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Daily Pivots: (S1) 1.6284; (P) 1.6314; (R1) 1.6340; More...

Despite loss of downside momentum as seen in 4H MACD, further fall is expected in EUR/AUD with 1.6418 resistance intact. Retest of 1.6126 low should be seen next. Firm break there will resume larger down trend from 1.8554. However, firm break of 1.6418 will indicate short term bottoming, and turn bias back to the upside for stronger rebound instead.

In the bigger picture, fall from 1.8554 (2025 high) is in progress and deeper decline should be seen to 61.8% retracement of 1.4281 to 1.8554 at 1.5913, which is slightly below 1.5963 structural support. Decisive break there will pave the way back to 1.4281 (2022 low). For now, risk will stay on the downside as long as 55 W EMA (now at 1.7129) holds, even in case of strong rebound.

Daily Pivots: (S1) 0.9211; (P) 0.9231; (R1) 0.9266; More....

While EUR/CHF's rebound was strong, it's still capped below 0.9264 resistance. Intraday bias remains neutral and more consolidations could be seen. But still, further rise is expected with 0.9155 support intact. On the upside, firm break of 0.9264 will resume the rise from 0.8979 to 0.9394 resistance next. However, break of 0.9155 will turn bias back to the downside for deeper pullback.

In the bigger picture, considering bullish convergence condition in W MACD, a medium term bottom should be in place at 0.8979. Sustained trading above 55 W EMA (now at 0.9277) will add more credence to this case. Further break of 0.9394 resistance will pave the way to 0.9660 resistance next. However rejection by the 55 W EMA will set up another fall through 0.8979 low at a later stage.

Markets

Core bond yields yesterday staged a further (forceful) bear steepening heading into the Fed, BoC, BoE and ECB policy meetings scheduled today and tomorrow. Markets are growing ever more convinced that a prolonged stalemate in the US-Iran conflict, including blockage of the Strait of Hormuz, will inevitably have lasting consequences for multiple supply chains. Most recent communication from the parties involved suggests that both of them consider themselves to be in a position not to be forced into concessions. In this respect, the WSJ reported that US President Trump told aides to prepare for an extended blockade of Hormuz. Brent oil ‘settles’ north of $110/b. The UAE announcing to leave the OPEC cartel didn’t help much. Turning to Europe, the ECB’s consumer expectations survey (March) showed citizens preparing/fearing a new, sharp and extended rise in global price levels. Inflation expectations for the next 12 months jumped from 2.5% to 4%. Three year ahead expectations also rose way more than expected to 3%. Combined with a strong stagflation message from last week’s PMI’s, this for sure won’t pass unnoticed at the ECB as it prepares the communication on its reaction function at tomorrow’s policy meeting. German yields added between 7.8 bps (2-y) and 1.2 bps (30-y). Consecutive steps in June (100%) and July (75%) are now seen as highly likely as is a third one by year-end. The ‘extreme’ positioning of end March/early April is again within reach. US pricing again was more modest with the 2-y adding 3.9 bps and the 30-y ceding 1.2 bps. The BoE is also under pressure to give a clear anti-inflationary commitment with the 10-y gilt yield surpassing 5%. The direct spill-over to other markets again was modest/orderly. Equities in the US lost up to 0.9% (Nasdaq). The Eurostoxx 50 ceded 0.41%.The dollar also profited only modestly from the oil ascent (DXY 98.64; EUR/USD 1.171). The yen underperformed as the BoJ failed to give a hard commitment on further policy normalization (USD/JPY 159.6).

