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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.

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.

Headline CPI 0.9%qtr/2.4%yr; Trimmed Mean 0.7%qtr/2.9%yr; Weighted Median 0.7%qtr/2.9%yr. Momentum in core inflation at the bottom of the band.

The CPI gained 0.9% in the March quarter, stronger than market consensus (0.8%) and Westpac’s expectation (0.7%) but we did highlight upside risk to our estimate. The annual pace of headline inflation, at 2.4%yr now definitively below the mid-point of the RBA’s inflation target band.

The more important measure of core inflation, the Trimmed Mean, rose 0.7% taking the annual pace down into the RBA’s target band at 2.9%yr with the two-quarter annualised pace dropping down to 2.4%yr. Westpac and the market had been looking for a 0.6% increase while we did see the risk to the upside of our estimate.

With the momentum in core inflation definitively at the bottom of the target band inflationary pressures have moderated, and the door is open for a rate cut in May. Our Chief Economist, Luci Ellis, had already locked in a rate cut for May “Lock it in: RBA to cut 25bps in May” and today’s data provides no reason to question that view.

The Monthly CPI Indicator came in 2.4%yr, the market was expecting 2.2%yr, Westpac was at 2.0%yr. Most of the variation to our estimate was due to stronger than expected increases in food, electricity, health, travel and education.

Headline inflation has been significantly reduced by various cost-of-living measures, but this is now being reversed as the energy rebates are being unwound, particularly the large $1,000 lump sum rebate in Qld. This quarter we saw a 16.3% increase in electricity prices which was stronger than our 14.5% estimate (worth an additional 0.05ppt on the CPI).

We estimated that these measures have shaved 0.5% off inflation in the year to March 2025. However, in the quarter with electricity prices rising we found that the rebates added 0.1ppt to the CPI. However, impact of these cost-of-living measures have had a limited impact on core inflation. As such the Trimmed Mean remains a reliable measure of core inflationary pressures and thus presents no hinderance to a rate cut by the RBA.

Core inflation is being held down by the moderation in housing inflation due to the moderation in rents and dwellings. Rents did rise a robust 1.2% in the quarter, but this is a step down from the 1.6% increase last September, 2.0% last June and 2.1% last March. The 0.6% increase last December was due to the maximum assistance from the Commonwealth Rent Assistance being increased by 10% on 20 September 2024. The annual pace of rental inflation is now down to 5.5%yr from 6.4%yr in December and a March 2024 peak of 7.8%yr.

This also has an impact on services inflation as the slower pace of services inflation in the March quarter was driven by moderating price growth for insurance and rents. Services inflation was 3.7%yr in March, down from 4.3%yr in December and a recent peak of 4.6%yr at September 2024. Market sector services, which is our preferred measure of domestic inflationary pressure, fell –0.1% in the March quarter, the first quarterly decline since June 2020. This took the annual pace down to 3.3%yr from 4.2%yr in December. This is the slowest pace of market services ex volatile inflation since March 2022. We had been expecting this measure to moderate as wages undershot expectations through 2024.

Dwelling prices fell –0.4% in March following a –0.2% fall in December taking the annual pace of dwellings inflation to 1.4%yr. Dwellings inflation peaked at 20.7yr in September 2022. The ABS notes that the moderation in dwellings inflation reflects project home builders increasing incentives and promotional offers to entice new business in a subdued new home market.

Compared to our expectations the main variations in the components of the CPI were:

• Food increased 1.2% vs 1.0% expected (+0.02ppt). The main contributors to the rise were fruit & vegetables (+2.8%), meals out & take away foods (+0.6%), non-alcoholic beverages (+3.2%) and food products n.e.c (+1.6%). Most of our error was with fruit & vegetables.
• Clothing footwear fell –0.8% vs –0.4% expected (–0.01ppt). The main contributors to the fall were garments (-1.1%) and footwear (-3.7%), driven by post-Christmas and back to school sales.
• Household contents & services fell –0.9% vs –1.1% expected (+0.01ppt). Furniture (-5.5%) was the main contributor to the fall, driven by post-Christmas sales on bedroom furniture. There was a partial offset from child care (+2.4%).
• Health rose +2.9% vs 2.5% expected (+0.03ppt). Medical & hospital services (+2.7%) and pharmaceutical products (+5.3%) rose because of the cyclical reduction in the proportion of consumers who qualify for subsidies under the Medicare Safety Net and Pharmaceutical Benefits Scheme (PBS). The safety net thresholds for both the PBS and Medicare are reset on 1 January each year.
• The most significant variation to our estimate was in recreation which recorded a –1.6% fall compared to –2.4 fall expected (0.10ppt) of which most was due to a smaller than expected fall in holiday travel: –3.6% vs –5.3% expected (0.11ppt). International holiday travel & accommodation (-7.6%) was the main contributor to the fall due to lower demand following the peak December holiday period.
• Education was a touch stronger at 5.2% vs 5.0% expected (0.01ppt). Secondary education (+6.4%) and preschool & primary education (+5.6%) rose reflecting fee increases at the start of the school year. The rises were driven by higher operating costs that were passed through as higher school fees. Tertiary education rose 3.6% due to the annual CPI indexation being applied to university course fees at the start of the year. This was partly offset by soft growth in TAFE fees as the federal government, in partnership with state and territory governments, continued fee-free TAFE places in 2025.

