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

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    ActionForex.com
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    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

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      ActionForex.com
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      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.

      RBA’s Kent highlights surge in FX volatility, stresses importance of market standards

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        ActionForex.com
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        In a speech today, RBA Assistant Governor Christopher Kent noted that early April saw some of the most extreme movements outside of the global financial crisis. He highlighted that Australian Dollar fluctuated within a range of 4 US cents and at one point suffered a 4.5% daily decline against the greenback — an unusually large move.

        Kent also pointed out that broader measures of FX volatility, such as those derived from options markets, spiked to levels last seen during the pandemic, with liquidity conditions deteriorating noticeably.

        While market conditions have calmed somewhat in recent days, Kent emphasized that such episodes serve as a reminder of the crucial role played by the Foreign Exchange Global Code.

        He stressed that in periods of heightened uncertainty, the Code’s standardized practices and commitment to transparency help maintain trust between participants and ensure smoother market functioning even amid significant economic shocks.

        Full speech of RBA’s Kent here.

        ECB officials highlight intensifying risks, signal openness to more rate cuts

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          ActionForex.com
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          ECB Vice President Luis de Guindos told the European Parliament today that while the Eurozone economy likely managed modest growth in Q1, risks to the outlook have intensified.

          He pointed to exceptional uncertainty stemming from new trade barriers, financial market tensions, and geopolitical instability, all of which could weigh on business investment and consumer spending in the months ahead.

          “In this environment, consumers may become cautious about the future and hold back spending,” de Guindos added.

          Separately, Finnish ECB Governing Council member Olli Rehn also flagged the growing headwinds, suggesting the central bank may need to cut interest rates below neutral levels and maintain maximum flexibility.

          Rehn emphasized that underlying inflation pressures are easing and that the escalation of US trade tariffs is largely contributing to increased downside risks for Eurozone inflation.

          IMF warns US tariffs to outweigh Germany’s stimulus, recommends just one more ECB cut

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            ActionForex.com
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            Higher infrastructure spending in Germany will offer some support to Europe’s growth outlook, but it won’t be enough to offset the damage caused by US tariffs, according to Alfred Kammer, director of the European department at the IMF.

            Speaking to CNBC, Kammer stressed that “it’s the tariffs and the trade tensions which weigh on the outlook rather than the positive effects on the fiscal side.”

            He noted that the IMF has delivered a “meaningful downgrade” to growth forecasts for Europe’s advanced economies and an even steeper downgrade for the emerging Eurozone countries over the next two years. The IMF cut its Eurozone growth forecasts by -0.2% for each of the next two years, now projecting growth of just 0.8% in 2025 and 1.2% in 2026.

            Kammer also outlined a clear policy recommendation for ECB. Acknowledging the success of the disinflation efforts, he suggested that ECB has room for “one more 25-basis-point cut in the summer,” after which it should hold rates steady at around 2%, barring major shocks.

            ECB’s Villeroy reaffirms gradual rate cut, sees no recession risk

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              ActionForex.com
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              French ECB Governing Council member Francois Villeroy de Galhau expressed confidence today that there is no imminent recession risk for either France or Europe, while inflation continues to decline.

              Speaking to RTL Radio, Villeroy also reaffirmed that the ECB retains “a gradual margin for rate cuts”, despite global uncertainties.

              Villeroy also issued a strong warning about the risks stemming from US trade policies. He criticized the administration’s protectionist stance, saying it was “playing against the US economy and unfortunately also against the world economy.”

              He stressed that protectionism ultimately leads to “less growth and more inflation.”

              China reaffirms growth target, holds back on major stimulus

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                ActionForex.com
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                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.

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

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                  ActionForex.com
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                  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.

                  Canada retail sales fall -0.4% mom in Feb, but core spending offers rebound hopes

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                    ActionForex.com
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                    Canadian retail sales declined by -0.4% mom to CAD 69.3B in February, in line with market expectations. The overall weakness was driven primarily by a -2.6%mom drop in motor vehicle and parts dealers, with all four store categories in the subsector posting declines.

                    However, beneath the surface, the data showed encouraging signs. Core retail sales—which exclude fuel and vehicle-related sales—rose by 0.5% mom.

                    Looking ahead, Statistics Canada’s advance estimate points to a 0.7% mom increase in total sales for March.

                    Full Canada retail sales release here.

                    SNB’s Schlegel: Growth may miss forecasts due to trade uncertainty

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                      ActionForex.com
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                      Swiss National Bank Chairman Martin Schlegel warned at the central bank’s annual general meeting that high levels of trade policy uncertainty continue to cloud the economic outlook.

                      “It remains very uncertain how inflation and the economy in Switzerland will develop,” Schlegel said, adding that “an economic slowdown cannot be ruled out.”

                      Growth forecasts are already under pressure, with SNB’s March projection of 1% to 1.5% GDP growth this year falling below Switzerland’s long-term average of 1.8%.

                      Schlegel reiterated that SNB stands ready to adjust policy if needed, including interest rate changes and foreign exchange interventions. However, he acknowledged the limits of monetary policy in addressing deeper structural uncertainty.

                      “Price stability cannot prevent trade policy uncertainty,” he cautioned, but emphasized that maintaining stable prices provides an essential foundation for the broader economy.

