Sample Category Title

BoJ Governor Kazuo Ueda emphasized today that the central bank remains "vigilant" to upside surprises in "underlying inflation.

While recent "very high" inflation has been driven largely by temporary factors like import costs and food prices, there’s still a possibility that underlying inflation could accelerate more quickly than expected.

Ueda warned that if such "broad-based inflation" materializes, BoJ would need to respond by raising interest rates and even take “stronger steps”.

However, for now, he reaffirmed the view that underlying inflation remains “just a bit” short of the 2% target, though it is on track to gradually converge to that level.

Meanwhile, data released today showed Japan’s services producer price index rose 3.0% yoy in February, a deceleration from January’s 3.2% and below expectations of 3.1%.

The RBA was too hawkish in its rhetoric last month to consider a cut at this meeting. The labour market, wages, consumption and trimmed mean inflation are all crucial for the path beyond that.

We are sufficiently confident that the RBA will keep rates on hold on 1 April that I will be writing my post-meeting note from London. We do not expect any surprises from the RBA this meeting that would require spending the early hours of the London morning trying to work out what is going on. While we still expect a rate cut in May, back-to-back cuts in February and April were never on the table. The RBA was too hawkish in its rhetoric last month for that, and the Board made clear that last month’s cut did not foreshadow more. Cutting again at the April meeting would therefore be damaging to its credibility.

Recall that the RBA’s February forecast round implied no further decline in trimmed mean inflation from here – flat at 2.7%, the same annualised rate achieved in the second half of 2024. This was predicated on a market path for the cash rate with roughly 90bps of policy easing over this year. In order to get inflation all the way back to the 2.5% midpoint of the target range, the RBA expects to need to cut by less than this. If things start turning out in line with this narrative, with inflation stuck at current rates and wages growth holding up in the near term, then it would be reasonable to expect the RBA to cut at most once more this year.

Our own view of the outlook is not wildly different, with trimmed mean inflation cycling around the desired level of 2.5%, just 0.2ppts below the RBA’s forecasts. We also expect a small lift in the unemployment rate, to 4.5% compared with the RBA’s 4.2% forecast, which is barely above the current level of 4.1%. (It is worth noting that Treasury’s Budget forecasts also have unemployment staying at 4¼% out to 2026/27.) However, our forecasts diverge enough to have different policy implications. If our forecasts are broadly correct, then the RBA is likely to cut three more times this year, bringing the cash rate to 3.35%.

Since the February meeting, the data flow has been in line with, or a little softer than the RBA’s forecasts. The monthly inflation indicator has been consistent with trimmed mean inflation at or below the RBA’s expectations. The headline CPI indicator outcome for February was essentially as expected, flat in the month and 2.4%yr (versus 2.5%yr expected, with the difference coming from some small revisions to past data and rounding). The monthly trimmed mean ticked down to 2.7%, suggesting we are on track to see the annual pace of the quarterly trimmed mean CPI series hit 2.7% in the March quarter. Pleasingly, inflation in the stickier housing-related and financial services components continues to unwind.

The labour market was a bit mixed in February, with both employment and participation stepping down. And population growth slowed a bit more sharply than we had expected, which points to both demand and labour supply being lower than assumed, and less housing-related inflationary pressure. (The Budget forecasts did not incorporate the latest information on the labour market or population.)

Other developments since the February RBA meeting include the breaking of the ‘US exceptionalism’ narrative, along with the associated market sell-off (now partially reversed) and decline in US consumer confidence. The downside risks to global growth from the US-instigated trade war are also a concern, though Treasury modelling in yesterday’s Budget suggests the implications for the Australian economy are modest.

The federal government’s announcement of a six-month extension to the electricity rebates pushes out the timing of the bounce-back in CPI inflation. The RBA will look through this and continue to focus on trimmed mean inflation. The other tax and spending measures were modest enough that they will not affect the RBA’s view of the outlook materially, even though market pricing did shift a bit on the night.

