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Daily Pivots: (S1) 1.1337; (P) 1.1367; (R1) 1.1420; More...

No change in EUR/USD's outlook and intraday bias stays mildly on the downside. Pullback from 1.1572 short term top could extend lower. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039. On the upside, break of 1.1572 will resume larger up trend.

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

Daily Pivots: (S1) 1.3277; (P) 1.3313; (R1) 1.3375; More...

Intraday bias in GBP/USD remains mildly on the downside at this point. Pullback from 1.3422 short term top would continue lower. But downside should be contained by 38.2% retracement of 1.2099 to 1.3422 at 1.2917. On the upside, firm break of 1.3433 will resume larger up trend.

In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could be the second leg. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on break of 1.3433 at a later stage.

Daily Pivots: (S1) 142.12; (P) 142.78; (R1) 143.29; More...

Intraday bias in USD/JPY remains mildly on the upside. Rebound from 139.87 short term bottom could extend higher. But overall risk will stay on the downside as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds. On the downside, decisive break of 139.26 will carry larger bearish implications.

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) 0.8237; (P) 0.8273; (R1) 0.8306; More….

Intraday bias in USD/CHF remains mildly on the upside for the moment. Corrective recovery from 0.8038 short term bottom could extend to 38.2% retracement of 0.9200 to 0.8038 at 0.8482. But upside should be limited there. On the downside, break of 0.8038 will resume larger down trend.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8794) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 0.6364; (P) 0.6389; (R1) 0.6433; More...

AUD/USD is staying in consolidations below 0.6438 and intraday bias stays neutral. Further rally is expected as long as 55 D EMA (now at 0.6302) holds. Above 0.6438 temporary top will resume the rebound from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, sustained trading below 55 D EMA will argue that the rebound has completed and turn bias back to the downside.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA (now at 0.6443) will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

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.

Yesterday allowed global risk investors to take a deeper breath. Dovish comments from Federal Reserve (Fed) members, and de-escalation of trade tensions between the US and China allowed a further recovery in global equities. Optimism was backed today by the Chinese announcement that it is considering easing tariffs on some US imports, further signalling de-escalation of trade tensions and supporting earlier comments from the Trump administration that triple-digit tariffs could come ‘substantially’ down. As a result, the Chinese CSI 300 is better bid this Friday, while the Hang Seng Index in HK is up nearly 1.50% at the time of writing. Part of the optimism is due to de-escalation of trade tensions, and part is due to Politburo’s reiteration of pro-active fiscal and supportive monetary stimulus to support the economy.

Turning dovish?

In the US, a few Fed members have started to lower their guard. Christopher Waller said he would support rate cuts if jobs are affected, and Beth Hammack indicated that the next Fed cut could arrive as early as June if there’s clear evidence of a US economic downturn. If Atlanta Fed’s GDP Now forecast is any indication, the US economy could post a 2.5% decline in Q1, down from 2.4% in Q4. Activity in Fed funds futures shows a more than 60% chance of a June rate cut.

The risk is the inflation outlook for the US is uncertain. If the economic slowdown doesn’t temper inflationary pressures, rising inflation from tariffs will limit the Fed’s scope for action. For now, however, market movements suggest investors are optimistic the Fed will act sooner rather than later. The US 2-year yield—best capturing Fed expectations—stands below 3.80% this morning compared to around 4.40% at the beginning of the year. But we sense that companies will try to pass tariffs on to their clients. Giants like P&G and Unilever warned this week: Unilever beat estimates in Q1 by raising prices, and P&G’s CEO said the company will ‘likely’ raise prices due to higher tariffs. Now, all eyes are on inflation and employment figures to determine what the Fed should do and how much they could ease pressure.

In Europe, the situation is different. Falling energy prices and a cheaper US dollar make the inflation outlook much softer than in the US, and softening inflation means the European central banks could continue cutting interest rates to support their economies, which are poised to slow down due to rising trade tensions. On the other hand, European government spending on security and infrastructure will likely boost prices in limited areas and won’t generate broad-based price pressure. As such, the diverging inflation outlooks for the US and Europe—and the idea that European economies will take a softer hit—support the euro against a broadly weakened US dollar. Though, the pair is struggling to find buyers into the 1.14 mark, as there’s growing fear that a too-strong euro could hurt European economies: 60% of the Stoxx 600's sales come from abroad and melt when converted back to euros. So far, the earnings season in Europe has been inconclusive. Luxury companies posted disappointing results, while tech results were mixed, with strong growth from SAP but significantly lower bookings from ASML.

Across the Channel, the FTSE 100 is outperforming the Stoxx 600. Miners are performing well. Fresnillo, for example, is up nearly 80% since the beginning of the year, while Antofagasta is up more than 30% since its April dip, as copper futures rally despite a gloomy global outlook. This rally is explained by a weaker dollar, Chinese stimulus, supply constraints, and perhaps increased buying before tariffs. Easing trade tensions could further boost appetite for the UK’s energy- and commodity-rich FTSE 100.

In the US, the selloff appears to have eased this week, and the first glance at tech earnings wasn’t that bad. Tesla did poorly for political reasons, but Netflix beat estimates, and Google—who announced its latest results yesterday after the bell—showed better-than-expected revenue growth for both its advertising and cloud segments, justifying the company’s AI spending plans. This gave AI investors a timid smile, indicating that the AI theme isn’t dead—it’s just been overshadowed by Trump’s trade news. As a result, Alphabet jumped more than 4.5% in after-hours trading and could break free from its year-to-date bearish trend. If all goes well, today’s post-earnings jump in Alphabet could push its share price above the critical 38.2% Fibonacci retracement of this year’s slump, into the medium-term bullish consolidation zone. The idea that AI is helping boost revenue and justify spending should also fuel appetite in AI enablers like Nvidia, diverting attention from the tariff war for a while.