Despite the turbulent global context, the Fed is widely expected to stick to a (modestly hawkish) hold today. Labour market and other US activity data over the previous six weeks were strong enough for the Fed to reconfirm that they can hold the policy rate at a tentatively restrictive level for some time to come. The main focus at the press conference probably will go to whether Powell will stay in the FOMC after his term as Fed chair ends mid-May. In Europe, the focus will stay on the next batch of (April) national inflation data (Spain, Germany, Belgium) as the impact of the conflict in the Middle East is filtering through to end prices. Even if this pass-through to official CPI data might be a bit different/delayed across individual countries, the trend probably won’t provide much comfort for ECB policymakers. We assume little market correction on the recent rebound in (European) yields as long as the stalemate in the Middle East persists and oil holds near current (or higher) levels. For (US) equities, Q1 earnings from bellwethers (Alphabet, Microsoft, Meta Platforms and Amazon) should ‘justify’ the recent tech rally.

News & Views

Australian CPI in Q1 accelerated to a consensus-matching 1.4% Q/Q and 4.1% Y/Y well above the RBA 2-3% target band. Core measures came in close to expectations, varying between 3.3% and 3.5%. The monthly March print showed a material quickening to 1.1% m/m (flat in Febr) reflecting the initial energy impact of the Iran war. The quarterly print, however, was only slightly higher than the RBA’s February projection, prior to the Middle East conflict. While much of the impact is probably yet to come, markets were bracing for a bigger inflationary shock already. It’s causing a bull steepening move in the Australian swap yield curve with changes amounting to up to -11 bps at the front end. The market implied probability for a third consecutive rate hike in May fell from around 80% to less than 70%. AUD/USD is trading around 0.716 compared to the multiyear highs of 0.72 in the days before.

Hungary’s incoming prime minister Magyar and the European Commission are negotiating to salvage some €10bn in pandemic funding that would otherwise be lost beyond an August deadline. The money is part of a total of more than €20bn in frozen resources over rule of law concerns during the Orban administration. Hungary would need to implement a slew of anti-corruption measures and judicial independence in order to regain access. That can happen fairly quickly because of Tisza’s supermajority. But for the €10bn in focus, the country also needs to present shovel-ready projects in a rewritten Recovery and Resilience Plan to claim the money. The remaining three months to do so is very tight. Some of the options being discussed include bringing forward projects currently allocated to other European programs with more distant expiry dates, Bloomberg reported citing an official, or use some of the available funds to increase the capital of its state investment bank, similar to what for example Spain has done. Those steps would salvage the funding while letting it be spent over a longer period of time.

Daily Pivots: (S1) 1.1684; (P) 1.1706; (R1) 1.1735; More….

Intraday bias in EUR/USD remains neutral for the moment. Further rally is expected with 1.1662 support intact. On the upside, sustained trading above 61.8% retracement of 1.2081 to 1.1408 at 1.1824 will pave the way to retest 1.2081 high. However, firm break of 1.1662 support will indicate the the rebound from 1.1408 has completed, and bring deeper decline back towards this low instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1530). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

Daily Pivots: (S1) 159.12; (P) 159.45; (R1) 159.95; More...

Intraday bias in USD/JPY remains neutral as consolidation continues below 160.45. Further rise is expected with 157.49 cluster support (38.2% retracement of 152.25 to 160.45 at 157.31) intact. On the upside break of 160.45 will target a retest on 161.94 high. However, firm break of 157.31/49 will bring deeper fall back to 61.8% retracement at 155.38 next.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 153.81) holds. Firm break of 161.94 will pave the way to 61.8% projection of 102.58 to 161.94 from 139.87 at 176.75.

Daily Pivots: (S1) 1.3472; (P) 1.3509; (R1) 1.3556; More...

Range trading continues in GBP/USD and intraday bias stays neutral. Further rise is still in favor with 1.3446 support intact. On the upside, firm break of 61.8% retracement of 1.3867 to 1.3158 at 1.3596 will pave the way to retest 1.3867 high. However, break of 1.3446 will turn bias back to the downside for deeper pullback.

In the bigger picture, current development suggests that price actions from 1.3867 are merely a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is back in favor for a later stage, towards 1.4248 key resistance (2021 high).

Daily Pivots: (S1) 0.7853; (P) 0.7883; (R1) 0.7923; More….

