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The week started on quite a positive note on hope that the next wave of US tariffs – expected to hit the ground on April 2nd - would be more targeted and more measured than previously thought. But Trump still threatened to impose 25% levies on countries that buy oil from Venezuela.

Chinese equities are under pressure this morning as the country buys oil from Venezuela and is concerned by the new tariff threats from the White House. And the barrel of US crude gained around 1.30%, though offers weighed heavier into the $69.5pb mark. Trend and momentum indicators are growing stronger, hinting that a rise above the $70pb is increasingly possible in the short run. But the long-term demand and supply dynamics remain in favour of cheaper oil – an expectation that’s already priced in, but could still prevent oil bulls from gaining too much traction after a potential break of the $70pb resistance.

Risk-on?

In the US, the low-risk assets including gold and treasuries sold off on Monday while equities gained. The S&P500 jumped 1.76%, cleared the 200-DMA resistance and closed the session above this level, Nasdaq 100 rallied more than 2% and one of the most severely hammered stocks of late, Tesla, rebounded almost 12% despite the news that its biggest rival BYD earned more than $107bn in 2024, more than Tesla ($97.7bn). BYD’s profit jumped 34% to around $5.6bn but remained short of Tesla’s $7.1bn. That’s perhaps why BYD investors preferred taking profit on the back of good and better-than-expected results, along with the fear of more tariffs on Chinese goods. But given the tariff story is hard to price in, the price pullbacks for a company like BYD are certainly interesting opportunities to strengthen long positions. As per Tesla, the latest numbers continue to look bad: the company’s European sales fell by 40% in February...

Elsewhere, the US small and medium cap indices gained more than 2% while the European indices were under pressure with the Stoxx600 retreating 0.13%.

Overall, Monday saw a correction of the rotation trade that hit the US equities and boosted the European and Chinese equivalents so far this year. Whether it’s the beginning of the end of the rotation, or just a correction is yet to be seen. The fact that the Federal Reserve (Fed) showed support despite the tariff-led inflation worries, and the fact that the European and Chinese stimulus news have already been priced in increase the need for new ingredients to keep the rotation on track. Note that the S&P500 tipped a toe into the correction zone by posting a 10% selloff from an ATH level earlier this month but avoided a further fall into that pit. Equity strategists at JPM, Morgan Stanley and Evercore ISI now think that the worst of the US market downturn is already over. Yet April 2nd will be the next important test for the global markets depending on the announcement of reciprocal tariffs - which will probably upset more than one. US and European futures are all slightly in the negative at the time of writing.

In the FX

The dollar index benefits from a broad-based rebound on relief – or fatigue – from the tariff talk. The EURUSD shortly retreated below the 1.08 mark yesterday despite a set of stronger-than-expected manufacturing PMI numbers from France and Germany thanks to the expectation of massive infrastructure and security spending, while services PMI came in lower than expected. But if we compare the two, manufacturing has a higher multiplier than the service-led spending, hence the latest PMI numbers are encouraging.

Across the Channel, the numbers tell a different story. The contraction in the manufacturing activity accelerated while services expanded faster. British inflation and the spring budget announcement will be the biggest drivers of sterling later this week, and there is a chance that we see sterling softer by the end of the week than otherwise provided that Rachel Reeves has no choice but to cut her spending plans. The latter would be negative for UK growth expectations and sterling if the Bank of England (BoE) doesn’t step in to compensate. And the BoE is not in a hurry to give support when global and trade uncertainties loom. In other words, the 1.30 resistance could be hard to clear for Cable, unless the US dollar experiences another selloff.

In focus today

In the US, the Conference Board's consumer confidence survey for March will be released. Earlier, a similar preliminary survey from the University of Michigan showed a clear weakening in consumer confidence due to political uncertainty. NY Fed's Williams will give remarks in the afternoon.

In Germany, we will receive the IFO growth indicator. It will be interesting to see if the release mirrors the positive surprise in the manufacturing PMI or the downtick in services counterpart.

In Sweden, February PPI data will be released this morning. Focus will be on the subcomponent that has the closest correspondence to CPI, the so-called domestic supply prices (mix of import and home market prices) for consumer goods.

In Hungary, the central bank will announce its policy rate. We and consensus expect the bank to keep the rate unchanged at 6.50%.

In China, PBoC will set the policy rate, the 1-year Medium-Term Lending Facility rate. We expect it to be unchanged again as we believe the central bank will continue to be sidelined for now until we move closer to another Fed cut.