As such, Nasdaq futures are leading gains this morning, and sentiment across major markets suggests that the week will likely end in a better mood than when it started! Let’s cross our fingers that the weekend news don’t spoil the latest optimism.

In focus today

The week concludes with a light macro schedule, where we keep an eye on the University of Michigan's revised April consumer sentiment survey. The preliminary data showed yet another worrying uptick in inflation expectations.

Economic and market news

What happened overnight

In Japan, Tokyo inflation for April came in higher than expected, with the headline at 3.5% y/y (prior: 2.9%) and core at 3.4% y/y (cons: 3.2%, prior: 2.4%), driven by a broad-based uptick in prices. April marks the start of a new fiscal year, a time when firms reassess their price-setting, and this year's increases were higher than expected, as firms are passing on rising input costs to consumers. Combined with the strong wage growth ahead, we expect the BoJ to continue its policy normalization path - though this remains contingent of the trade war. Also addressing the risks of US tariffs, BoJ Governor Ueda stated yesterday that the BoJ will continue its hiking cycle if underlying inflation converges toward the 2% target, but the impact of US tariffs could change that course.
What happened yesterday

In the US, March durable goods orders was much stronger than expected at 9.2% m/m SA (cons: 2.0%). The figures were clearly affected by front-loading, as orders of primary metals and cars have ticked higher in early 2025. Looking at details, the largest uptick occurred in non-defence aircraft orders at 149% y/y, mostly reflecting a strong increase in Boeing's order books, since excluding aircraft, new orders hardly increased at all. As the uptick mainly reflects temporary factors, the market impact was muted.

Several Fed speakers were on the wire yesterday. Cleveland Fed President (hawk and non-voting member) unsurprisingly struck a hawkish tone, emphasizing that the Fed should be patient rather than pre-emptive in assessing how tariffs will impact inflation and growth. Fed Governor Waller (dove and voting member), conversely, conveyed a dovish tone, noting that it would not be surprising to see more layoffs and higher unemployment. Minneapolis Fed President Kashkari (hawk and non-voting member) expressed concern that the trade policy made him "nervous" about potential large-scale layoffs, though so far, he has only heard about businesses beginning to plan for this scenario if trade uncertainty persists. Importantly, the blackout period ahead of the May meeting begins on Saturday. The Fed staying put is seemingly a done deal, unless Trump somehow causes some renewed chaos in markets before the meeting. We maintain our call for the next cut in June and expect quarterly 25bp reductions until the policy rate reaches a terminal range of 3.00-3.25% by mid-2026.

In the US-China trade war, Beijing yesterday played some of their cards, stating that the US should cancel all "unilateral tariff measures" against China "if it truly wanted" to resolve the trade war. Currently, no economic and trade negotiations between the two countries have taken place, despite the US frequently mentioning de-escalation in recent days.

Firms also appear to be factoring in the ongoing trade war between the US and China, as reflected by Apple's plan to relocate the production of iPhones sold in the US from China to India as soon as next year, according to the Financial Times this morning.

In Germany, the Ifo index for April was surprisingly positive, not really impacted by tariffs, as was expected. The assessment of the current economic situation rose to 86.4 in contrast to an expected decline (cons: 85.4, prior: 85.7). Interestingly, the expectations component declined only marginally to 87.4, much less than expected (cons: 85.0, prior: 87.7). Hence, like the PMI data, the Ifo index did not really show an abrupt impact of the Trump trade war. Details show that the smaller-than-expected decline in expectations was due to construction expectations rising, services remaining unchanged, and manufacturing expectations declining. Hence, the manufacturing leg was marginally impacted by the trade war, while the construction expectations ticked higher most likely due to the infrastructure package.

Equities: Equity markets continued their upward trajectory yesterday, consistent with the pattern observed in recent sessions. Once again, US equities led the gains, with cyclical stocks outperforming, supported by declining implied and realised volatility. As US cyclicals, growth, and tech stocks outperformed, we also saw significant underperformance in minimum-volatility stocks. The investment narrative remains relatively straightforward at present. Macro and micro data are taking a back seat, with market focus squarely on whether the US continues to escalate - or de-escalate - the trade conflict. Yesterday brought further signals from the US administration pointing towards de-escalation. In the US yesterday, Dow +1.2%, S&P 500 +2.0%, Nasdaq +2.7% and Russell 2000 +2.0%. Asian equity markets are broadly in the green this morning, supported by initial signs from China suggesting a softening stance, not further escalation. Reports indicate that China is considering exempting certain product categories from the steep 125% tariffs currently imposed on US imports. Futures in both Europe and the US are also trading higher this morning, with US futures driven by positive earnings after the close yesterday.

FI & FX: Rates rallied, both in the US and Europe, during yesterday's trading session. The USD weakened somewhat against the EUR yesterday but regained all back in today's morning session. Rumours that China might suspend the elevated tariffs on some of the US goods imports, lifts Chinese sentiment this morning. A rather empty macro-agenda makes lacks any triggers for big movements, and focus will be on any (geo)political comments that might come during the day.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

USD/CAD Daily Outlook

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

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

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