We therefore think that the April meeting will prove to be something of a ‘dead rubber’. Even so, there are some things to watch for in the post-meeting statement. Along with any update to the outlook for inflation, we look for any commentary on the outlook for wages; as best as we can tell, wages growth would actually have to pick up from here to meet the RBA’s near-term forecasts for Wage Price Index growth. We think this is unlikely and will be watching for how the RBA characterises developments here.

Likewise, we look for more discussion about the consumption outlook. Recent timely data have been a bit mixed, and the RBA’s outlook for consumption growth in calendar 2025 is notably above consensus, even after the slight downward revision in the February SMP. While Assistant Governor Hunter noted in a recent speech that spending has indeed picked up for goods and services less affected by Black Friday and other sales periods, nobody was suggesting otherwise. The real risk around the consumption outlook is that the lift in spending in response to the Stage 3 tax cuts, while positive, is less than historical experience would lead one to expect. That is the message of our own Westpac–DataX Consumer Panel, which points to only about 25 cents in every dollar of extra disposable income being spent, which is on the low side of earlier expectations.

Looking forward to May, the inflation data will once again be crucial. So much is hanging on that difference between 2.7% and 2.5% that even a small downside surprise for the RBA on trimmed mean inflation in the March quarter will cement our current view on the timing and scale of further cuts.

• Despite rising recession fears and declining US consumer confidence, the Dow Jones Industrial Average is experiencing gains.
• US consumer confidence has fallen for the fourth consecutive month.
• Key Technical Levels Identified for Dow Jones.

US Equity markets continued their advance today as investors evaluated the impact of upcoming reciprocal tariffs following U.S. President Donald Trump's hint at possibly softening his trade policy.

Dow Jones Heatmap

Source: TradingView

President Trump stated that not all planned tariffs would start on April 2nd, with some countries potentially being exempt. However, new tariffs on autos, pharmaceuticals, and a 25% tariff on Venezuelan crude were mentioned.

Meanwhile, Fed Governor Kugler said monetary policy is still tight but noted slower progress toward the 2% inflation goal since last summer, calling the recent rise in goods inflation "unhelpful."

US Data Ramps Up Recession Fears

Lackluster US data failed to dent market optimism proving once more that at present, Tariff chatter is the dominant force driving market moves.

U.S. consumer sentiment continued to drop in March, with the Conference Board’s Consumer Confidence Index falling from 98.3 to 92.9, the lowest level since February 2021.

The print is worse than the July 2022 print which was the nadir of the Biden Presidency when inflation was at 9%. It is the fourth monthly decline in a row.

The consumer expectations index based on consumers’ short-term outlook for income, business, and labor market conditions recorded its lowest reading in 12 years.

Source: Macrobond, Conference Board

In March, consumers' expectations for inflation over the next year increased, according to the Conference Board survey. These expectations had been falling last year but have gone up for three months in a row now.

As US data continues to underwhelm recession fears are only likely to grow. Today's report showed that opinions on current business conditions are now almost neutral, while consumers have become more negative about the future, with growing pessimism about upcoming business conditions.

Is this the pain President Trump was referring to and will it lead to a recession? For now US Equity markets are on the rise but i expect market concern to grow especially if US data continues to underwhelm moving forward.

Technical Analysis - Dow Jones (DJIA)

Looking at Dow Jones from a technical standpoint, we had a gap higher over the weekend before the index enjoyed a bullish start to the week yesterday with gains of 1.36%.

Price is currently testing a key resistance level at 42764 with a break above opening up a test of resistance at 43402.

A positive for bulls is that the 14-period RSI has crossed above the 50 handle which is a sign that momentum may be shifting.

Also supporting a bullish narrative is that US stocks have historically exhibited positive performance trends during the final two weeks of March since 1950.

If history repeats itself the Dow Jones could be set for further gains or at the least hold onto most of its recent gains since bottoming out on March 13 at 40665.

Dow Jones Daily Chart, March 25, 2025

Source: TradingView

Support

• 42446
• 41950
• 41400

Resistance

• 42764
• 43402
• 44451

Gold: ⬆️ Buy

• Gold reversed from support zone
• Likely to rise to the resistance level 3060.00

Gold recently reversed up from the support zone between the round support level 3000.00 and the 38.2% Fibonacci correction of the upward impulse from the start of March.

