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We had a busy after-hours news flow, with Meta Platforms, Microsoft, Amazon and Alphabet reporting their Q1 earnings after the bell. The results were overall solid—except for Meta.

Microsoft, Amazon and Google posted strong growth in their cloud divisions as they continue to back multiple AI models, effectively diversifying individual risks. Amazon, for example, delivered its fastest cloud growth in more than three years, with spending rising above analyst expectations. The share price fluctuated between gains and losses before bulls took control, driving a nearly 3% jump.

Google shares surged around 7% in after-hours trading after beating expectations. Microsoft’s Azure posted 39% growth, reinforcing the idea that massive AI spending is now translating into revenue. Its after-hours price action remained mixed, leaving the stock roughly flat.

Meta, however, slumped sharply after announcing higher spending, now projecting between $135–145bn! Shares slumped more than 7% in the afterhours.

The issue is positioning: Meta is essentially a single bet, investing heavily in its own ecosystem, whereas the other three are supplying infrastructure—offering computing power and chips to benefit from the broader expansion of AI. At this stage, Meta looks like a more concentrated and riskier play, especially as competition intensifies.

Overall, the trend remains positive for AI-exposed stocks. Strong cloud revenue growth continues to validate the AI adoption story, which in turn supports demand for chipmakers.

In Asia, the Kospi rose to a fresh all-time high before giving back gains, even as Samsung Electronics reported striking results. Fasten your belt: revenue rose 69.2% year-on-year, net profit jumped 474%, and operating profit surged 756%. All of this was driven by the rebound in memory chip prices amid ongoing supply constraints.

Alas, despite encouraging tech news, Nasdaq futures are down around 22% this morning, overshadowed by a fresh rally in oil prices.

WTI crude oil is being aggressively bought since yesterday after the US insisted to maintain the naval blockade in place preventing Iran from coming to the negotiation table. Prices surged nearly 9% and continue to extend gains above $113 per barrel, while Brent crude is also pushing above $113 this morning.

High and rising energy prices are pushing inflation expectations higher and making central banks increasingly uncomfortable. The Federal Reserve (Fed) left rates unchanged, as widely expected, but noted that developments in the Middle East are ‘contributing to elevated uncertainty around the economic outlook’. Nothing surprising.

What was unusual, however, is that three Fed members opposed the post-meeting language suggesting the central bank would eventually resume cutting interest rates. They argued that it was too early to signal easing while the inflation outlook remains uncertain. This divergence could complicate the Fed’s communication under the new Chair, particularly as policy expectations evolve.

Following the Fed decision and the spike in oil prices, Fed funds futures have stopped pricing in any rate cuts this year. The probability of a December cut is now around 4%. The US 2-year yield has risen to 3.94%, pushing the 10-year yield to 4.43%.

Today, the European Central Bank (ECB) and the Bank of England (BoE) are expected to leave policy unchanged. However, rising inflation risks could keep the possibility of rate hikes on the table, unless growth slows sufficiently to offset the pressure from higher energy prices—the so-called ‘demand destruction’ as oil becomes too expensive for consumers and businesses.

Meanwhile, the US dollar is strengthening alongside oil prices, as more dollars are needed to purchase increasingly expensive energy.

Over the longer term, however, the dollar’s outlook is weakening. The broader issue is fiscal: the Iran war has already cost $25bn to the US government and, given the current trajectory, that figure is likely to rise. At the same time, US debt is increasing alongside expansive fiscal policies. Total US debt is approaching the $40 trillion mark.

More importantly, in fiscal year 2025, out of $10.3 trillion in total federal spending, $1.4 trillion went to national defense and $1.3 trillion to interest payments on the debt—meaning interest costs are now rivaling defense as one of the largest spending categories, behind only Social Security and Medicare. This dynamic increasingly weighs on growth outlook.

It’s a serious issue. Debt held by the public is now close to 100% of GDP, and projections from the Congressional Budget Office suggest it could rise to 120% within a decade—and potentially 131% if tax cuts are extended.

As a result, global investors are gradually shifting away from US Treasuries, potentially in favour of alternatives such as gold. In that context, dips in gold remain attractive buying opportunities. According to the World Gold Council, central banks purchased a net 244 tonnes of gold in Q1 2026—the fastest pace in over a year.

China’s official PMI data for April showed the economy maintaining modest expansion, but with a clear divergence between sectors. PMI Manufacturing edged down slightly from 50.4 to 50.3, staying in expansion for a second month. PMI Non-Manufacturing dropped from 50.1 to 49.4, the lowest since January and slipping into contraction. PMI Composite also eased from 50.5 to 50.1, indicating overall growth is continuing but losing momentum.

