extremely high.”

    RBA’s Hunter: AUD’s recent resilience linked to global shift away from USD exposure

    RBA Chief Economist Sarah Hunter addressed the unusual behavior of the Australian Dollar in recent months in a speech today. She highlighted that while initial moves were consistent with past risk-off episodes, the currency’s subsequent rebound against the US Dollar stood out as “more unusual”.

    On a “trade-weighted” basis, AUD has remained broadly stable, even though it has appreciated against the greenback and the Chinese renminbi, while weakening against most other major currencies.

    This divergence, Hunter explained, stems from “offsetting factors”. Global growth concerns have pressured the AUD against safe-haven and cyclical peers, while simultaneous outflows from US assets have weakened the US Dollar.

    Hunter cautioned that it’s too soon to tell whether this trend will persist, but acknowledged that recent market behavior reflects shifting investor sentiment, particularly toward capital reallocation away from US assets. As a result, Australian Dollar’s relative resilience against USD may be underpinned by portfolio rebalancing and perceived relative economic stability.

    Hunter noted that the trade-weighted index has reverted to “pre-shock values”, suggesting minimal net change in the foreign-currency value of Australian exports. However, the “relative move of capital” into Australia, at a time when the US is facing policy and tariff-related volatility, could offer some support to “domestic investment activity”, providing a cushion to the broader economy amid global uncertainties.

    RBA Minutes: 25bps cut chosen for caution and predictability after debating hold and 50bps options

    RBA’s May 20 meeting minutes revealed that policymakers weighed three policy options—holding rates, a 25bps cut, or a larger 50bps reduction—before ultimately opting for a modest 25bps cut to 3.85%.

    The case for easing hinged on three key factors: sustained progress in bringing inflation back toward target without upside surprises, weakening global conditions and household consumption, and the view that a cut would be the “path of least regret” given the risk distribution.

    While members discussed a 50bps reduction after deciding to ease, they found the case for a larger move unconvincing. Australian data at the time showed little evidence that trade-related global uncertainty was materially harming domestic activity. Furthermore, some scenarios might even result in upward pressure on inflation, prompting caution. The Board also assessed that it was “not yet time to move monetary policy to an expansionary stance”.

    Ultimately, the Board judged that to move “cautiously and predictably” was more appropriate.

    Caixin PMI manufacturing drops to 48.3, as China faces marked weakening at start of Q2

    China’s manufacturing sector unexpectedly shrank in May, with Caixin PMI falling to 48.3 from 50.4, well below market expectations of 50.6. This marked the first contraction in eight months and the lowest reading since September 2022.

    According to Caixin Insight’s Wang Zhe, both supply and demand weakened, with a particularly notable drag from overseas demand. Employment continued to contract, pricing pressures remained subdued, and logistics saw moderate delays. Although business optimism saw a marginal recovery, the broader picture points to intensifying headwinds.

    The report highlights the fragile start to Q2, with Wang pointing to a “marked weakening” in key economic indicators and a “significantly intensified” level of downward pressure.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1377; (P) 1.1413; (R1) 1.1480; More…

    Intraday bias in EUR/USD is turned neutral with current retreat. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

    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
    22:45 NZD Terms of Trade Index Q1 1.90% 3.60% 3.10% 3.20%
    23:50 JPY Monetary Base Y/Y May -3.40% -4.20% -4.80%
    01:30 AUD RBA Meeting Minutes
    01:30 AUD Current Account (AUD) Q1 -14.7B -12.0B -12.5B -16.3B
    01:45 CNY Caixin Manufacturing PMI May 48.3 50.6 50.4
    06:30 CHF CPI M/M May 0.10% 0.10% 0.00%
    06:30 CHF CPI Y/Y May -0.10% -0.10% 0%
    09:00 EUR Eurozone Unemployment Rate Apr 6.20% 6.20% 6.20% 6.30%
    09:00 EUR Eurozone CPI Y/Y May P 1.90% 2.00% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y May P 2.30% 2.40% 2.70%
    14:00 USD Factory Orders M/M Apr -3.10% 3.40%

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Fed’s Williams stresses need for vigilance on inflation expectations

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

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

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

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

    USD/JPY Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    ECB’s Villeroy and Simuks Signal June rate cut

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

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

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

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

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

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

    BoJ’s Ueda highlights persistent food inflation and trade uncertainty

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

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

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

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

    USD/JPY Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Gold Eyes Fresh Record High as Safe Haven Flows Persist

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

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

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

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

    GBP/USD Weekly Outlook

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

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

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



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

    Weak Data Overlooked as Yen Rises on Risk-Off Mood


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    NZ BNZ manufacturing rises to 53.9, recovery gains ground

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

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

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

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

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

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

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

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

    USD/JPY Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Dollar Eases as Trade Boost Fades, Sterling Finds Support on Wages and BoE Rhetoric

    Dollar Eases as Trade Boost Fades, Sterling Finds Support on Wages and BoE Rhetoric


    Dollar softened slightly in early US trading today, though the move appears more related to a fading post-trade-deal rally than any direct reaction to economic data. While April’s inflation report showed encouraging progress on headline disinflation, the core CPI reading held firm, suggesting underlying price pressures remain sticky. That dynamic should keep Fed cautious, and today’s market reaction suggests the data did little to shift expectations meaningfully. The more optimistic takeaway, however, is that recent tariffs have yet to significantly lift inflation.

    In contrast, Sterling is gaining some traction, particularly against Euro, following solid UK wage data. Despite signs of softening in overall employment, wage growth remains robust, with average earnings still running well above levels consistent with BoE’s 2% inflation target. BoE Chief Economist Huw Pill reinforced that concern by warning that more aggressive or sustained policy action may be needed to bring inflation under control. His remarks have helped underpin Sterling sentiment.

    Overall in the currency markets, Aussie has overtaken Dollar to become the week’s top performer. Kiwi and Loonie are also firm. At the other end of the spectrum, Yen continues to struggle, while Swiss Franc and Euro are also soft.

    Technically, GBP/JPY is now pressing 195.95 resistance as rise from 184.35 extends. Decisive break of 195.95 will argue that choppy fall from 199.79 has completed at 184.35 already. More importantly, rise from 180.00 might then be ready to resume through 199.79 in this bullish case.

    In Europe, at the time of writing, FTSE is up 0.05%. DAX is up 0.17%. CAC is up 0.23%. UK 10-year yield is up 0.021 at 4.671. Germany 10-year yield is up 0.013 at 2.666. Earlier in Asia, Nikkei rose 1.43%. Hong Kong HSI fell -1.87%. China Shanghai SSE rose 0.17%. Singapore Strait Times rose 0.13%. Japan 10-year JGB yield rose 0.06 to 1.449.

    US CPI hits four year low at 2.3%, but core inflation holds steady at 2.8%

    US headline CPI rose just 0.2% mom, below the expected 0.3% mom. Core CPI, excluding food and energy, also increased by 0.2%, undershooting forecasts of 0.3% mom.

