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Daily Pivots: (S1) 141.92; (P) 142.34; (R1) 142.77; More...

Intraday bias in USD/JPY remains neutral for the moment. On the upside, above 144.02 will resume the rebound from 139.87. But ear 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 142.26 will argue that the recovery from 139.87 short term bottom 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.

Daily Pivots: (S1) 0.6357; (P) 0.6403; (R1) 0.6431; More...

Intraday bias in AUD/USD is turned neutral first. On the upside, above 0.6448 will resume the rebound from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6343 support will confirm short term topping, and turn bias back to the downside for 55 D EMA (now at 0.6312) and below.

In the bigger picture, as long as 55 W EMA (now at 0.6440) holds, the down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

Daily Pivots: (S1) 1.3805; (P) 1.3838; (R1) 1.3868; More...

Intraday bias in USD/CAD remains neutral for the moment. On the upside, break of 1.3903 minor resistance will extend the rebound from 1.3780. But 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.

Daily Pivots: (S1) 0.9359; (P) 0.9384; (R1) 0.9405; More....

Intraday bias in EUR/CHF stays neutral at this point. Rebound from 0.9218 is either a corrective move, or the third leg of the pattern from 0.9204. Break of 0.9445 will resume the rebound towards 0.9660 resistance. However, on the downside, 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.

Daily Pivots: (S1) 0.8482; (P) 0.8497; (R1) 0.8509; More...

Intraday bias in EUR/GBP remains on the downside for the moment. Fall from 0.8737 is in progress for 55 D EMA (now at 0.8450). Sustained break there will argue that whole rebound from 0.8221 has completed and turn near term outlook bearish. On the upside, though, break of 0.8622 resistance will bring retest of 0.8737.

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.

Daily Pivots: (S1) 1.7729; (P) 1.7809; (R1) 1.7915; More...

Intraday bias in EUR/AUD stays neutral and outlook is unchanged. Corrective pattern from 1.8554 could extend, but downside should be contained by 38.2% retracement of 1.5963 to 1.8854 at 1.7750. On the upside, above 1.8014 minor resistance will bring retest of 1.8554 first. Firm break there will resume larger up trend. However, firm break of 1.7750 will bring deeper fall to 55 D EMA (now at 1.7399) and possibly below.

In the bigger picture, up trend from 1.4281 (2022 low) is in progress for 100% projection of 1.4281 to 1.7062 from 1.5963 at 1.8744. Firm break there will pave the way to 138.2% projection at 1.9806, which is close to 1.9799 (2020 high). Outlook will remain bullish as long as 1.7062 resistance turned support (2023 high) holds even in case of deep pullback.

Daily Pivots: (S1) 161.76; (P) 162.16; (R1) 162.43; More...

No change in EUR/JPY's outlook and intraday bias stays neutral. On the upside, firm break of 164.16 will resume whole rise from 154.77. Next target will be 100% projection of 154.77 to 164.16 from 158.27 at 167.66. However, break of 158.27 will bring deeper fall back to 154.40/77 support zone.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Markets

The US released a first batch of economic data yesterday. Both JOLTS (7.19mn March vs 7.48mn in February) and Conference Board consumer confidence (April) fell short of expectations. The latter saw a particular deterioration in the forward looking component, which tumbled to the lowest since 2011. Given the survey’s skew to the employment and income situation, the numbers are essentially a partial update of the labour market ahead of Friday’s payrolls. It explains the market reaction, consisting of a 3.4-4.7 bps yield drop across the US curve, wiping out earlier gains. There was a slight outperformance at the front as markets raised Fed easing bets to just shy of 100 bps for the year. President Trump would approve. He lashed out at Fed chair Powell again during an event to mark his 100th day in office. He also touted his tariff policy, saying it would bring growth and manufacturing back to the US. Net daily changes for Bund yields varied between -0.6 bps (2-yr) to -2.4 bps (10-yr). The dollar held a minor advantage in technically insignificant trading. EUR/USD oscillated around 1.14, the trade-weighted dollar index held north of 99. Sterling’s attack at the EUR/GBP 0.85 level is unrelenting but could soon face tough resistance around the 0.8474 area in case of a break. The economic calendar today goes straight into highest gear with GDP numbers in France this morning (printed in line with expectations), Germany and the euro area (expected at 0.2% q/q, 1.1% y/y). Those member states also release April inflation numbers. The ADP job report is due in the US and could show employment growth easing from 155k to 115k. Q1 GDP growth is also on tap. Heavy import frontloading ahead of the April 2 tariff announcement weighs on the expected headline print (-0.2% q/q annualized). We are therefore focused at the contribution coming from consumer and capital spending. US price deflators published simultaneously should confirm the Fed’s limited scope to cut rates in the near term – as long as the labour market remains resilient. A unidirectional market reaction against the backdrop of such a wide data range is not obvious. We’re instead looking for some bottoming out and consolidation in core bond yields, especially in Europe where we think markets went ahead of themselves. EUR/USD & DXY are locked in a stalemate in the 1.14 & 98-100 area.