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 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.

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 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.

Business confidence has largely held up since the US tariff announcement.

Key results, April 2025

• Business confidence: 49.3 (Prev: 57.5)
• Expectations for own trading activity: 47.7 (Prev: 48.6)
• Activity vs same month one year ago: 11.3 (Prev: 0.8)
• Inflation expectations: 2.65% (Prev: 2.63%)
• Pricing intentions: 49.3 (Prev: 51.2)

The ANZ April business opinion survey – the first one held since the US “Liberation Day” tariff announcement – was remarkably steady. Sentiment about general conditions was softer compared to March, but firm’s own-activity expectations were little changed, and remain at high levels.

ANZ did note that responses were weaker in the later part of the month, albeit based on a small sample. There was also some divergence in responses by sector, with confidence picking up in the more domestically-focused services sectors, while it fell in the more trade-exposed manufacturing and agricultural sectors.

A net 11% of firms said that conditions were better than a year ago, a strong lift from the March reading. This does at least point to some consistency in the responses, since it was in April last year when this measure fell sharply. Employment was also reported to be slightly higher compared to a year ago.

The pricing gauges of the survey were mixed. A net 78% of firms expect their own costs to increase, compared to 74% in March. This measure has been picking up since late last year, and likely reflects the fall in the New Zealand dollar over that time (though the currency actually rose strongly in the second half of April). However, firms’ own pricing intentions eased back slightly, and expectations of the inflation rate over the year ahead were little changed.

Overall, businesses seem to have taken a measured view so far of the impact of the US tariffs. That may change over time, once we see whether or not the hard data supports some of the more dire predictions about the impact on the global economy. As we noted in our initial assessment, the direct impact of the 10% on NZ exports is unwelcome but is likely to be manageable; the indirect impacts will be more significant but are harder to assess, and will depend in part on how policymakers in other countries respond.

Key Highlights

• Gold started a downside correction from the $3,500 resistance zone.
• A key contracting triangle is forming with resistance at $3,335 on the 4-hour chart.
• EUR/USD is consolidating gains below the 1.1420 resistance zone.
• WTI Crude Oil prices are again moving lower below the $62.00 resistance.

Gold Price Technical Analysis

Gold prices started a downside correction from the $3,500 resistance zone. The price declined below the $3,420 and $3,350 support levels.

The 4-hour chart of XAU/USD indicates that the price even declined below $3,300. A low was formed at $3,260 and the price is now consolidating losses. The price is still well above the 200 Simple Moving Average (green, 4 hours) and the 100 Simple Moving Average (red, 4 hours).

There is also a key contracting triangle forming with resistance at $3,335 on the same chart. On the upside, immediate resistance is near the $3,335 level.

The next major resistance sits near the $3,350 level. A clear move above the $3,350 resistance could open the doors for more upsides. The next major resistance could be $3,380, above which the price could rally toward the milestone level of $3,420.

On the downside, initial support is near the $3,285 level. The first key support is near $3,265. The next major support is near the $3,250 level. The main support is now $3,235. A downside break below the $3,235 support might call for more downsides. The next major support is near the $3,200 level.

Looking at EUR/USD, the pair started a short-term downside correction and might soon aim for a fresh increase if it clears the 1.1420 resistance.

Economic Releases to Watch Today

• US Gross Domestic Product for Q1 2025 (Preliminary) – Forecast 0.4% versus previous 2.4%.
• US Personal Income for March 2025 (MoM) - Forecast +0.4%, versus +0.8% previous.

S&P 500 index: ⬆️ Buy

• S&P 500 index broke key resistance level 5500.00
• Likely to rise to resistance level 5700.00

S&P 500 index recently broke the key resistance level 5500.00 (former support from March, which also stopped A-wave of the active ABC correction B from the start of April).

The breakout of the resistance level 5500.00 coincided with the breakout of the 50% Fibonacci correction of the downward impulse from February.

S&P 500 index can be expected to rise toward the next resistance level 5700.00, target price for the completion of the active impulse wave C.