    On an annual basis, headline inflation eased to 2.3% yoy from 2.4% yoy, the lowest rate since April 2021. Core inflation held steady at 2.8% yoy, in line with expectations.

    Shelter remained the key driver of monthly inflation, rising 0.3% mom and accounting for over half of the total increase.

    Energy prices also ticked higher by 0.7% mom, while food prices declined slightly by -0.1% mom. On a year-over-year basis, energy costs dropped by -3.7%, helping to keep overall inflation in check, while food prices rose 2.8%.

    BoE’s Pill: May require more aggressive and persistent effort to bring down inflation

    Speaking at a press conference today, BoE Chief Economist Huw Pill warned that returning inflation to the BoE’s 2% target may prove more difficult than anticipated. Hence, Pill said the central bank may need to respond in a “somewhat more aggressive or more persistent” way to ensure inflation is brought under control within a reasonable time frame.

    He raised concerns that recent shifts in wage and price-setting behavior might reflect a more “structural change”, drawing parallels with inflation dynamics of the 1970s and 1980s.

    Pill emphasized that investors should not interpret BoE’s latest forecast, showing inflation returning to target by early 2027 based on market-implied rates, as a clear endorsement of future rate cuts.

    Instead, he pointed to the Bank’s more inflationary risk scenario, which assumed persistently weak productivity and stronger wage pressures. These conditions, he said, echo past inflation crises, where elevated price levels triggered repeated and entrenched pay demands.

    Last week, Pill voted against the BoE’s quarter-point rate cut, aligning with fellow hawk Catherine Mann in preferring to keep rates unchanged.

    UK payrolled employment falls -33k, wage growth remains elevated

    UK labor market data for April showed signs of softening in employment but continued strength in wage growth. Payrolled employment fell by -33k (-0.1% mom), while the claimant count rose by 5.2k. Median monthly pay rose by 6.4% yoy in April, accelerating from 5.9% yoy in the previous month.

    In the three months to March, unemployment rate in the three months to March edged up from 4.4% to 4.5%, in line with expectations and marking the highest level since late 2021.

    Average earnings including bonuses rose 5.5% yoy, beating expectations of 5.2% yoy. Earnings excluding bonuses rose 5.6% yoy, slightly below forecast of 5.7% yoy.

    German ZEW economic sentiment surges on stabilizing domestic politics and trade progress

    Investor sentiment in Germany and the wider Eurozone improved sharply in May, with ZEW Economic Sentiment Index for Germany jumping from -14.0 to 25.2, well above the expected 9.8. Eurozone sentiment followed suit, rising from -18.5 to 11.6, also beating expectations.

    According to ZEW President Achim Wambach, the rebound reflects growing optimism tied to easing trade tensions, a new German government, and stabilizing inflation, helping to offset last month’s sharp deterioration.

    However, views on current conditions remain deeply negative. Germany’s Current Situation Index edged down further from -81.2 to -82.0, missing forecasts. Eurozone’s improved modestly but still stood at -42.2. This divergence suggests that while expectations for the months ahead are improving, near-term economic conditions remain fragile, particularly in Germany.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1022; (P) 1.1132; (R1) 1.1199; More…

    Intraday bias in EUR/USD is turned neutral first with current recovery. Overall, strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to bring rebound. On the upside, break of 1.1380 will suggest that the correction from 1.1572 has completed, and bring retest of 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BoJ Summary of Opinions
    23:50 JPY Money Supply M2+CD Y/Y Apr 0.50% 0.60% 0.80%
    00:30 AUD Westpac Consumer Confidence May 2.20% -6%
    01:30 AUD NAB Business Conditions Apr 2 4
    01:30 AUD NAB Business Confidence Apr -1 -3
    06:00 GBP Claimant Count Change Apr 5.2K 22.3K 18.7K -16.9K
    06:00 GBP ILO Unemployment Rate (3M) Mar 4.50% 4.50% 4.40%
    06:00 GBP Average Earnings Including Bonus 3M/Y Mar 5.50% 5.20% 5.60% 5.70%
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Mar 5.60% 5.70% 5.90%
    09:00 EUR Germany ZEW Economic Sentiment May 25.2 9.8 -14
    09:00 EUR Germany ZEW Current Situation May -82 -77 -81.2
    09:00 EUR Eurozone ZEW Economic Sentiment May 11.6 -4.4 -18.5
    10:00 USD NFIB Business Optimism Index Apr 95.8 94.5 97.4
    12:30 USD CPI M/M Apr 0.20% 0.30% -0.10%
    12:30 USD CPI Y/Y Apr 2.30% 2.40% 2.40%
    12:30 USD CPI Core M/M Apr 0.20% 0.30% 0.10%
    12:30 USD CPI Core Y/Y Apr 2.80% 2.80% 2.80%

     



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  • Risk Assets Soar as US-China Tariff Rollback Surpasses Expectations

    Risk Assets Soar as US-China Tariff Rollback Surpasses Expectations


    Global risk markets surged after the surprising breakthrough in US-China trade negotiations delivered results far beyond market expectations. Just days ago, hopes were low, with even the mere continuation of talks seen as a positive development. Investors had braced for a possible breakdown or at best, a symbolic gesture of engagement. Instead, both countries announced a major easing of tariffs, offering a rare dose of optimism to fragile global sentiment.

    The agreement will see tariffs lowered on both sides for a 90-day period. Specifically, the US will cut its tariffs on Chinese goods from 125% to 30%, while China will reduce its duties on US goods from 125% to just 10%. The gap reflects the US’s decision to maintain a 20% base tariff linked to concerns about fentanyl imports. Still, the rollback represents a major de-escalation.

    In a joint statement, both governments emphasized the intention to continue discussions in a “spirit of mutual openness” and “cooperation,” with follow-up meetings already being planned. US Treasury Secretary Scott Bessent confirmed he expects to meet Chinese officials again in the coming weeks to build on the momentum.

    In the currency markets, Dollar is the strongest performer of the day. Commodity-linked currencies including the Aussie, Kiwi and Loonie are also advancing. In contrast, Yen is under significant pressure while. European majors are also lagging.

    AUD/USD would now provide an important gauge to Dollar’s underlying strength in this risk-on sentiment. Technically, break of 0.6364 support will confirm short term topping at 0.6511. Deeper decline would then be seen to 38.2% retracement of 0.5913 to 0.6511 at 0.6283. Firm break there will argue that whole rise from 0.5913 has already completed.

    In Europe, at the time of writing, FTSE is up 0.64%. DAX is up 0.67%. CAC is up 1.46%. UK 10-year yield is up 0.089%. Germany 10-year yield is up 0.085 at 2.646. Earlier in Asia, Nikkei rose 0.38%. Hong Kong HSI rose 2.98% China Shanghai SSE rose 0.82%. Singapore was on holiday. Japan 10-year JGB yield rose 0.035 to 1.389.