Intraday bias in USD/CHF stays neutral for the moment. On the downside, below 0.7830 will turn bias to the downside for 0.7774 support. Sustained break of 61.8% retracement of 0.7603 to 0.8041 at 0.7770 will pave the way to retest 0.7603 low. However, decisive break of 0.7933 will argue that fall from 0.8041 has completed as a corrective move. Further rise should then be seen through 0.8041 to resume the whole rebound from 0.7603.

In the bigger picture, rebound from 0.7603 medium term bottom is seen as correcting the fall from 0.9200 only. Rejection by 55 W EMA (now at 0.8053) will affirm this bearish case, and setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage. Though, sustained break of 55 W EMA will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 1.3632; (P) 1.3662; (R1) 1.3712; More...

Intraday bias in USD/CAD is turned neutral first with current recovery. Further decline is expected as long as 1.3713 resistance holds. Below 1.3596 will resume the decline from 1.3965 to retest 1.3480 low. Nevertheless, firm break of 1.3713 will turn bias to the upside for stronger rebound instead.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen, as the pattern extends, to 61.8% retracement of 1.2005 to 1.4791 at 1.3069. However, decisive break of 38.2% retracement of 1.4791 to 1.3480 at 1.3981 will argue that the correction has completed with three waves down to 1.3480 already. Further break of 1.4139 will confirm and bring retest of 1.4791 high.

We had two big headlines yesterday — neither Trump-related, hallelujah — and these were:

1. The WSJ reporting that OpenAI missed several monthly internal targets for new users and revenue, and
2. The UAE is leaving OPEC.

It was hard to choose which one to start with, but here we go — I'll start with the UAE news.

The UAE is leaving OPEC after six decades. They want to follow their own oil strategy, they don't want to be constrained by OPEC production quotas, they have had disputes about this before with Saudi Arabia, and they felt that the current Middle East disruption was the right moment to take the step.

What's important to know is that the UAE accounted for 12% of OPEC's total production and will surely have an impact on the punch power of OPEC globally. OPEC accounted for about 35–40% of global market share; without the UAE, this share would drop to roughly 31–36%. It means that OPEC's output restrictions would have a smaller impact on stabilizing global oil prices, and worse, the UAE's departure could encourage other producers to pursue their national interests independently — meaning maximizing production to maximize revenue in a context where smaller overall production can't provide enough support to oil prices to make the output-restriction strategy worthwhile. In short, higher competition and more supply will likely weigh on medium- to long-term oil prices once the Middle East dust settles and trade through the Strait of Hormuz is restored.

In the short run, however, given the massive disruption to oil flows through the Strait, the split will have little impact. The geopolitical tensions weigh much heavier. The oil market is undersupplied due to the near-complete halt of oil flows to global markets, and the UAE cannot bring barrels to market even if it wanted to. This is why oil prices rose yesterday. Both WTI and Brent crude traded past $105 per barrel, and longer-dated oil futures rose — though they rose less, hinting that the UAE news was indeed diluted by the highly tense geopolitical context.

Higher oil prices did not enthuse equity investors around the world, but the real hit to equity sentiment was the news that OpenAI missed internal targets on revenue and user growth, suggesting that revenue growth may not be enough to meet future — and lofty — computing contracts. In short, OpenAI may miss future payments if it cannot bring in enough money.

A startup missing targets could have been a minor issue for global financial markets, were it not sitting at the centre of a hundreds-of-billions-of-dollars AI ecosystem that includes the world's biggest and most richly valued names. I think of Nvidia — down around 1.60% yesterday — AMD down 3.40%, Oracle down more than 4%, and SoftBank down nearly 10%. Microsoft, on the other hand, rebounded 1% after having announced a day earlier that it is loosening its ties with the company.

The reason OpenAI missed its targets is likely the emergence of Google's Gemini and Anthropic's Claude models, which have come to challenge OpenAI especially in the lucrative coding business — they simply took a share of OpenAI's revenue. And indeed, since last October, Anthropic-related stocks have done notably better than OpenAI-related ones. The circles of course overlap, with some big companies sitting at the intersection of both, like Nvidia and AMD. But Google and Amazon, for example, have been strongly backing Anthropic, while Oracle and Microsoft were among the major names in the OpenAI circle.