NBS noted that within manufacturing, conditions remain relatively resilient. Output and new orders stayed in expansion territory, and firms’ willingness to purchase inputs improved, pointing to steady demand. Business expectations also strengthened, with confidence rising for a third consecutive month. However, this recovery is being accompanied by rising price pressures, as both input and output price indices remain elevated amid volatile commodity markets.

Private survey data painted a stronger picture. The RatingDog PMI Manufacturing rose from 50.8 to 52.2, the highest since late 2020, marking a fifth consecutive month of expansion. Strong demand, improved operations, and new product launches drove output and orders higher, while cost pressures intensified. Input prices rose at the fastest pace in over four years, with firms passing these costs through to customers via higher selling and export prices, highlighting a growing inflationary impulse within the manufacturing sector.

Key Highlights

• GBP/USD corrected gains and tested the 1.3450 support.
• A declining channel is forming with resistance at 1.3560 on the 4-hour chart.
• Gold prices are moving lower below the $4,650 support.
• The US GDP could grow by 2.3% in Q1 2026 (Preliminary).

GBP/USD Technical Analysis

The British Pound started a downside correction from 1.3600 against the US Dollar. GBP/USD dipped below the 1.3560 and 1.3550 levels.

Looking at the 4-hour chart, the pair declined toward the 38.2% Fib retracement level of the upward move from the 1.3177 swing low to the 1.3599 high. However, it is still stable above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

Besides, there is a declining channel forming with resistance at 1.3560. On the upside, the pair faces resistance at 1.3540. The first major resistance sits at 1.3560.

The main resistance could be 1.3600. A close above 1.3600 could open doors for gains above 1.3620. In the stated case, the bulls could aim for a move to 1.3750.

Immediate support is seen near 1.3470 and the 100 simple moving average (red, 4-hour). The next support could be 1.3385 and the 200 simple moving average (green, 4-hour). It coincides with the 50% Fib retracement level of the upward move from the 1.3177 swing low to the 1.3599 high.

A close below 1.3385 might push the pair toward 1.3330. Any more losses could initiate a fresh move to 1.3250 in the coming days.

Looking at Gold, the bears seem to be in action, and they could aim for a move toward the $4,420 level in the coming days.

Upcoming Key Economic Events:

• BoE Interest Rate Decision - Forecast 3.75%, versus 3.75% previous.
• US Initial Jobless Claims - Forecast 215K, versus 214K previous.
• US Gross Domestic Product for Q1 2026 (Preliminary) – Forecast 2.3% versus previous 0.5%.

Japan’s industrial production declined -0.5% mom in March, falling short of expectations for a 1.1% increase. The drop was broad-based, with output declining in 8 of 15 sectors.

The downturn was led by petroleum-related products, where output of polyethylene plunged 27% and polypropylene fell 15%. Domestic fuel production also weakened sharply, with gasoline down 7.3% and diesel falling 14.3%. The scale of the decline likely reflects supply disruptions and input constraints linked to the effective closure of the Strait of Hormuz, which has tightened the flow of crude and refined products into the region.

Despite the weak headline figure, the Ministry of Economy, Trade and Industry maintained its assessment that production “fluctuates indecisively.” Forward-looking indicators offer some support, with manufacturers expecting output to rebound by 2.1% in April and 2.2% in May, led by machinery, electronic components, and transportation equipment.

On the demand side, retail sales provided a positive offset, rising 1.7% yoy after a 0.1% decline in February and beating expectations of 0.8%. The rebound suggests that consumption remains resilient.

Sector Breakdown (Industrial Production)

Forward Guidance (METI Survey)

New Zealand business confidence deteriorated sharply in April, with ANZ’s headline index plunging from 32.5 to -10.6, highlighting a rapid shift in sentiment amid rising cost pressures. Firms’ own activity outlook also fell significantly from 39.3 to 19.6. One-year ahead expectations, meanwhile, jumped from 3.08% to 3.81%, the highest since February 2024.

Cost pressures have intensified again. Cost expectations rose from 84.7 to 90.4 in net terms, reaching the highest level since January 2023. On a three-month horizon, cost expectations surged from 2.99% to 4.57%, the highest since May 2023. This reflects a renewed wave of input cost pressure hitting firms, reinforcing the inflation impulse from external shocks.

Pricing behavior is firm but not accelerating as sharply. Pricing intentions edged down from 60.3 to 57.7, led by strong retail pricing at 78, while services at 51 dragged the overall measure lower. Short-term pricing expectations rose slightly from 2.37% to 2.41%, with manufacturing firms showing stronger pass-through at 3.4% compared to just 2.0% in services. This divergence suggests uneven ability to pass costs on.