    BoE’s Lombardelli: Gradual cuts warranted as wage and services inflation stay high

    BoE Deputy Governor Clare Lombardelli reinforced the case for a “gradual and careful” approach to policy easing in a speech today. She noted underlying inflation “have continued to fall” despite noises. Monetary policy is still restrictive and will continue to balance the need to lower inflation with the risk of undermining already soft demand.

    Lombardelli highlighted wage growth as a central focus in the disinflation process, particularly given its outsized influence on domestic services pricing. She noted that private sector regular average weekly earnings rose 5.9% in February, still well above levels consistent with BoE’s inflation target. Services inflation, a key proxy for persistent price pressure, remains elevated at 4.7% as of March. Both indicators suggest that while progress has been made, inflationary momentum in wage-sensitive sectors continues to pose a challenge.

    She also addressed the global backdrop, warning that higher US tariffs and increasingly uncertain American trade policy could lower growth and inflation in the short term by dampening global demand and trade volumes. However, over the longer term, if trade fragmentation continues, it could “reduce output and productivity and would raise inflationary pressures.”

    BoE’s Greene says trade risks justify rate cut

    BoE MPC member Megan Greene said during a panel discussion today that while wages and inflation are moving in the right direction, they remain uncomfortably high. And more concerningly, “medium-term inflation expectations have also started picking up.”

    Greene, who voted with the majority last week in favor of a 25bps rate cut, the fourth since last August, revealed that she was initially undecided going into the meeting.

    She noted being “torn” between holding rates steady and cutting, but ultimately decided to support easing. A key factor in her decision was the rise in global trade tensions, driven by US President Donald Trump’s sharp tariff hikes.

    Despite the subsequent temporary trade truce between the US and China announced today, Greene said it would not have changed her vote.

    She also flagged continued uncertainty over US-EU trade relations as a key downside risk for the UK economy, noting that any escalation could further dampen external demand.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 144.74; (P) 145.46; (R1) 146.11; More…

    USD/JPY’s rise from 139.87 accelerates higher today Break of 38.2% retracement of 158.86 to 139.87 at 147.12 suggests that whole fall from 158.86 has completed at 139.87, after defending 139.57 support and 139.26 fibonacci level. Intraday bias stays on the upside for 61.8% retracement at 151.60 next. On the downside, below 145.70 minor support will turn intraday bias neutral again first.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Bank Lending Y/Y Apr 2.40% 2.80% 2.80%
    23:50 JPY Current Account (JPY) Mar 2.72T 2.42T 2.32T 2.91T
    05:00 JPY Eco Watchers Survey: Current Apr 42.6 44.5 45.1

     



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  • Markets Cautious Despite US-China Trade Progress, US Inflation and Consumer Data In Focus This Week

    Markets Cautious Despite US-China Trade Progress, US Inflation and Consumer Data In Focus This Week


    Markets opened the week on a subdued note despite the White House’s announcement that a trade agreement had been reached with China following negotiations in Switzerland. Despite the positive headline, investor reaction has been muted with lackluster performance in Asian stocks. Traders appear to be holding back judgment, at least until US Treasury Secretary Scott Bessent’s full briefing later in the day.

    In the currency markets, commodity currencies including Kiwi, Aussie and Loonie are outperforming slightly, supported by cautious optimism surrounding global trade. Meanwhile, traditional safe-haven currencies, Yen and Swiss Franc, are softening, along with Euro. Dollar and British Pound are trading mixed in the middle..

    This week brings a raft of high-profile US data, with particular attention on CPI, PPI, and retail sales. These releases will offer the first real look at how the sweeping April tariffs are affecting consumer prices and spending behavior.

    Technically, AUD/JPY is showing encouraging signs of strength as risk appetite improves. The rebound from the 86.03 low is resuming, with the pair now trading above 55 D EMA at 92.84. Sustained trading above this EMA will add to the case that correction from 109.36 (2024 high) has completed at 86.03. Next target will be 38.2% retracement of 109.36 to 86.03 at 94.94. However, break of 92.10 support will dampen this bullish view and mix up the outlook.

    In Asia, at the time of writing, Nikkei is up 0.05%. Hong Kong HSI is up 0.93%. China Shanghai SSE is up 0.37%. Singapore is on holiday. Japan 10-year JGB yield is up 0.039 at 1.393.

    Gold Falls as US-China Trade Deal Signals Easing Tensions

    Gold opened the week on the back foot as signs of further easing global trade tensions dented demand for safe-haven assets. The White House posted a surprise announcement of a trade agreement with China after weekend negotiations in Geneva. While no details were released immediately, both sides described the outcome as positive.

    US Treasury Secretary Scott Bessent called the talks a source of “substantial progress,” with a full briefing promised for Monday. US Trade Representative Jamieson Greer said the deal would help resolve the ongoing “national emergency” in trade. China’s Vice Premier He Lifeng confirmed both sides had reached “important consensus” and agreed to create a consultation mechanism for economic and trade issues.

    Markets appear to be cautiously optimistic that the US-China agreement marks a turning point in the broader trade conflict, at least in tone and intent. Investors are likely waiting for concrete details before reassessing the longer-term outlook, but for now, the improved risk sentiment is weighing on Gold’s short-term appeal.

    Technically, Gold’s extended decline suggests that rebound from 3201.70 has completed at 3434.76. Fall from there is now seen as the third leg of the corrective pattern from 3499.79 high. Deeper fall is in favor to 3201.70 support and possibly below. Still, down side should be contained by 38.2% retracement of 2584.24 to 3499.79 at 3150.04, which is close to 55 D EMA (now at 3144.42). Larger up trend is expected to resume after the correction completes.

    Bitcoin losing momentum after strong rally

    Bitcoin posted a strong rally last week, driven by a combination of improved global risk sentiment and sustained institutional demand through exchange-traded funds. A key driver has been BlackRock’s spot Bitcoin ETF, which extended its inflow streak to 19 consecutive trading days, its longest run of the year. These flows have provided strong tailwinds for Bitcoin, helping push prices closer to the 109,571 record high.

    However, signs are emerging that the rally may be losing steam, as seen in 4H MACD. A break below 102,291 support level would confirm short term topping, opening the door for a deeper pullback toward the 93,351 zone.

    The depth and structure of the correction, if realized, will be critical in assessing whether the advance from 74,373 low marks resumption of the long-term uptrend. Or it was merely the second leg in the medium term corrective pattern from the all-time high of 109,571.

     

    US data deluge to reveal first hints of tariff impacts

    This week will be packed with key economic data from the US, Japan, the UK and Australia. In particular for the US, tariffs impacts are beginning to filter through inflation and consumption indicators.