News & Views

Australian Q1 inflation was a bit mixed but didn’t change market expectations for the Reserve Bank of Australia to continue with a second 25 bps rate cut at the May 19-20 meeting. Headline inflation printed 0.9% Q/Q (from 0.2% Q/Q). Y/Y measures unexpectedly stayed unchanged at 2.4%. The trimmed mean measure rose sightly more than expected from 0.5% Q/Q to 0.7% Q/Q. Even so, the Y/Y figure slowed from 3.3% to 2.9%, the lowest since 2021Q4. It also bring this inflation measure back within the 2-3% RBA inflation target range. Annual services inflation was 3.7% in the March quarter, down from 4.3% in the December quarter and the slowest since the June 2022 quarter. The Aussie dollar this morning rises modestly to AUD/USD 0.6415, but stays in consolidation modus after recent rebound against a broadly weaker dollar.

The central bank of Hungary (MNB) as expected yesterday left its policy rate unchanged at 6.50%. A careful and patient approach to monetary policy remains necessary due to risks to the inflation environment as well as trade policy and geopolitical tensions, it said. For now maintaining tight monetary conditions is warranted. The MNB expects inflation to cool further in April after a decline to 4.7% in March. From there it is expected to remain near the upper bound of the central bank tolerance band in the coming months. Profit margin caps introduced by the authorities are expected to moderate inflation, as will lower energy prices. However, upside risks to inflation could intensify in the event of increases in tariff rates. Rising uncertainty in international financial markets also increases risk aversion towards Hungarian assets, which also poses a risk of higher inflation. Despite current MNB cautious wait-and-see attitude markets still expect the MNB to cut interest rate further in 2025H2. The forint hardly reacted and maintained recent gains (EUR/HUF 404.35).

Market sentiment somehow improved on news that Donald Trump would ease auto tariffs by lifting some levies on imported auto parts, and to avoid aluminium and steel levies stacking up alongside the rest of the tariffs—probably as a marketing move as he gave a speech in Michigan marking his 100 days in office. As a result, carmakers around the world and major US indices posted gains yesterday.

Part of the gains was also due to hope that US corporate earnings would be resilient to tariff uncertainty, that Scott Bessent is eyeing July 4th to pass a multi-trillion-dollar tax cut package to help improve the new administration’s plunging approval ratings, and that the Federal Reserve (Fed) would step in if things worsened. But the majority of the news was less than ideal—to say the least. So let me cite a few that caught my attention.

First, GM lowered its earnings guidance for the year citing tariff uncertainty, suspended a $4bn share buyback plan, and postponed its earnings call as it needed more clarity on tariffs before making additional statements. The tariff relief for carmakers helped GM recover most early losses, but the stock remained capped at its 50-DMA and the top of its November-to-date bearish trend channel.

Kraft Heinz cut its annual sales and profit outlook due to weakening consumer sentiment and the prospect of higher costs. Chipmaker NXP tanked nearly 7% after warning of a ‘very uncertain environment.’ UPS announced it will cut 20,000 jobs and close dozens of facilities. S&P Global lowered its revenue forecast, expecting that companies will delay debt sales due to highly uncertain market conditions.

Apple said it would produce iPhones in the US—good luck with that. Adidas said it would reflect tariff-led price increases in US prices. Amazon first suggested it could show the additional cost of tariffs on bills—like Chinese retailers do—but walked back the decision after facing the White House’s rage, which called the move ‘political’. Hilton lowered its earnings forecast, PayPal didn’t improve its forecast despite a stronger-than-expected quarter, while Spotify offered a muted outlook.

Then, Super Micro Computer posted softer-than-expected quarterly results after the bell, Snap flagged lower sales, and Starbucks' sales fell slightly faster than expected.

US futures are in the negative this morning.

The rest of the week will be crucial for Big Tech. Microsoft, Meta, and Qualcomm are due to release earnings today after the bell; Apple and Amazon report tomorrow. There are reports—pre-earnings—that Microsoft and Amazon could scale back spending plans due to an overestimation of AI demand that may have resulted in oversupply. Spending plans will be just as important as quarterly results. Hints of lower AI spending from the four biggest spenders globally (expected to spend over $300bn this year) could send markets back into bearish territory, while reiterating spending commitments could convince some investors to buy the dip—not knowing, however, how big a hit US Big Tech could take from the trade war, as Europe is now directly targeting these firms in retaliation against Trump’s tariff attacks.