                      UK retail sales rise 0.4% mom in March, 1.6% qoq in Q1

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                        ActionForex.com
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                        UK retail sales surprised to the upside in March, rising by 0.4% mom, defying market expectations for a -0.3% mom decline.

                        The unexpected strength was attributed largely to favorable weather conditions, which lifted sales at clothing and outdoor retailers. However, this gain was partially offset by weaker performance at supermarkets.

                        Looking beyond the monthly figure, the broader quarterly performance painted an encouraging picture of consumer resilience. Retail sales volumes grew by 1.6% qoq 1.7% yoy in Q1. These results indicate that UK consumers remain relatively active despite broader economic uncertainties.

                        Full UK retail sales release here.

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

                          By
                          ActionForex.com
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                          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.

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

                            By
                            ActionForex.com
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                            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.

                             

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

                              By
                              ActionForex.com
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                              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.”

                              Fed’s Hammack: May too early for rate cut, eyes June for clearer data

                                By
                                ActionForex.com
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                                Cleveland Fed President Beth Hammack told CNBC that it’s “too soon” to consider easing interest rates at the May 6-7 FOMC meeting. Emphasizing the need for patience, Hammack said she prefers to “take our time” and monitor how the economy evolves rather than acting prematurely.

                                While Hammack stressed an open-minded approach to every meeting, she suggested that clearer direction could emerge by June.

                                “If we have clear and convincing data by June, then I think you’ll see the committee move,” she said, noting that any decision would depend on whether the incoming information provides a strong signal on the appropriate policy path.

                                ECB’s Nagel and Lane warn of growth hit from tariffs, downplay recession risk

                                  By
                                  ActionForex.com
                                  -

                                  German ECB Governing Council member Joachim Nagel acknowledged today that Germany faces significant downside risks to growth due to US tariffs.

                                  “As far as economic growth is concerned, which of course also depends on the level of the respective tariffs, the impact in Europe will also be significant for Germany,” he warned.

                                  But on inflation, “we are relatively certain that the impact on inflation in the US will be stronger than in the euro zone,” Nagel added.

                                  Separately, ECB Chief Economist Philip Lane told Bloomberg News that while the tariff shock will likely drag on Eurozone growth, the region is not on an automatic path toward recession.

                                  Lane emphasized the bloc’s diversified trade relationships beyond the US, which could act as a cushion against a more severe downturn.

                                  US durable goods orders surge 9.2% mom on transportation demand, but underlying momentum stalls

                                    By
                                    ActionForex.com
                                    -

                                    US durable goods orders soared by 9.2% mom in March to USD 315.7B, far surpassing expectations of a 1.5% mom gain. The sharp rise was driven almost entirely by a surge in transportation equipment, which jumped 27% mom to USD124.6B, marking a third consecutive monthly increase.

                                    Orders excluding defense also posted a strong 10.4% mom gain to USD 300.0B, highlighting a significant boost in civilian aircraft and related components.

                                    However, the underlying momentum in business investment appeared far less robust. Core orders excluding transportation were flat at USD 191.1B, missing forecasts for a modest 0.2% mom increase.

                                    Full US durable goods orders release here.

                                    US initial jobless claims rise to 222k, matched expectations

                                      By
                                      ActionForex.com
                                      -

                                      US initial jobless claims rose 6k to 222k in the week ending April 19, matched expectations. Four-week moving average of initial claims fell -1k to 220k.

                                      Continuing claims fell -37k to 1841k in the week ending April 12. Four-week moving average of continuing claims fell -1.5k to 1864k.

                                      Full US jobless claims release here.

                                      German Ifo climbs slightly to 86.9, but rising uncertainty signals turbulence ahead

                                        By
                                        ActionForex.com
                                        -

                                        Germany’s Ifo Business Climate Index edged higher in April, rising from 86.7 to 86.9 and beating market expectations of 85.2. Current Assessment Index climbed to 86.4 from 85.7. Expectations, while slightly lower at 87.4 compared to March’s 87.7, still surpassed the anticipated 85.0.

                                        However, a closer look at the sectoral breakdown reveals growing divergence and fragility. Manufacturing sentiment deteriorated further, dropping from -16.6 to -18.1, while trade confidence took a notable hit, falling from -23.8 to -27.0. On the other hand, modest gains in services (from -1.1 to -0.8) and construction (from -24.3 to -21.9) offered some relief, though both remain firmly in negative territory.

                                        The Ifo Institute cautioned that “uncertainty among the companies has increased,” adding that “the German economy is preparing for turbulence.”

                                        Full German Ifo release here.

                                        IMF: BoJ may delay rate hike on tariff risk, backs Yen’s haven role

                                          By
                                          ActionForex.com
                                          -

                                          Nada Choueiri, deputy director of IMF’s Asia Pacific Department, told Reuters that BoJ is likely to delay further interest rate hikes as heightened uncertainty from US tariff policy weighs on business sentiment and economic outlook.

                                          She noted that many Japanese firms are now hesitant to move forward with investment plans, opting instead to wait for greater clarity on global trade developments. “This is postponing investment decisions as well,” Choueiri said, adding that the downside risks to both growth and inflation have increased.

                                          “We do see that if our reference scenario materializes, the BoJ interest rate increases will be pushed backwards in time,” she said.

                                          Choueiri also commented on the recent appreciation of Yen, reaffirming its role as a “safe-haven currency”, supported by the country’s economic stability and predictability.

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