Importantly, the underlying picture is not uniformly negative. ANZ noted that many activity indicators improved relative to late responses in the prior month, indicating that some of the initial confidence shock has eased. For the RBNZ, the challenge is clear: rising cost pressures and inflation expectations increase the risk of persistence, even as pricing and wage behavior remain relatively contained for now.

Full ANZ Business Confidence release here.

Gold’s selloff is accelerating as a powerful macro combination weighs on the metal. Instead of acting as a safe haven, gold is being squeezed by rising oil prices and higher bond yields. A retest of the March low is now in sight, with 4,000 emerging as the next key level. How quickly it gets there will depend on the path of oil and yields.

Oil has taken the lead. Brent is now pressing the key $120 psychological level after reports that US President Donald Trump has instructed aides to prepare for an extended blockade of Iran. At the same time, the Strait of Hormuz effectively closed to most tankers. Markets are pricing a sustained supply shock, which reinforces inflation risks globally.

The transmission into financial markets has been swift. Rising oil prices are feeding into higher inflation expectations, lifting US 10-year yields above the 4.4% level.

At the same time, the Federal Reserve’s latest decision overnight has reinforced a hawkish tilt. The Fed may have held rates, but the details mattered. The three hawkish dissenters (Hammack, Kashkari, and Logan) didn't just want to hold rates; they specifically voted against the "easing bias. For markets, the takeaway is clear: a dovish pivot is not imminent.

This creates a clear “double whammy” for Gold.

Technically, Gold’s extend decline suggests that rebound from 4,098.45 low has already completed at 4,889.24. Further fall is expected as long as 55 4H EMA (now at 4,681.60) holds, back towards 4,098.45 low, and possibly further to 4,000 psychological level.

The speed and depth of the decline will depend on developments in related markets. Brent’s behavior around the $120 level is critical. A clean break higher would likely reinforce inflation fears and push yields further up through 4.5%, accelerating Gold’s decline.

The Fed maintained its policy stance unchanged, as widely expected. Stephen Miran dissented in favour of a rate cut, while three participants dissented against maintaining an easing bias. Powell announced he continues as a Fed Governor past his term as Chair but did not specify for how long.

Powell flagged that growing number of participants are seeing current stance as neutral but did not suggest rate hikes were in the cards for now. Neither the statement nor Powell discussed the Fed's balance sheet operations.

UST yields moved higher, with markets erasing earlier bets for rate cuts this year and instead pricing in around 50% probability of a hike in H1 2027. We maintain our relatively dovish call, and still expect two cuts in Sep and Dec.

Jay Powell's final press conference as the Fed chair was as much about guidance during a difficult time for policy setting, as it was about his personal choice. Powell continues as a Fed Governor also after his term as the Chair ends 15 May, though he intentionally did not specify for how long. The decision is hawkish on the margin, as it blocks Trump from nominating a new and potentially more dovish replacement.

It also means Stephen Miran, who was the only participant voting in favour of a cut, will not continue as a Governor in June when Kevin Warsh takes his seat. Powell tied his future exit to DoJ's criminal investigation being 'well and truly over', but we also flagged in RtM USD, 28 April, that staying beyond midterms could complicate Trump's task of replacing him with a dove like Miran if Democrats manage to flip the Senate.

Three participants - Logan, Kashkari and Hammack - dissented against the Fed's current easing bias. That said, all three have been firmly in the FOMC's hawkish camp for a while, as they vocally opposed the latest rate cut already last fall. Powell specified that no one in the committee argued for a hike, and majority did not want to send a signal that a hike would be equally likely as a cut. On the other hand, Powell emphasized that the committee will not be even thinking about cutting for the next few months, as it waits to see both the effects of the energy supply shock and whether tariff-driven inflation begins to fade.

We still think the Fed will eventually resume its easing cycle with two final cuts in September and December. The war in Iran hurts the economy where we see it as already vulnerable to setbacks - in private consumption via lower disposable income, and in non-AI investments via higher interest costs. Bond yields continued to rise during the press conference, and not just because inflation expectations are following oil prices. The 10y real swap rate is even above its pre-war levels (chart 2). The bottom line is that tighter financial conditions are already weighing on the growth outlook even without explicit policy stance tightening.

Neither the statement nor Powell touched upon the Fed's balance sheet, but we expect further guidance on the T-bill Reserve Management Purchases in the minutes. Earlier guidance suggests purchase amounts will continue to decline sharply in May.