The upward reversal from this support zone stopped continues the active minor impulse wave 5 of the intermediate impulse wave (3) from November.

Given the clear daily uptrend, Gold can be expected to rise to the next resistance level 3060.00 (which reversed the price earlier this month).

Nasdaq-100: ⬆️ Buy

• Nasdaq-100 broke resistance zone
• Likely to rise to resistance level 20500.00

Nasdaq-100 index recently broke the resistance zone between the round resistance level 20000.00 and the resistance trendline of the daily down channel from February.

The breakout of this resistance zone accelerated the active intermediate impulse wave (3) from the start of March.

Nasdaq-100 index can be expected to rise to the next resistance level 20500.00 (former strong support from January and the target price for the completion of the active impulse wave (3)).

Technical Analysis

• Current Policy Rate: 0.5% (Highest since 2008)
• Previous Hikes:
  • March 2024: Exit from ultra-loose stimulus.
  • July 2024: Rate increased to 0.25%.
  • January 2025: Rate increased to 0.5%.

Fundamental Factors Affecting the BOJ's Decision

1. Accommodative Financial Conditions Persist
   • Policymakers acknowledged that interest rates remain negative, even after the latest hike.
     Further tightening remains an option if economic and price trends align with expectations.
2. Inflation and Wage Growth Trends
   • The BOJ revised its inflation outlook upwards, citing sustained wage growth.
   • Governor Kazuo Ueda emphasized rising food prices and substantial wage increases as key risks to watch.
3. Global Uncertainty and U.S. Tariffs
   • The BOJ is cautious about the economic impact of Trump's tariffs, which could disrupt global trade.
   • Further rate hikes will depend on how external risks unfold.

Key Takeaway for Traders

• Short-term: BOJ is unlikely to rush into another hike but will monitor inflation and global risks.
• Medium-term: Stronger wage growth and persistent domestic inflation could push the BOJ toward further tightening.
• Long-term: Traders should watch for signs of a shift away from accommodative policy as Japan adjusts to its post-stimulus monetary framework.

GBPJPY – D1 Timeframe

The onset of bearish momentum was set up by the bearish break of structure on the daily timeframe chart of GBPJPY, so we can describe the ongoing bullish movement as a retracement. The area of interest for the continuation of the bearish momentum is the rally-base-drop supply zone. The overlapping trendline resistance is an additional confluence favoring the bearish sentiment.

GBPJPY – H4 Timeframe

We realize on the 4-hour timeframe chart of GBPJPY that the highlighted daily timeframe supply was formed right around the 88% level of the Fibonacci retracement tool. Considering all other factors already discussed, price can be expected to react off the highlighted supply area.

Analyst's Expectations:

• Direction: Bearish
• Target- 186.175
• Invalidation- 199.725

Gold price bounced on Tuesday after a double failure on important $3000 support signaled that shallow correction from new record high might be over.

Persisting uncertainty over the magnitude of negative impact from looming US reciprocal tariffs on global economy and fragile geopolitical situation, keep strong safe haven demand.

Investors are also concerned by signals of slowdown of the US economy, which adds to factors that fuel migration into safety, although the latest calmer tones about tariffs from President Trump, may slow the process.

As I mentioned in my previous comments, near- term action is expected to remain biased higher as long as the price stays above $3000, with limited dips to provide better levels to re-enter larger bullish market.

Overall bullish daily studies support the notion, with today’s close above $3033 (Monday’s high / 5DMA) to validate bullish signal and open way for fresh acceleration towards all-time high ($3057).