    The US April CPI and PPI reports will be the first meaningful look at how tariffs are affecting price levels. While it’s likely too early to see the full pass-through, any uptick in goods inflation could point to the initial impact of the 10–145% import duties imposed last month. In this round, annual readings will remain relevant, but month-on-month changes could carry more market impact at this early stage of the tariff cycle.

    Alongside inflation, April retail sales data will offer a clearer picture of how US consumers are reacting to any pricing shifts and the broader risk of higher costs on the horizon. The University of Michigan’s consumer sentiment survey, including its forward-looking inflation expectations component, will also provide key insight into how tariffs are feeding further into household psychology.

    In Japan, markets are increasingly convinced that BoJ will hold off on further tightening for longer, especially after it downgraded GDP forecasts. This week’s preliminary Q1 GDP data may confirm a contraction, reinforcing that view. Additionally, the BoJ’s Summary of Opinions from the latest policy meeting will give investors a sense of how concerned board members are about the rising risks from global trade disruptions and fragile domestic demand. A clear dovish tilt in the minutes could further weigh on Yen and push back rate hike expectations even further.

    From the UK, GDP and employment figures are due, but these are unlikely to shift the BoE from its current path of gradual easing—one 25bps cut per quarter—unless the data contains major surprises. Attention is likely to remain on the next phase of the recently announced US-UK trade agreement. With the framework now public, markets are looking for concrete details, timelines, and sector-specific implementations that could affect investment flows and business sentiment in the months ahead.

    Australia’s wage price index and job figures will also draw attention, though they are not expected to derail the current consensus for a rate cut from RBA later this month. Slowing growth, fading inflation momentum, and global uncertainty continue to dominate the domestic narrative.

    Here are some highlights for the week:

    • Monday: Japan current account; Eco Watcher sentiment.
    • Tuesday: BoJ Summary of Opinions; Australia Westpac consumer sentiment, NAB business confidence; UK employment; Germany ZEW economic sentiment; US CPI.
    • Wednesday: Japan PPI; Australia wage price index; Canada building permits.
    • Thursday: Australia employment; UK GDP, trade balance; Swiss PPI; Eurozone GDP revision, industrial production; Canada housing starts, manufacturing sales, wholesale sales; US retail sales, PPI, jobless claims, Empire State manufacturing, Philly Fed manufacturing, industrial production, business inventories, NAHB housing index.
    • Friday: New Zealand BNZ manufacturing, inflation expectations; Japan GDP; Eurozone trade balance; US building permits and housing starts, import prices, UoM consumer sentiment and inflation expectations.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8192; (P) 0.8232; (R1) 0.8278; More….

    USD/CHF’s breach of 0.8333 suggests that rebound from 0.8038 is resuming. Intraday bias is back on the upside for 38.2% retracement of 0.9200 to 0.8038 at 0.8482. But strong resistance should be seen there to limit upside. On the downside, firm break of 0.8184 support will argue that the corrective rise has completed, and bring retest of 0.8038.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Bank Lending Y/Y Apr 2.40% 2.80% 2.80%
    23:50 JPY Current Account (JPY) Mar 2.72T 2.42T 2.32T 2.91T
    05:00 JPY Eco Watchers Survey: Current Apr 42.6 44.5 45.1

     



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  • Pound and Dollar Lead FX on UK-US Trade Deal, BoE Cut Overshadowed

    Pound and Dollar Lead FX on UK-US Trade Deal, BoE Cut Overshadowed


    Sterling and the US Dollar are leading gains among major currencies today, lifted by anticipation surrounding the imminent announcement of a comprehensive US-UK trade agreement. The Pound remained resilient after BoE’s expected 25bps rate cut. The three-way split within the BoE’s Monetary Policy Committee and the mixed implications of its economic projections have made it difficult for markets to form a decisive reaction.

    BoE’s updated economic projections included two alternative scenarios, one based on weaker global demand due to trade disruptions, the other on renewed inflation stickiness from second-round effects. But with global trade dynamics in flux, these projections are highly conditional and arguably academic at this stage. A trade deal with the US may relieve some economic pressure on Britain, but its benefit depends on how the US proceeds with other partners, especially the EU and China.

    For now, attention is squarely on the 1400 GMT press conference where US President Donald Trump is expected to formally unveil the UK trade deal. Trump described the agreement as “full and comprehensive,” calling it a first step in a broader realignment of US trade policy. UK Prime Minister Keir Starmer’s office confirmed talks have progressed swiftly and promised an update later today.

    Meanwhile, Euro is also holding firm despite signs of growing transatlantic strain. European Commission has announced preparations for countermeasures in response to Washington’s reciprocal tariff regime, launching a WTO dispute and consulting on duties affecting EUR 95B worth of US imports. Still, EC President Ursula von der Leyen emphasized a preference for negotiation, suggesting room remains for diplomacy.

    In contrast, Yen is the weakest major currency today, Loonie and Swiss Franc. Aussie and Kiwi are positioning in the middle.

    Technically, Bitcoin’s rally from 74373 resumed today by breaking through 97944 resistance. Further rally is expected as long as 93351 support holds, to retest 109571 record high. Nevertheless, barring clear sign of upside acceleration, current rise is seen as the second leg a medium term corrective pattern. Hence, strong resistance is expected from 109571 to limit upside to bring near term reversal.

    In Europe, at the time of writing, FTSE is up 0.17%. DAX is up 0.80%. CAC is up 0.92%. UK 10-year yield is up 0.025 at 4.489. Germany 10-year yield is up 0.018 at 2.494. Earlier in Asia, Nikkei rose 0.41%. Hong Kong HSI rose 0.37%. China Shanghai SSE rose 0.28%. Singapore Strait Times fell -0.44%. Japan 10-year JGB yield rose 0.025 to 1.325.

    US initial jobless claims fall to 228k vs exp 235k

    US initial jobless claims fell -13k to 228k in the week ending May 3, below expectation of 235k. Four-week moving average of initial claims rose 1k to 227k.

    Continuing claims fell -29k to 1879k in the week ending April 26. Four-week moving average of continuing claims rose 9k to 1875k.

    BoE cuts 25bps, three-way vote split reveals growing rift on rate path

    BoE lowered its benchmark Bank Rate by 25 basis points to 4.25% , in line with market expectations. However, the decision revealed a rare three-way split among policymakers.

    Five members supported the 25bps reduction, while Catherine Mann and Chief Economist Huw Pill voted to keep rates unchanged. On the dovish end, Swati Dhingra and Alan Taylor backed a deeper 50bps cut.

    In its accompanying statement, BoE reiterated that a “gradual and careful approach” remains appropriate as it withdraws monetary restraint.

    While acknowledging progress on inflation, the central bank emphasized the need for policy to stay “restrictive for sufficiently long” to ensure inflation returns sustainably to the 2% target.

    In its latest Monetary Policy Report, the BoE’s baseline forecast sees CPI inflation rising to 3.5% in Q3 2025 before easing back to 2% in the medium term.