Anyway, on the data front, the news isn’t brilliant either. US job openings fell in March, and the Atlanta Fed’s GDPNow forecast was revised down further to 2.7%—suggesting that the US economy may have contracted by 2.7% in Q1. The first official US GDP estimate is due today, with a Bloomberg consensus pointing to 0.4% growth—so expect some disappointment. But disappointment doesn’t mean a risk-off move. Since a sharp contraction has likely already been priced in, a weak number could lead to dip-buying on rising dovish Fed expectations.

Besides that, US ADP data and CPI updates from Eurozone countries will be in focus.

In FX, the US dollar is slightly better bid this week on signs that Trump is pulling back tariffs, but risks remain tilted to the downside. The EURUSD saw strong resistance into the 1.1420 level after data yesterday hinted at softer sentiment across the Eurozone: lower-than-expected GDP growth coupled with a higher-than-expected CPI print from Spain. Today, French and German numbers will be in focus. The euro needs strong growth and soft inflation to break the 1.15 resistance against the US dollar.

European equities, meanwhile, are enjoying a rare calm amid Trump’s attacks. The Stoxx 600 extended gains above the 200-DMA for a second straight session, yet trade negotiations with the US aren’t going in the right direction—which could limit enthusiasm as the index approaches a critical Fibonacci resistance.

Over in China, the CSI 300 remains particularly flat amid conflicting PMI numbers—official data suggests contraction, while the Caixin print hints at slight expansion in manufacturing activity. That, coupled with worsening global trade sentiment and a 3.76 million barrel rise in US weekly oil inventories, sent US crude below $60pb this morning. The outlook for oil and industrial metals remains negative given the gloomy global growth outlook.

In Australia, the latest CPI print came in stronger than expected, giving some support to AUDUSD. But the Aussie still needs reassurance that China is doing fine to clear its 200-DMA resistance.

Closer to home, UK food prices posted their biggest jump since January last year due to tax increases and a sharp rise in the national minimum wage, which hit supermarkets particularly hard. The 6.7% minimum wage hike fuelled UK inflation expectations and tamed dovish Bank of England (BoE) bets.

On the inflation spectrum, the euro appears to be in the best place—with potential disinflationary impact from a stronger euro and weaker energy prices. The UK sits in the middle, with an uncertain inflation and growth outlook as tax and wage hikes could offset disinflation from stronger sterling and softer energy. The US is in the worst place among the three, with sharply deteriorating growth and rising inflation expectations.

As such, the euro has the most positive outlook, followed by sterling, and lastly the US dollar.

In focus today

In the US, the preliminary Q1 GDP is due for release this afternoon. Front-loading of imports ahead of the trade war pushed growth contribution from net exports deeply into negative territory, and we think GDP contracted by 0.1% q/q AR. Underlying private consumption growth likely remained steady ahead of the sharpest 'Liberation Day' tariff hikes. March PCE data and the Q1 Employment Cost Index will also be released at the same time but might gather less attention than usual given the focus on more timely data. Finally, ADP's private sector employment report will provide markets with the first sense of what to expect from the Friday's April Jobs Report.

In the euro area, we follow inflation data from France, Germany, and Italy. It will be interesting after Spanish inflation yesterday surprised on the upside, both in headline and core inflation.

Also in the euro area, we receive the first estimate of GDP growth in Q1 2025, which we expect to show that real GDP rose 0.3% q/q. Growth likely picked up in the first quarter of the year as indicated by PMIs averaging 50.4 compared to 49.3 in Q4 2024 and industrial production rising. We expect growth to once again be especially driven by Spain, while Germany should also show positive growth in Q1.

Economic and market news

What happened overnight

In China, we received manufacturing PMIs from Caixin (private version) and NBS. Caixin fell to 50.4 (prior 51.2), marking the weakest growth since January. However, a figure above 50 still marks the seventh consecutive month of expansion, suggesting that Beijing's stimulus measures are supporting economic recovery. NBS fell below expectations, coming in at 49.0 (cons: 49.8, prior: 50.5). Both output and new orders declined, but the fall was mostly driven by foreign orders shrinking the most in 11 months.

Though China claims it has positioned itself to be more resistant to the negative implications of the trade war, the setback in the PMIs illustrate well that tariffs of this magnitude is a loser's game. As pain grow on each side, we find it likely that the US soon approaches China and aim for a short-term deal agreeing to lower tariffs from the current high levels.

What happened yesterday

In the US, JOLTs Job openings declined more than expected (7.2m vs. cons: 7.5m) in March, so before the Liberation Day. Other details from the JOLTs report were not as concerning. Hiring picked up in March, and the number of involuntary layoffs declined. Overall, it seems labour market conditions remained relatively steady.