Economic and market news

What happened yesterday

In the euro area, PMIs came in slightly weaker than expected in March, with the composite PMI rising to 50.4 (cons: 50.7) from 50.2. The rise was driven by a stronger-than-expected uptick in the manufacturing sector to 48.7 (cons: 48.2), while the service sector disappointed with a decline to 50.4 (cons: 51.1, prior: 50.6). The composite PMI signals that the euro area economy has had a positive start to 2025 and likely grew around 0.2% q/q. For the ECB's rate decision in April, the PMI data does not clearly point in either direction, with market pricing staying unchanged.

In the US, March Flash PMIs came in at 49.8, down from 52.7 in February. This indicates a contrasting trend compared to the euro area. In line with the weaker signals from the regional Fed indices, the manufacturing PMI has plunged back to contractionary territory amid tariff uncertainty - reflected by input prices rising sharply and production, domestic orders and employment weakening. However, the services index rebounded strongly to 54.3 (from 51.0), moving higher across the board, spurring the uptick in the composite index. Overall, the signals are rather mixed, yet it is positive that tariff uncertainty has not yet affected broader services activity, despite the pessimistic consumer sentiment surveys. Following the release, EUR/USD ticked lower. President Donald Trump announced Monday that auto tariffs are on the horizon but suggested that not all planned duties will take effect on 2 April, with some nations potentially receiving exemptions. Hence, significant uncertainty remains regarding Trumps tariffs.

In the UK, preliminary PMIs for March exceeded expectations, leading to a drop in EUR/GBP upon release. The composite index rose to 52.0 (cons: 50.5), driven by a rise in services to 53.2 (cons: 51.0) with more pronounced weakness in manufacturing at 44.6 (cons: 47.2). Despite a weak February print, employment indicators are showing improvement although from a low level and should be read with caution given the impending rise in employers' national insurance contribution from April. Price pressures are easing in the service sector, while manufacturing is more of a mixed bag. Overall, the release was positive news for the BoE, supporting a gradual quarterly cutting cycle.

In geopolitics, following Sunday's discussions in Saudi Arabia, US and Russian officials engaged in further talks on Monday, aiming to establish a Black Sea maritime ceasefire before negotiating a broader ceasefire in Ukraine. Despite US optimism, ongoing strikes by Russia and Ukraine underscore the fragile nature of the proposed 30-day ceasefire, while European powers remain sceptical about Putin's willingness to make real concessions. Today delegators from the US and Ukraine are scheduled to meet in Saudi Arabia.

Equities: Tariff relief made US stocks rally yesterday, with S&P 500 1.8%, Nasdaq 2.3% and small cap Russell 2000 2.6%. Investors bought the dip with Mag 7 leading the market, with this being the best day for the group since January and especially Tesla the standout up 12%. Meanwhile, European equities were unchanged although rosy PMIs would have suggested otherwise. However, underneath risk-on was evident here as well with cyclical sectors (especially banks and materials) outperforming defensives. Optimism is fading this morning though with Asian equities wavering and US and European stock futures pointing lower.

FI&FX: US equities rallied and S&P500 closed back above the 200dma on potential tariff de-escalation. US yields tracked higher under minor flattening and also European yields rose across the curve, with a minor spread tightening to peripherals. EUR/USD is hovering around 1.08 after yesterday's mixed bag of PMI's, and the positive risk sentiment weighed on the Yen. Canada's PM Carney has called for a snap election April 28, but as this was heavily expected the reaction in CAD has been muted. The NOK found support in rising oil prices, with EUR/NOK trading below 11.40. Neighbouring SEK had a strong finish to yesterday's session, breaking through 10.90 and currently trading at its lowest level since late-2022.

Daily Pivots: (S1) 1.0769; (P) 1.0814; (R1) 1.0845; More...

Intraday bias in EUR/USD remains mildly on the downside, as correction from 1.0953 short term top would extend to 38.2% retracement of 1.0358 to 1.0953 at 1.0726. Strong support should be seen there to bring rebound. On the upside, break of 1.0953 will resume the rally from 1.0176 towards 1.1274 key resistance.

In the bigger picture, prior strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

Daily Pivots: (S1) 1.2881; (P) 1.2927; (R1) 1.2970; More...

Intraday bias in GBP/USD stays mildly on the downside as correction from 1.3013 short term top would extend to 38.2% retracement of 1.2248 to 1.3013 at 1.2721. Strong support should be seen there to bring rebound. On the upside, break of 1.3013 will resume the rally from 1.2099.

In the bigger picture, up trend from 1.3051 (2022 low) is not completed. Resumption is expected after corrective pattern from 1.3433 completes. Next target will be 1.4248 key resistance. This will now remain the favored case as long as 1.2099 support holds.

Daily Pivots: (S1) 149.78; (P) 150.27; (R1) 151.19; More...

