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

    By
    ActionForex
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    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”.

    Full UK PMI manufacturing final release here.

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

      By
      ActionForex
      -

      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.

       

      BoJ holds rates, slashes growth outlook on trade headwinds

        By
        ActionForex
        -

        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.

        Full BoJ’s Outlook for Economic Activity and Prices here.

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

          By
          ActionForex
          -

          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”.

          Full Japan PMI manufacturing final release here.

          BoC minutes: Dual uncertainties cloud policy path

            By
            ActionForex
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            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.

            Full BoC summary of deliberations here.

            US core PCE inflation cools to 2.6%, spending remains resilient

              By
              ActionForex
              -

              US core PCE price index, Fed’s preferred inflation gauge, came in flat on a monthly basis in March, undershooting expectations of 0.1% mom rise. Headline PCE index was also flat, matched expectations.

              On a year-over-year basis, core PCE inflation eased from 3.0% to 2.6%, offering some reassurance that underlying price pressures are gradually moderating. Headline PCE inflation also slowed from 2.7% to 2.3% yoy, slightly above expectation of 2.2%.

              Meanwhile, consumers continue to spend. Personal income rose 0.5% mom, outpacing forecasts of 0.6% mom. Spending jumped 0.7% mom above expectation of 0.6% mom, led by solid increases in both goods and services.

              Full US Personal Income and Outlays release here.

              Canada’s GDP contracts -0.2% mom in Feb, weakness broad-based across sectors

                By
                ActionForex
                -

                Canada’s economy unexpectedly shrank by -0.2% mom in February, missing expectations of flat growth, as a broad-based downturn weighed on output.

                Goods-producing sectors led the decline with a -0.6% mom drop, particularly from mining, quarrying, and oil and gas extraction, as well as construction.

                Sservices sector also edged lower by -0.1% mom, dragged down by transportation, warehousing, and real estate

                12 out of 20 industrial sectors posting declines.

                Looking ahead, preliminary data suggests a modest rebound of 0.1% mom in March, led by gains in mining, retail trade, and transportation.

                Full Canada’s GDP release here.

                US GDP shrinks -0.3% annualized in Q1, price pressures building up

                  By
                  ActionForex
                  -

                  The US economy unexpectedly contracted in the Q1, with GDP shrinking at an annualized rate of -0.3%, marking the first decline since Q2 2022 and falling well short of expectations for modest 0.4% growth.

                  The surprise contraction was driven by a surge in imports and a pullback in government spending, which more than offset gains in investment, consumer spending, and exports.

                  Compounding the disappointing headline figure, inflation pressures showed renewed strength. The GDP price index jumped to 3.7% yoy, significantly above the 3.1% yoy forecast and accelerating from 2.3% yoy in Q4.

                  Full US GDP release here.

                  US ADP jobs rise just 62k in Apr, well below expectations

                    By
                    ActionForex
                    -

                    US ADP private sector employment rose by just 62k in April, sharply missing expectations of a 130k increase and marking a notable slowdown in hiring.

                    Gains were split between goods-producing industries, which added 26k jobs, and service-providing sectors, which contributed 34k. By establishment size, medium-sized firms led with 40k new jobs, while small and large businesses added 11k and 12k, respectively.

                    Pay trends were mixed. Job-stayers saw wage growth slow slightly to 4.5% yoy. Job-changers experienced an uptick in pay increases from 6.7% yoy to 6.9% yoy.

                    ADP Chief Economist Nela Richardson described the tone as one of “unease,” as employers balance strong economic signals against growing uncertainty tied to fiscal policy and consumer sentiment.

                    Full US ADP release here.

                    Eurozone GDP beats expectation of 0.4% qoq growth, EU up 0.3% qoq

                      By
                      ActionForex
                      -

                      Eurozone GDP expanded by 0.4% qoq in Q1, doubling market expectations of 0.2% and signaling a stronger-than-anticipated start to the year. Across the broader EU, GDP rose by 0.3% qoq.