The FOMC kept the stance of policy and their outlook unchanged in April as expected, at Powell’s last meeting as FOMC Chair.

As expected, the FOMC kept the stance of policy unchanged at its April meeting and, broadly speaking, portrayed a balanced baseline and risk outlook. This is despite not explicitly stating a hike is as likely as a cut – language the dissenters Hammack, Kashkari, and Logan arguably would have preferred. This outcome is consistent with our and the market’s expectations as well as the degree of uncertainty evident in financial markets – the price of Brent crude rising circa 7% today to USD120 per barrel while US equities held near record highs.

The Committee’s take on economic activity was sanguine, with GDP characterised as “expanding at a solid pace” and the unemployment rate “little changed in recent months” even as job gains “remained low”. Members’ views on the price outlook showed caution but not overt concern, with inflation simply characterised as "elevated". "The Committee is [also] attentive to the risks to both sides of its dual mandate", and Chair Powell noted in the press conference that, in his view, policy is in a good place to take time to monitor conditions, being at the "high end of neutral”, “perhaps mildly restrictive".

We have been more concerned than the FOMC over domestic inflation stemming from capacity constraints and, in such an economic state, believe outsized and/or persistent second-round effects of energy and tariff inflation are meaningful risks. Still, with growth below trend in Q4 2025 and Q1 2026, and likely through mid-2027, there is no urgency to take a hawkish stance, let alone hike. Per Chair Powell’s remarks and current market pricing, the best course is to hold and continue assessing current conditions and uncertainties.

Like all other major central banks, the road ahead for the Federal Reserve is challenging. The domestic and international risks the economy and Committee face are disparate and could persist for some time. The FOMC will also have to navigate considerable US fiscal uncertainty over the year(s) ahead. A continued uptrend in the US 10-year yield, and consequently the 30-year mortgage rate, will limit the breadth of growth across the economy and weigh on household and financial market confidence. In time, it will also restrict the Government’s capacity to act against a meaningful deterioration in economic momentum as the interest burden grows. As such, we cannot discount policy rate cuts entirely, though they are more likely to be a topic of conversation in 2027 or 2028 than 2026.

Finally, with Kevin Warsh's nomination for FOMC Chair advancing from the Committee stage to a full vote in the Senate, it is important to recognise this meeting was Powell’s last meeting as Chair. In the press conference though, Powell made clear he still intends to stay on as a Federal Reserve Governor, and consequently a member of the FOMC, until the investigations into the Federal Reserve are “well and truly over with finality and transparency”. The Department of Justice dropping their criminal investigation into the organisation and Chair Powell are a decisive step in that direction, but the Supreme Court decision in Lisa Cook’s case is still to come, and the Federal Reserve’s own investigation into construction costs has to be completed to rule out the Department of Justice re-opening its investigation. Powell remaining in place as a Governor over the period will provide continuity while these uncertainties are resolved.

The Federal Open Market Committee (FOMC) held the policy rate steady at the target range of 3.5%-3.75% for a third consecutive meeting.

There were only a few minor changes to the policy statement. While the Committee still views economic activity as expanding at a solid pace, it was noted that the "developments in the Middle East are contributing to a high level of uncertainty about the economic outlook".

The wording on inflation was also tweaked, with the Committee now seeing it as "elevated" as opposed to "somewhat elevated". There was also a nod to the fact that higher energy prices are already leading to higher inflation.

Eleven of the twelve FOMC members voted in favor of today's decision, though three of those participants voted against maintaining an easing bias in the statement. Only Stephen Miran dissented in favor of a 25-bps cut.

Key Implications

With the economic outlook largely unchanged since the last FOMC meeting and energy prices still elevated amid unresolved issues to reopen the Strait of Hormuz, the Fed opted to maintain the status quo, holding the fed funds rate steady and only making minor changes to its policy statement. But the overall sentiment leaned slightly hawkish, with several participants voting against maintaining the current easing bias in the statement.

Today marks the end of an era for Jerome Powell, with this afternoon's press conference likely his last as Fed chair. If all goes as planned, Kevin Warsh will be in-seat for the next interest rate decision on June 16-17, though it remains unclear whether Powell will serve out the remaining two-years of his term on the board of governors. Either way, it seems very unlikely that a Warsh Fed will quickly pivot to lowering interest rates. Decisions are made by a majority vote, and it's becoming clear that many participants are reluctant to take rates any lower amid a resilient economy and still elevated inflationary pressures. We see the Fed staying on hold through at least the summer, with the potential for more rate cuts later this year should inflation show more compelling evidence of moving back towards the Fed's 2% target.