So what's next? While the OpenAI news impacted Google and Amazon less than it did companies heavily betting on OpenAI — looking at you, SoftBank — the risk of slowing revenue growth due to intense competition could, and probably will, become a headache for other AI players as well, since scaling is costly and competition is extremely intense. This should have a limited impact on chip and computing demand overall, but companies must navigate revenue potential and risks more carefully — because if OpenAI misses a payment, there will be a domino effect down the line. That is the worst-case scenario for the AI rally and could have global implications.

In any case, futures are in positive territory this morning, suggesting the market has absorbed the OpenAI news and decided to look past it.

The Federal Reserve (Fed) will be in focus today, along with earnings from Google, Microsoft, Meta, and Qualcomm due after the bell. US Big Tech is expected to report around 40% revenue growth for last quarter — slowing, but still strong. Beyond that, 80% of S&P 500 companies have beaten revenue expectations so far.

Across the Atlantic, the picture is more mixed. Barclays fell short of its US rivals in Q1 results, while BP gained around 1% after confirming that Middle East-driven volatility contributed to profit. But appetite for European equities is waning due to rising energy costs and deteriorating growth prospects. Meanwhile, 12-month inflation expectations for the euro area spiked to 4% — a rise that could encourage workers to demand higher wages and companies to pass additional costs on to clients, potentially starting a fresh inflation spiral that could oblige the European Central Bank (ECB) to tighten policy by hiking rates. The ECB is expected to hold when it announces its latest policy decision tomorrow. A benchmark 10-year euro area government yield is nonetheless painting a worrying picture. The EURUSD, meanwhile, remains under pressure despite the hawkish implications for the ECB, as the broadly stronger US dollar is weighing on the pair amid persistent geopolitical tensions and rising oil prices.

In focus today

Tonight the FOMC is expected to keep its target rate unchanged within the current range of 3.5-3.75%. It is likely the last meeting with Jerome Powell as Fed chair, before Kevin Warsh is expected to replace him. For more details, read our Research US - Fed preview: In a waiting mode, 27 April.

We will receive German and Spain flash inflation numbers today, the most important releases ahead of the euro area print tomorrow. Furthermore, the EU Commission's business confidence indicator is released today where focus is on the selling price expectations. The forward-looking nature of the survey is important for the ECB.

In Sweden, we will receive preliminary GDP data and the NIER survey, which will provide crucial insights into the outcome for the first quarter. We expect 0% q/q growth and 2% y/y growth for the preliminary GDP figures. The quarterly NIER survey will also reveal firms' inflation expectations, which over time has proven to be one of the most reliable inflation indicators.

In the afternoon, the Bank of Canada is widely expected to keep its key policy rate unchanged at 2.25%, thus marking the fourth consecutive hold.

Overnight, China releases PMIs for April with both the private as well as official NBS data coming out. The numbers will give an indication of how the Chinese economy is coping with the war in the Middle East. As seen in the euro zone last week, manufacturing PMIs are expected to hold up at levels above 50 while the service sector could see a hit due to negative effects on transportation and a decline in tourism.

Economic and market news

What happened overnight

In Australia, the Reserve Bank of Australia's (RBA) preferred measure of core inflation, the trimmed mean measure, rose by 0.8% in Q1, slightly below market expectations and the 0.9% increase seen in Q4. RBA is expected to hike rates again next week, but it is not a done deal yet with around 70% probability priced in.

What happened yesterday

In oil markets, prices continued to climb slightly yesterday, with Brent crude rising to USD 111/bbl, returning to pre-ceasefire levels. Expectations for a swift reopening of the Strait of Hormuz have diminished significantly, with investors on Polymarket now assigning roughly a 40% probability of oil flows normalising before the end of May, down sharply from 70% immediately after the ceasefire. Markets are likely to remain sceptical about progress in US-Iran talks and may only react decisively once ships begin to cross the strait again.