    But policymakers outlined two risk-laden alternative scenarios. The first, a lower demand scenario, assumes heightened uncertainty depresses domestic spending and inflationary pressures fade more quickly. Under this path, the economy faces a wider output gap and inflation runs -0.3% lower than baseline by the three-year horizon.

    Conversely, the second scenario envisions higher inflation persistence, where near-term rise in headline inflation triggers second-round effects in wages and prices, compounded by weak productivity growth. In this case, the impact on growth is modest, but inflation runs 0.4% above baseline throughout the forecast period.

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

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

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

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

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

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

    BoJ minutes: Caught between global uncertainty and domestic price pressures

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

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

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

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

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

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

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 142.81; (P) 143.40; (R1) 144.43; More…

    USD/JPY rebounded further today but stays below 145.90 resistance. Overall, rise from 139.87 could extend through 145.90. But near term outlook will stay bearish as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds, in case of another bounce. On the downside, firm break of 141.96 will argue that rebound from 139.87 has completed as a corrective move. Retest of 139.87 should then be seen next in this case.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance Apr -3% -4% 2%
    23:50 JPY BoJ Minutes
    06:00 EUR Germany Industrial Production M/M Feb 3.00% 0.80% -1.30%
    06:00 EUR Germany Trade Balance (EUR) Mar 21.1B 18.8B 17.7B
    11:00 GBP BoE Interest Rate Decision 4.25% 4.25% 4.50%
    11:00 GBP MPC Official Bank Rate Votes 2–5–2 0–9–0 0–1–8
    12:30 USD Initial Jobless Claims (May 2) 228K 235K 241K
    12:30 USD Nonfarm Productivity Q1 P -0.80% -0.40% 1.50%
    12:30 USD Unit Labor Costs Q1 P 5.70% 5.30% 2.20%
    14:00 USD Wholesale Inventories Mar F 0.50% 0.50%
    14:30 USD Natural Gas Storage 103B 107B

     



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

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


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

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

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

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

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

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

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

    SNB’ Schlegel signals willingness to revisit negative rates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/GBP Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Weekly Outlook

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

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

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



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  • FX Markets Hold Range While Yen Extends Slide

    FX Markets Hold Range While Yen Extends Slide


    Yen weakness remains the dominant theme in an otherwise range-bound forex market today. While all other major pairs and crosses are contained within yesterday’s trading range, the Japanese currency continues to lose ground as traders react to BoJ’s dovish tone. Governor Kazuo Ueda attempted to soften the impact of the downgraded growth outlook and emphasized that a delay in inflation convergence wouldn’t necessarily mean a delay in rate hikes.

    However, markets took greater note of his admission that the baseline scenario for Japan’s economy “no longer has very high probability,” a statement that effectively resets expectations for near-term tightening. The prospect of a move in June has effectively diminished, and the odds for a Q3 hike now hinge heavily on how trade negotiations evolve between the US and its key partners, including Japan.

    In the US, equity market sentiment is buoyant today as strong earnings from tech giants Meta Platforms and Microsoft lifted futures. Initial jobless claims rose more than expected, but the data has been largely brushed aside for now. Markets are instead turning attention to the upcoming ISM manufacturing report, which will offer more timely insights into how business activity and pricing dynamics are responding to the trade policy shockwaves. Still, the real litmus test for broader sentiment will be Friday’s non-farm payrolls release.

    On the week, Kiwi leads losses for now, followed by Yen and Euro. Loonie outperforms, along with Sterling and Swiss Franc. Dollar and Aussie are treading water in the middle of the pack.

    Technically. Gold’s correction from 3499.79 extended lower today. Deeper fall might be seen, but downside should be contained by 3167.62 resistance turned support, which is close to 38.2% retracement of 2584.24 to 3499.79 at 3150.04. Break of 3352.92 resistance will bring retest of 3499.79 high.

    In Europe, at the time of writing, FTSE is down -0.13%. UK 10-year yield is down -0.01 at 4.436. Germany and France are on holiday. Earlier in Asia, Nikkei rose 1.13%. Japan 10-year JGB yield fell -0.04 to 1.275. Hong Kong, China, and Singapore were on holiday.

    US initial jobless claims rise to 241k vs exp 221k

    US initial jobless claims rose 18k to 241k in the week ending April 26, above expectation of 221k. Four-week moving average of initial claims rose 5.5k to 226k.

    Continuing claims rose 83k to 1916k in the week ending April 19, highest since November 13, 2021. Four-week moving average of continuing claims rose 6k to 1868k.

    UK PMI manufacturing finalized at 45.4, rising costs, declining demand

    UK manufacturing continued to contract in April, with PMI finalized at 45.4, a modest rise from March’s 44.9.

    The sector is facing mounting challenges as output, new orders, and exports all declined further. Business confidence also fell to its lowest level since late 2022, reflecting growing unease over global trade disruptions and rising input costs.

    S&P Global’s Rob Dobson highlighted a nearly five-year record drop in new export orders, particularly from the US, Europe, and China.

    Manufacturers are also being squeezed by a surge in purchase price inflation, now at a 28-month high. This is prompting firms to raise prices and cut discretionary spending, reinforcing a troubling mix of “rising costs, declining demand”.

    BoJ holds rates, slashes growth outlook on trade headwinds

    BoJ kept its benchmark interest rate unchanged at 0.50% today, by unanimous vote, in line with expectations. However, it struck a cautious tone on the economic outlook by sharply cutting its growth forecasts.

    The central bank now projects Japan’s real GDP to grow just 0.5% in fiscal 2025, down from the 1.1% forecast in January, and 0.7% in fiscal 2026 (downgraded from 1.0%). Growth is expected to recover to 1.0% in fiscal 2027, assuming stabilization in global conditions.

    In its statement, BoJ acknowledged that “Japan’s economic growth is likely to moderate” as global trade and policy uncertainty weigh on external demand and corporate profitability. Still, the bank expects activity to reaccelerate once overseas economies resume “a moderate growth path.”

    On inflation, BoJ maintained that price pressures are broadly on course toward the 2% target, but revised its CPI core forecast down from 2.4% to 2.2% for fiscal 2025, and from 2.0% to 1.7% for fiscal 2026.

    BoJ raised its projection for the core-core CPI from 2.1% to 2.3% for fiscal 2025, reflecting persistent domestic inflation pressures. However, this is followed by a downgrade from 2.1% to 1.8% in 2026 before stabilizing at 2.0% in 2027.

    BoJ’s Ueda: Inflation target delay won’t necessarily postpone rate hikes

    At the post meeting press conference, BoJ Kazuo Ueda acknowledged that the surge in global trade tensions, sparked by the US’s “reciprocal” tariffs, has sharply elevated uncertainty over global policy direction. He warned that these tariff shocks would “weigh on” on Japan’s growth and inflation in the near term, but expressed hope that such effects would fade as overseas economies stabilize.