Res: 3036; 3047; 3057; 3079
Sup: 3021; 3009; 3000; 2981

Markets

European stocks hesitated yesterday to join Wall Street up to 2% higher but they catch a nice bid today. Equities in the region rise around 1% in what is otherwise a news-poor trading day. With the April 2 “Liberation Day” date approaching fast there’s an apparent increase in articles diving deeper in what US President Trump could announce in terms of reciprocal tariffs. We’re moving beyond the flurry of often confusing headlines to highlight one report that’s grabbing some attention. The Financial Times citing people familiar wrote the US administration is considering a two-step approach in the new tariff regime. It would entail launching (trade) investigations first under the so-called Section 301 of the 1974 Trade Act while simultaneously invoking rarely-used emergency powers to install immediate tariffs in the meantime. The articles under which this could happen, according to the FT, would mean tariffs of either up to 50% or 15%. The fact of the matter remains, however, that no one, including the market, simply does know what to expect. Meanwhile, the tariff chatter is causing further headaches for US consumers as confidence continues to slip. The Conference Board composite indicator fell to its lowest since the pandemic months, driven lower by the expectations component. The latter tanked to just 65.2, the lowest since 2013. The outcome dovetails with the U. of Michigan survey two weeks ago. And just like that, US growth worries are back at the front after one day of absence. US front end yields extended a previous intraday retreat from the highs to new daily lows around 4.01% (2-yr -2 bps). Longer maturities similarly hit new lows for the day but nonetheless underperform vs the front. European/German yields appear to have found a bottom end last week and eke out a few bps today. Curves bear steepen with net daily changes of up to 4 bps. The US dollar faces some selling pressure, including against a euro that’s not doing great today either. The latter has been correcting lower over the past week and could remain lackluster going into April 2. EUR/USD did shrug off early morning weakness that pushed it temporarily sub 1.08 to trade around 1.081 currently. DXY revisits the 104 area. There’s a striking outperformance by the Scandinavian currencies today, led by the Swedish crown. Aided by a technical acceleration after breaking to new YtD highs, SEK is rallying towards EUR/SEK 10.80, its strongest level since November 2022. Oil prices in commodity markets build on a rebound that started early March. Brent rises towards $73.5/b. Gold bounced off the 3K mark.

News & Views

According the a Eurobarometer poll conducted for the European Parliament in January and February, Europeans have high expectations from the EU in its role to protect them against global challenges and security risks. 74% of citizens think that their country benefits from EU membership. This is the highest result ever recorded in a Eurobarometer survey for this question since it was first asked in 1983. 66% of citizens want the EU to play a greater role in protecting them against global crises and security risks. Defence and security (36%) and competitiveness (32%) are considered the top policy priorities. Regarding economic topics that are at the forefront for the European Parliament to address as priority, four in ten Europeans mention inflation, rising prices and the cost of living (43%). At the national level, results for a stronger role of the EU range from 87% in Sweden to 47% in Romania and 44% in Poland.

UK retail sales in March declined sharply amid weak confidence, the March CBI distributive trades survey shows. The March outcome marked the sixth consecutive monthly decline. Retail sales volumes fell at an accelerated rate in the year to March (balance -41% from -23% in February). Sales are expected to fall at a slower pace next month (-30%). Sales for the time of year were judged to be below seasonal norms to a similar extent to February (-36% from -34%). Sales are expected to disappoint again in April (-35%). Retail orders placed upon suppliers fell at the same rapid pace as in February (-38%). Orders are expected to decline at a similar rate next month (-41%). Retail stock volumes in relation to expected demand were firm in March (+20% from +16% in February; long-run average +17%). Martin Sartorius, Economist at CBI analyses that ‘Firms across the retail and wholesale sectors reported that global trade tensions and the Autumn Budget are weighing on consumer and business confidence, which is leading to reduced demand’.

US consumer confidence took a sharp turn lower in March, with Conference Board’s index dropping -7.2 pts to 92.9, well below expectations of 94.2. Present Situation Index slipped -3.6 pts to 134.5.

The real concern lies in Expectations Index, which plummeted nearly 10 points to 65.2, its lowest level in 12 years and far beneath the 80-mark typically associated with recession.

Stephanie Guichard, Senior Economist at the Conference Board, noted that consumer confidence has now declined for four straight months, falling outside of the stable range observed since 2022.

Most worrying was the sharp drop in income expectations, which had previously remained resilient. Guichard highlighted that "worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”

Full US consumer confidence release here.