Furthermore, the UAE's decision to leave OPEC and OPEC+ from 1 May marks a notable shift in the oil market. While the move allows the UAE to produce at full capacity independently, the news did not affect oil pricing due to the continued closing of the Strait of Hormuz. Reuters reports that the UAE, which accounted for 3% of global crude supply with a production of 3.4 million bbl/day before the Iran war, could ramp up output to its full capacity of 5 million bbl/day once shipping resumes. As OPEC's fourth-largest producer, the UAE's departure reduces the group's control over global oil production from 50% to approximately 45%. While Iraq has confirmed its commitment to OPEC+, the UAE's exit raises questions about the organisation's cohesion and signals a potential regime shift in the oil market. While such a shift could potentially drive a substantial drop in oil prices, this is contingent on the reopening of the Strait of Hormuz.

In the euro area, the ECB's Consumer Expectations Survey for March revealed sharply higher inflation expectations, with median 1Y CPI expectations jumping to 4.0% from 2.5%, and 3Y expectations rising to 3.0% from 2.5%. The monthly increase in 1Y expectations is nearly as large as the surge seen in March 2022, signalling a hawkish shift. Particularly medium-term expectations climbed, which prompted an upwards push on the EUR rates. Meanwhile, the ECB's quarterly bank lending survey showed banks tightening credit standards across all loan categories in Q1, driven by higher perceived risks. Further tightening is expected in Q2, which could help cool the euro area economy ahead of anticipated ECB rate hikes this summer.

In Japan, following the BoJ's decision to keep rates unchanged, Governor Ueda avoided firm guidance on the timing of a rate hike but kept the door open for potential action at the June meeting. Market pricing of hikes remained steady, with 17bp worth of hikes priced in by June and 50bp total rate hikes in 2026. We continue to expect a rate hike at the June meeting.

In the US, the April Conference Board consumer confidence index improved for the third consecutive month, in contrast to the less optimistic University of Michigan survey. In any case, overall confidence remains weak compared to pre-pandemic levels, and inflation expectations stay modestly elevated. ADP also released their weekly private sector jobs growth estimate, which showed that employment grew by 39k per week on average over the four weeks ending April 12, which is roughly consistent with the reference period for the upcoming April NFP. While the correlation to BLS's Jobs Report is far from perfect, ADP's weekly estimates have signalled improving sequential jobs growth into April.

In Hungary, the central bank (MNB) left its benchmark rate unchanged at 6.25% yesterday, in line with both our expectations and market consensus.

Equities: Equities moved lower yesterday, with most regions in the red and the sector rotation tilting more defensive. What is worth noting, however, is that tech led the decline while the VIX actually fell. In other words, this was not primarily a classic negative macro-data sell-off. It was at least as much about renewed concerns around the AI space, triggered by OpenAI warning on revenue developments. That naturally brought one of the key underlying concerns in the AI narrative back to the surface: monetisation. But investors should be careful not to extrapolate too aggressively. What we have heard from OpenAI does not match what we have heard from Anthropic. Put differently, this may be less a story about broad-based AI demand disappointment and more about a meaningful shift in users from ChatGPT towards Claude.

Asian equities are mixed this morning, with Chinese equities stronger in Hong Kong. European and US futures are marginally higher.

FI and FX: EUR/USD continues to trade near 1.17 ahead of tonight's FOMC meeting where no change to the policy rate and no firm forward guidance is expected. The following press conference should be the last one for J. Powell as a Fed Chair. The BoC is to leave its policy rate unchanged at 2.25%, too, while focus will be on the quarterly MPR. The UAE's decision to leave OPEC might be a bearish trigger for oil prices once the SOH reopens, for now however oil remains at elevated levels with the June Brent Crude at USD111.2. In Sweden we will get important data from the NIER survey and the GDP Indicator for Q1. The Norwegian retail sales numbers are likely less of a mover of the NOK than potential surprises from the FOMC.