    Ueda noted that BoJ downgraded its growth outlook for fiscal 2025 and 2026, with both inflation and wage gains expected to “likely slow somewhat. However, he maintained that Japan’s “severe labour shortage” should keep the positive wage-inflation cycle intact over the medium term.

    Despite pushing back the timeline for inflation to converge with the 2% target, Ueda stressed “that doesn’t mean the timing of further rate hikes will automatically be delayed by the same margin.”

    Ueda emphasized that BoJ’s forecasts hinge on the assumption that trade negotiations will progress and avoid serious supply chain disruptions. However, he admitted that the probability of the baseline scenario being realized “is no longer very high.” Further tariff escalation could alter both the economic outlook and BoJ’s future policy stance.

    Japan’s PMI manufacturing finalized at 48.7, slump persists amid trade uncertainty

    Japan’s manufacturing sector remained in contractionary territory in April, with the final PMI reading at 48.7, up slightly from March’s 48.4. While the deterioration in business conditions marked the tenth consecutive month of decline, it remained modest.

    However, underlying components revealed more concerning trends, with sharper drops in new orders and exports, highlighting persistent demand-side weakness.

    According to S&P Global, firms responded by scaling back purchasing and adjusting inventories, while overall sentiment worsened.

    Business confidence around future output fell to its lowest since mid-2020, as companies expressed caution amid ongoing global trade tensions and muted demand. Without a significant turnaround in both domestic and external demand, “firms are likely to struggle to see a recovery in conditions”.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 142.42; (P) 142.81; (R1) 143.45; More…

    Intraday bias in USD/JPY remains on the upside for the moment. Rebound from 139.87 should target 100% projection of 139.87 to 144.02 from 141.96 at 146.11. But still, near term outlook will stay bearish as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds. On the downside, firm break of 141.96 will argue that the rebound has completed as a corrective move. Retest of 139.87 should then be seen next in this case.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 JPY Manufacturing PMI Apr F 48.7 48.5 48.5
    01:30 AUD Import Price Index Q/Q Q1 3.30% 0.30% 0.20%
    01:30 AUD Trade Balance (AUD) Mar 6.90B 3.10B 2.97B 2.85B
    03:03 JPY BoJ Interest Rate Decision 0.50% 0.50% 0.50%
    05:00 JPY Consumer Confidence Index Apr 31.2 34 34.1
    06:30 CHF Real Retail Sales Y/Y Mar 2.20% 1.90% 1.60% 1.20%
    08:30 GBP M4 Money Supply M/M Mar 0.30% 0.20% 0.20%
    08:30 GBP Mortgage Approvals Mar 64K 65K 65K
    08:30 GBP Manufacturing PMI Apr F 45.4 44 44
    11:30 USD Challenger Job Cuts Y/Y Apr 62.70% 204.80%
    12:30 USD Initial Jobless Claims (Apr 25) 241K 221K 222K 223K
    13:30 CAD Manufacturing PMI Apr 46.3
    13:45 USD Manufacturing PMI Apr F 50.7 50.7
    14:00 USD ISM Manufacturing PMI Apr 47.9 49
    14:00 USD ISM Manufacturing Prices Paid Apr 70.2 69.4
    14:00 USD ISM Manufacturing Employment Apr 44.7
    14:00 USD Construction Spending M/M Mar 0.30% 0.70%
    14:30 USD Natural Gas Storage 111B 88B

     



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  • Yen Slides as BoJ Slashes Growth Outlook; Investor Resilience Faces ISM Test

    Yen Slides as BoJ Slashes Growth Outlook; Investor Resilience Faces ISM Test


    Yen weakened broadly today following the BoJ’s decision to leave interest rates unchanged, while significantly downgrading its growth projections for the current fiscal year. Inflation outlook was also softened, with risks of undershooting the 2% target increased, albeit slightly.

    This backdrop suggests that while BoJ remains on a slow tightening path, policymakers may take a more cautious approach in the near term. The prospect of a rate hike in June now appears less likely unless global trade negotiations between the US and its partners make meaningful progress.

    Elsewhere, Wall Street showed surprising resilience overnight. After initially tumbling on the back of an unexpected Q1 contraction in US GDP, DOW and S&P 500 managed to close in positive territory, while NASDAQ was little changed. Fed rate expectations were also little changed, with markets still pricing in a 97% chance of a hold in May and a 66% chance of a rate cut in June.

    Investor sentiment, while shaken, has not broken—at least not yet. Attention now shifts to the upcoming ISM manufacturing survey today and tomorrow’s US non-farm payroll report.

    In the currency markets, Yen is the day’s weakest performer so far, weighed down by BoJ’s dovish lean. Sterling and Euro are also under pressure. On the other side, Kiwi leads gains, followed by Loonie and Aussie. Dollar and Swiss Franc are trading in the middle.

    Technically, EUR/USD’s correction from 1.1572 short term top is resuming through 1.1306 support. Deeper fall is now in favor to 100% projection of 1.1572 to 1.1306 from 1.1424 at 1.1158. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to complete the pullback.

    In Asia, at the time of writing, Nikkei is up 0.93%. Japan 10-year JGB yield is down -0.038 at 1.277. Hong Kong, China and Singapore are on holiday. Overnight, DOW rose 0.35%. S&P 500 rose 0.15%. NASDAQ fell -0.09%. 10-year yield rose 0.004 to 4.177.

    Looking ahead, Swiss retail sales and UK PMI maufacturing final will be released in European sesison. Later in the day, US will publish ISM manufacturing and jobless claims.

    BoJ holds rates, slashes growth outlook on trade headwinds

    BoJ kept its benchmark interest rate unchanged at 0.50% today, by unanimous vote, in line with expectations. However, it struck a cautious tone on the economic outlook by sharply cutting its growth forecasts.

    The central bank now projects Japan’s real GDP to grow just 0.5% in fiscal 2025, down from the 1.1% forecast in January, and 0.7% in fiscal 2026 (downgraded from 1.0%). Growth is expected to recover to 1.0% in fiscal 2027, assuming stabilization in global conditions.

    In its statement, BoJ acknowledged that “Japan’s economic growth is likely to moderate” as global trade and policy uncertainty weigh on external demand and corporate profitability. Still, the bank expects activity to reaccelerate once overseas economies resume “a moderate growth path.”

    On inflation, BoJ maintained that price pressures are broadly on course toward the 2% target, but revised its CPI core forecast down from 2.4% to 2.2% for fiscal 2025, and from 2.0% to 1.7% for fiscal 2026.

    BoJ raised its projection for the core-core CPI from 2.1% to 2.3% for fiscal 2025, reflecting persistent domestic inflation pressures. However, this is followed by a downgrade from 2.1% to 1.8% in 2026 before stabilizing at 2.0% in 2027.

    Japan’s PMI manufacturing finalized at 48.7, slump persists amid trade uncertainty

    Japan’s manufacturing sector remained in contractionary territory in April, with the final PMI reading at 48.7, up slightly from March’s 48.4. While the deterioration in business conditions marked the tenth consecutive month of decline, it remained modest.