                      On a year-on-year basis, seasonally adjusted GDP grew 1.2% in the Eurozone and 1.4% in the EU, matching growth rates from the previous quarter.

                      Ireland led the regional performance with a sharp 3.2% quarterly increase, followed by Spain and Lithuania with 0.6% growth. Hungary was the only member state to post a quarterly contraction, down -0.2%.

                      Full Eurozone GDP release here.

                      Swiss KOF falls to 97.1, outlook considerably subdued

                        By
                        ActionForex
                        -

                        The Swiss KOF Economic Barometer slumped to 97.1 in April, down sharply from 103.9 and well below the expected 102.0, marking its first drop below the medium-term average this year.

                        The KOF Swiss Economic Institute noted that the outlook for the Swiss economy is now “considerably subdued,” as broad-based weakness weighed on the indicator.

                        According to KOF, the sharp deterioration was primarily driven by a significant setback in manufacturing sentiment, with additional pressure seen across the hospitality and broader services sectors. Financial and insurance services were the only areas showing relative stability.

                        Full Swiss KOF release here.

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

                          By
                          ActionForex
                          -

                          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.

                          Full China’s Caixin PMI manufacturing release here.

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

                            By
                            ActionForex
                            -

                            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.

                            Full Australia quarterly CPI release here.

                            NZ ANZ business confidence falls to 49.3, inflation expectations steady

                              By
                              ActionForex
                              -

                              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%.

                              Full ANZ business confidence release here.

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

                                By
                                ActionForex
                                -

                                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.

                                US consumer confidence falls to 86, expectations slumps to 13-year low signaling rising recession risks

                                  By
                                  ActionForex
                                  -

                                  US Conference Board Consumer Confidence fell for the fifth consecutive month from 93.9 to 86.0, missing expectations of 87.1. Present Situation Index dipped slightly by -0.9 points to 113.5. But the real alarm came from Expectations Index, which plummeted by -12.5 points to 5.4, the lowest level since October 2011. It is far below the threshold of 80, which traditionally signals a recession is likely within the next year.

                                  Stephanie Guichard, Senior Economist at The Conference Board, noted that the deterioration was driven almost entirely by weakening expectations around business conditions, employment prospects, and future income.

                                  Of particular concern, the percentage of consumers expecting fewer jobs in the next six months surged to 32.1%, a level last seen during the depths of the Great Recession in 2009. For the first time in five years, expectations about future income prospects turned negative, suggesting that economic worries are now spilling over into personal financial concerns.

                                  Full US consumer confidence release here.

                                  ECB consumer survey shows inflation expectations ticking higher

                                    By
                                    ActionForex
                                    -

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

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

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

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

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

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

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

                                    Full ECB Consumer Expectation Survey results here.

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

                                      By
                                      ActionForex
                                      -

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

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

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

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

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

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

                                      Full speech of ECB’s Cipollone here.

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

                                        By
                                        ActionForex
                                        -

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

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

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

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

                                        Full Germany Gfk consumer sentiment release here.

                                        Canadian Dollar steady as Liberals projected to retain power, but lack majority

                                          By
                                          ActionForex
                                          -

                                          Canadian Dollar remained steady following the country’s general election, with only a brief uptick in volatility as early results began to unfold. The ruling Liberal Party, led by Prime Minister Mark Carney, is projected to retain power. But the lack of clarity over whether they will secure a majority quickly tempered any bullish reaction in the Loonie.

                                          With the Liberals leading in 156 districts versus the Conservatives’ 145, the party still falls short of the 172 seats needed for a majority in the 343-seat House of Commons.

                                          Carney’s leadership, a former head of both BoC and BoE, is seen as a sign of stability for the country, offering some reassurance to investors. However, his tougher stance toward the US over tariffs suggests that trade relationship could face renewed challenges in the months ahead, with more difficult negotiations expected.

                                          Technically, USD/CAD is still extending the consolidations from 1.3780 short term bottom. Another bounce could be seen through 1.3903 minor resistance. But upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166). Fall from 1.4791 is expected to resume at a later stage.

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