In line with expectations, the Conference Board's consumer confidence measure ticked lower for the fifth consecutive month. The decline was driven especially by the expectations component, while current situation assessment remained steadier. Most sub-components weakened as well, as more consumers thought jobs were "hard to get" and plans for big-ticket purchases (vacations, cars, homes etc) slowed down. Inflation expectations, unsurprisingly, ticked higher as well. We pay close attention to the 'hard' data that we'll get over the coming days/weeks, as consumer confidence surveys have not had the best correlation to actual spending during the recent uncertainty.

In the euro area, credit growth continued its steady increase in March. The annual growth rate of loans to households increased to 1.7% y/y in March (prior 1.5%), while loans to non-financial corporations increased to 2.3% y/y (prior 2.1%). Rising credit growth following lower interest rates is supporting growth especially in the industry. Yet, the growth rate remains quite low in a sign that we should not expect activity to rise sharply but only gradually. The credit impulse, which measures the 6-month momentum in credit growth, and is often better correlated with GDP compared to the annual growth rate of credit, also supports the latter view.

Also in the euro area, the preliminary inflation data from Spain showed stronger than expected inflation in April. Headline inflation fell to 2.2% y/y (cons: 2.0% y/y) in April from 2.3% y/y in March. The move was driven mainly by energy prices that have declined over the month, after rising in the same month last year. Euro area HICP inflation is expected to tick down to 2.1% y/y from 2.2% y/y and we see upside risks to that forecast now with Spain coming in higher than expected.

In Sweden, the GDP indicator for Q1 landed on the weak side of expectations (0.0% q/q, 1.1% y/y). Note though that the GDP indicator is historically unreliable and tends to not only be volatile but also underestimating actual GDP data. Retail sales for March showed a healthy +0.3% m/m increase (+3.6% y/y), which must be viewed as positive given that consumer confidence dropped from 94.6 to 89.8 during the same month.

Continuing in Sweden, the NIER Survey showed a roughly unchanged overall tendency indicator (94.8 vs 95.2 in March) but in the underlying numbers we note a clear drop in consumer confidence, which dropped sharply to 88.8 from 81.6. Manufacturing confidence rose from 96.4 to 99.6. Furthermore, the survey showed a large increase in inflation expectations among companies, up from 1.7% to 2.7%. Overall, we would view ETI as "normal", but the inflation expectations and price plans are hawkish for the Riksbank and makes it hard to motivate a near-term cut.

In Norway, retail sales increased +0.6 % m/m in March (consensus: 0.3%, DB: 0.1%), taking the 3M/3m growth to 1.5% in Q1. Hence, the upward trend witnessed since last autumn continues, driven by higher real wage growth and fading headwinds from higher mortgage rates and saving ratios. The solid lift in retail sales could question the need for rate cuts, but keep in mind that a solid uptick in private consumption is well in line with our, and most other forecasters', expectations for 2025. That said, this was on the strong side of our expectations.

In the trade war, Trump signed orders to ease auto tariffs on the eve of his 100th day in office. The order gives carmakers two years to boost domestic component percentages in US-assembled vehicles, just days before 25% import taxes was set to kick off in automotive components. The order will not affect the 25% tariff on vehicle imports to the US.

Equities: Equities were higher yesterday. US markets posted solid gains with S&P 500 gaining 0.6%, close to day-highs. Market breadth was impressive, with little discrepancy between defensives/cyclicals, growth/value and so on. We interpret this as investors raising the overall equity allocation again, chasing the rally, rather than making selective bets. One unusual sector dynamic worth noting: Real estate and banks being top performers - at the same time. This is a combination few investors would buy into a few months ago but which makes fully sense now, as these sectors will benefit from a pause in the recession trade, but not get meaningfully impacted by the swings in FX or trade disruptions, if the tariff discussion would shift back again. US futures are heading lower this morning.

FI & FX: With risk appetite holding up well, US Treasury yields continued to drift lower, resulting in a modest bull steepening of the curve. In contrast, the 2Y German Bund yield was broadly unchanged around 1.74%, while the 10Y Bund yield fell 2bp, marginally tightening the transatlantic spread and continuing the recent convergence in US-European yield differentials. In an otherwise relatively quiet week, the USD found some support from the continued positive risk environment, bolstered by de-escalating tariff headlines - even as JOLTS job openings saw a larger-than-expected decline in March (ahead of Liberation Day). EUR/SEK has been in consolidation mode around current levels just below 11.00 for the last two weeks. Today, Norges Bank will announce its daily FX transactions (both fiscal and FX cap) for May. We expect an unchanged net NOK purchase amount just above 0.