    However, underlying components revealed more concerning trends, with sharper drops in new orders and exports, highlighting persistent demand-side weakness.

    According to S&P Global, firms responded by scaling back purchasing and adjusting inventories, while overall sentiment worsened.

    Business confidence around future output fell to its lowest since mid-2020, as companies expressed caution amid ongoing global trade tensions and muted demand. Without a significant turnaround in both domestic and external demand, “firms are likely to struggle to see a recovery in conditions”.

    BoC minutes: Dual uncertainties cloud policy path

    BoC’s summary of deliberations from its April meeting revealed a divided Governing Council, as members weighed the case for another rate cut against the need for more clarity.

    While some policymakers pushed for an immediate cut, citing a weakening domestic economy and subdued near-term inflation, others argued in favor of holding steady at 2.75% to better assess the evolving trade environment, especially with US tariffs in flux.

    All members acknowledged the unusually high level of uncertainty. They agreed to be “less forward-looking than usual,” signaling a preference for data-dependence over proactive policy signaling.

    The Council framed the current risks in two layers: the unpredictable path of U.S. trade policy, and the unknown economic impact of tariffs—including potential fiscal responses to soften the blow.

    With no clear resolution on either front, the BoC leaned toward caution, holding policy steady at 2.75% while signaling a readiness to adjust as needed.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 142.42; (P) 142.81; (R1) 143.45; More…

    USD/JPY’s rebound from 139.87 short term bottom resumed by breaking through 144.02 today. Intraday bias is back on the upside for 100% projection of 139.87 to 144.02 from 141.96 at 146.11. But still, near term outlook will stay bearish as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds. On the downside, firm break of 141.96 will argue that the rebound has completed as a corrective move. Retest of 139.87 should then be seen next in this case.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    JPY BoJ Interest Rate Decision 0.50% 0.50%
    00:30 JPY Manufacturing PMI Apr F 48.7 48.5 48.5
    01:30 AUD Import Price Index Q/Q Q1 3.30% 0.30% 0.20%
    01:30 AUD Trade Balance (AUD) Mar 6.90B 3.10B 2.97B 2.85B
    05:00 JPY Consumer Confidence Index Apr 31.2 34 34.1
    06:30 CHF Real Retail Sales Y/Y Mar 1.90% 1.60%
    08:30 GBP M4 Money Supply M/M Mar 0.20% 0.20%
    08:30 GBP Mortgage Approvals Mar 65K 65K
    08:30 GBP Manufacturing PMI Apr F 44 44
    11:30 USD Challenger Job Cuts Y/Y Apr 204.80%
    12:30 USD Initial Jobless Claims (Apr 25) 221K 222K
    13:30 CAD Manufacturing PMI Apr 46.3
    13:45 USD Manufacturing PMI Apr F 50.7 50.7
    14:00 USD ISM Manufacturing PMI Apr 47.9 49
    14:00 USD ISM Manufacturing Prices Paid Apr 70.2 69.4
    14:00 USD ISM Manufacturing Employment Apr 44.7
    14:00 USD Construction Spending M/M Mar 0.30% 0.70%
    14:30 USD Natural Gas Storage 111B 88B

     



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  • Markets Ignores Trade News Ahead of Data Barrage; Aussie Outperforms

    Markets Ignores Trade News Ahead of Data Barrage; Aussie Outperforms


    Global financial markets are largely steady ahead of a packed economic calendar, with traders bracing for volatility as Eurozone and US GDP figures, as well as US PCE inflation data, are due shortly. Despite negative signals from China’s latest PMI reports, and another round of trade headlines, market reactions remain muted.

    Risk sentiment is cautiously tilted to the positive side, reflected in the stronger performance of commodity-linked currencies like Australian, New Zealand, and Canadian Dollars. But major moves have yet to materialize. Euro, Sterling, and Yen are on the softer side, while Dollar and Swiss Franc are mixed.

    Trade developments, which dominated headlines in recent weeks, offered some positive news but failed to stir markets significantly. US President Donald Trump signed a set of executive orders to ease the impact of automotive tariffs, including provisions for credits and relief on other levies. Commerce Secretary Howard Lutnick hinted at a breakthrough with one country to permanently remove reciprocal tariffs, though withheld specifics.

    In Australia, Q1 CPI report slightly exceeded expectations on the headline but failed to derail market conviction on RBA policy. Crucially, the trimmed mean CPI—a preferred core measure—returned to within the RBA’s 2–3% target band for the first time since 2021. Services disinflation has also progressed notably. These trends, coupled with a slowing economic backdrop, have cemented expectations for a 25bps rate cut in May.

    Nevertheless, RBA’s path of easing is likely to remain steady and measured. Unless there is a material deterioration in the global or domestic outlook, the central bank is expected to proceed with one cut per quarter.

    Technically, AUD/NZD is extending the rebound from 1.0649 short term bottom today. Nevertheless, this rally is currently seen as a corrective move only. Hence, upside should be limited by 38.2% retracement of 1.1173 to 1.0649 at 1.0849. Break of 1.0742 minor support will turn bias back to the downside for retesting 1.0649, and possibly resuming larger fall. However, firm break of 1.0849 will raise the chance of near term bullish reversal, and target 61.8% retracement at 1.0973 next.

    In Asia, at the time of writing, Nikkei is up 0.30%. Hong Kong HSI is up 0.37%. China Shanghai SSE is down -0.09%. Singapore Strait Times is up 0.44%. Japan 10-year JGB yield is down -0.006 at 1.309. Overnight, DOW rose 0.75%. S&P 500 rose 0.58%. NASDAQ rose 0.55%. 10-year yield fell -0.043 to 4.173.

    Looking ahead, Eurozone GDP is the main focus in European session. Later in the day, Canada GDP will be a feature today. But most attention would be on US ADP employment, Q1 GDP dance, March personal income and spending, and PCE inflation.

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

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

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

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

    NZ ANZ business confidence falls to 49.3, inflation expectations steady

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    GBP/JPY Daily Outlook

    Daily Pivots: (S1) 190.39; (P) 190.87; (R1) 191.34; More…

    Intraday bias in GBP/JPY is turned neutral first with current retreat. Rebound from 184.35 is in favor to continue as long as 189.28 minor support holds. Above 191.70 will target 195.95 resistance next. However, break of 189.28 will suggest that the rebound has completed and turn bias back to the downside.

    In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 175.94 will bring deeper fall even still as a correction.

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

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

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

    China reaffirms growth target, holds back on major stimulus

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

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

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

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

    High-stakes week ahead

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

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

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

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

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

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

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

    Here are some highlights for the week:

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

    USD/CAD Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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

    Global Risk Sentiment Brightens, But Caution Lingers Around US Assets


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

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

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

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

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

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

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

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

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

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

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

    European Strength Offers Hope, Caution Persists for US Indexes

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

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

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

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

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

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

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

    Dollar Struggles Despite Risk Stabilization, Policy Uncertainty Remains a Drag

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

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

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

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

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

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

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

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

    EUR/CHF Weekly Outlook

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

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

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



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  • Glimmers of Trade Optimism Lift Asian Markets, But Concrete Progress Still Elusive

    Glimmers of Trade Optimism Lift Asian Markets, But Concrete Progress Still Elusive


    There’s a cautious tone of optimism in Asian markets today, though gains are largely concentrated in Japan, South Korea, and Hong Kong. This moderate rally is being supported by a handful of headlines suggesting incremental movement in global trade diplomacy, even if concrete progress remains limited.

    One of the more notable developments comes from a Bloomberg report indicating that China is considering suspending its 125% tariffs on certain US imports, including medical equipment, industrial chemicals, and possibly even aircraft leases. While such a move would mark a significant de-escalation, it remains speculative at this stage.

    Adding to the mix, U.S. President Donald Trump pushed back on China’s claims that no talks were underway between Washington and Beijing. Trump insisted that “they had a meeting this morning,” although it was unclear who “they” referred to—even he conceded the ambiguity. With no official confirmation from either side, the market reaction has been understandably restrained.

    More tangible, however, was news from Washington of a “very successful” trade meeting between the US and South Korea. Treasury Secretary Scott Bessent expressed unexpected optimism following the bilateral “2+2” talks, suggesting that technical-level negotiations could begin as early as next week. South Korea is hoping to strike a deal with the US by July to avert impending tariffs. The news gave a noticeable lift to South Korean shipbuilding stocks, a sector highly sensitive to global trade developments.

    In Japan, Prime Minister Shigeru Ishiba unveiled an emergency economic package designed to cushion the impact of higher US tariffs. The stimulus includes corporate financing support, consumer-focused measures to boost domestic spending, and targeted relief such as subsidies for energy bills and fuel price reductions. This has added to the positive tone in Japanese equities, as the government shows readiness to act swiftly in cushioning external shocks and stabilizing demand.

    Currency markets are also reflecting shifting sentiment. Kiwi continues to lead the pack this week, followed by Aussie and Dollar. On the weaker end, safe-haven currencies like Swiss Franc, Yen, and Euro remain under some pressure as investors unwind defensive positions.

    Sterling and Loonie are holding in the middle of the pack, awaiting further direction from today’s retail sales reports out of the UK and Canada. Market participants will also be watching for any comments from SNB Chair Schlegel regarding the Franc’s recent strength amid global risk aversion.

    Technically, it’s possible that AUD/JPY’s fall from 102.39 has completed as a five-wave impulse at 86.03, which also marks the completion of the whole three-wave correction from 109.36. For now, further rise is in favor as long as 89.62 support holds. Next target is 55 D EMA (now at 92.97). Sustained trading above there will solidify bullish reversal, and target 38.2% retracement of 109.36 to 86.03 at 94.94 next.

    In Asia, at the time of writing, Nikkei is up 1.80%. Hong Kong HSI is up 1.05%. China Shanghai SSE is up 0.05%. Singapore Strait Times is down -0.02%. Japan 10-year JGB yield is up 0.028 at 1.337. Overnight, DOW rose 1.23%. S&P 500 rose 2.03%. NASDAQ rose 2.74%. 10-year yield fell -0.082 to 4.305.

    Tokyo CPI core surges to 3.4% in April, strengthening case for BoJ June hike

    Inflation in Japan’s capital city surged in April, with Tokyo core CPI (excluding food) accelerating from 2.4% yoy to 3.4% yoy, above the 3.2% yoy forecast. The more domestically focused core-core measure (excluding food and energy) also rose sharply, from 2.2% yoy to 3.1% yoy. Headline CPI jumped from 2.9% yoy to 3.5% yoy.

    Despite the upside surprise, BoJ is still expected to hold rates steady at its May 1 policy meeting as it gauges the broader impact of recent US tariffs and awaits progress in ongoing trade negotiations. However, with inflation gathering pace across key categories, market expectations are shifting toward a rate hike as soon as June.

    BoJ’s Ueda says G20 peers aAlign on tariff risks to trade and sentiment

    BoJ Governor Kazuo Ueda acknowledged growing global concern over the economic impact of tariffs, following discussions with international counterparts at a G20 finance ministers’ meeting.

    Speaking at a press conference, Ueda said many global policymakers “roughly had the same view” that tariffs weigh on trade activity, weaken business sentiment, and increase market volatility. He noted that these factors will be integrated into BoJ’s evolving assessment of Japan’s economic outlook and monetary policy.

    Ueda reaffirmed BoJ’s intention to raise interest rates gradually, provided underlying inflation continues to converge toward the 2% target. But he emphasized a cautious, data-dependent approach.

    “We would like to scrutinize various data that comes in, without pre-conception,” he said.

    Fed’s Kashkari: Trade shift could raise US borrowing costs

    Minneapolis Fed President Neel Kashkari highlighted the economic risks tied to shifts in the US trade balance and lingering uncertainty from ongoing trade disputes.

    Speaking at an event overnight, Kashkari noted that the US’s persistent trade deficit has long been supported by foreign capital inflows, which have helped keep interest rates low. However, if the U.S. were to move toward a trade surplus and lose its status as the “singular premier destination for capital”, borrowing costs could rise, along with the neutral interest rate.

    Kashkari emphasized that resolving current trade disputes with major partners could provide much-needed clarity for businesses and households, reducing the “extraordinary uncertainty” they currently face.

    He warned that a collective loss of confidence could quickly ripple through the economy, “really bring down the economy, really slow it down” and potentially triggering job losses. While such a downturn hasn’t materialized yet, Kashkari said it’s a risk he is “keeping a close eye on.”

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3830; (P) 1.3864; (R1) 1.3889; More…

    Intraday bias in USD/CAD stays mildly on the upside at this point. Recovery from 1.3780 short term bottom could extend higher. However, upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166. On the downside, firm break of 1.3780 will resume the whole fall from 1.4791.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP GfK Consumer Confidence Apr -23 -22 -19
    23:30 JPY Tokyo CPI Y/Y Apr 3.50% 2.90%
    23:30 JPY Tokyo CPI Core Y/Y Apr 3.40% 3.20% 2.40%
    23:30 JPY Tokyo CPI Core-Core Y/Y Apr 3.10% 2.20%
    06:00 GBP Retail Sales M/M Mar -0.60% 1%
    12:30 CAD Retail Sales M/M Feb -0.40% -0.60%
    12:30 CAD Retail Sales ex Autos M/M Feb 0.00% 0.20%
    14:00 USD UoM Consumer Sentiment Index Apr 50.7 50.8
    14:00 USD UoM Consumer Inflation Expectations Apr 6.70%

     



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