Outlook is USD/JPY is unchanged. Recovery from 146.52 is seen as a corrective move. Upside should be limited by 150.92 support turned resistance. On the downside, break of 148.17 support will bring retest of 146.52 first. Sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will resume the fall from 158.86 to 139.57 support. However, firm break of 150.92 will argue that fall from 158.86 has completed and turn bias back to the upside for 154.79 resistance next.

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) 0.8804; (P) 0.8825; (R1) 0.8850; More…

USD/CHF is staying in consolidation from 0.8757 and intraday bias remains neutral. In case of stronger recovery, upside should be limited by 0.8911 support turned resistance. On the downside, break of 0.8757 will resume the fall from 0.9200 to 61.8% retracement of 0.8374 to 0.9200 at 0.8690. Sustained break there will pave the way back to 0.8374 support.

In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

Daily Pivots: (S1) 0.6268; (P) 0.6286; (R1) 0.6305; More...

No change in AUD/USD's outlook and intraday bias stays neutral at this point. On the downside, firm break of near term trend line support (now at 0.6255) will argue that corrective pattern from 0.6087 has already completed. Intraday bias will be back on the downside for 0.6186 support. Further break there will solidify this bearish case and target 0.6087 low. For now, in case of another rise, upside should be limited by 38.2% retracement of 0.6941 to 0.6087 at 0.6413.

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. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6467) holds.

Daily Pivots: (S1) 1.4287; (P) 1.4322; (R1) 1.4354; More...

Range trading continues in USD/CAD and intraday bias remains neutral for now. Overall, price actions from 1.4791 are seen as a corrective pattern. On the upside, break of 1.4541 will extend the second leg from 1.4150 to retest 1.4791 high. On the downside, break of 1.4238 will argue that the third leg has already started through 1.4150 support.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

Financial markets entered Tuesday on a subdued note, with the Asian session notably quiet. While US stocks managed a rebound overnight on speculation that the April 2 “Liberation Day” tariff rollout might be narrower in scope than initially feared, sentiment failed to fully carry into Asia. Equity indices across the region were mixed, reflecting ongoing investor caution. In the currency markets, major pairs remained trapped within yesterday’s ranges, signaling a broader wait-and-see mode among traders.

Yen is seeing some mild recovery after Monday’s selloff, partially supported by signals from BoJ’s latest January meeting minutes. The central bank reaffirmed its readiness to tighten policy further. Still, external developments—particularly the uncertainty over global trade and US tariffs—are making the policy path less clear, forcing BoJ to move with greater caution in coming months.

Looking ahead to the European session, Germany’s Ifo Business Climate data will be watched. Still, most of the optimism linked to Germany’s fiscal expansion appears to be already priced in. Unless there's a sharp upside surprise, the report may not trigger much market movement.

Later in the day, US Consumer Confidence figures are in focus. Expectations are for a continued decline, reflecting growing concerns over the economic fallout from reciprocal tariffs. Yet, this deterioration in sentiment has become a familiar theme, and its market impact may also be muted unless the drop is significantly worse than expected.

What investors truly crave are concrete details surrounding Trump’s tariff due next week. Until then, markets are likely to remain rangebound and headline-driven. With such a pivotal policy move on the horizon, traders are understandably reluctant to take strong directional bets. That has kept volatility suppressed for now, even as the risk environment remains fragile underneath the surface.

Technically, a major focus now is USD/JPY, which has extended the rebound from 146.52 short term bottom this week. Strong resistance is expected from 150.92 support turned resistance, and 55 D EMA (now at 151.08) to limit upside. However, firm break of this zone will argue the fall from 158.86 has completed, and turn near term outlook bullish for stronger rebound. The next move in USD/JPY would determine the overall tone of Yen in the markets.

In Asia, at the time of writing, Nikkei is up 0.56%. Hong Kong HSI is down -1.99%. China Shanghai SSE is down -0.05%. Singapore Strait Times is up 1.11%. Japan 10-year JGB yield is up 0.028 at 1.574. Overnight, DOW rose 1.42%. S&P 500 rose 1.76%. NASDAQ rose 2.27%. 10-year yield rose 0.079 to 4.331.

BoJ minutes signal readiness to tighten further if outlook holds

Minutes from BoJ’s January 23–24 meeting revealed a growing consensus among policymakers that further tightening would be appropriate, provided the current economic and price outlooks hold.

While the central bank raised policy rate to 0.5%, members acknowledged that real interest rates remained "significantly negative", ensuring "accommodative financial conditions would be maintained."

However, the path ahead is clouded by global uncertainty. While BoJ held rates steady at its latest meeting last week, it flagged increasing risks from escalating US tariffs.

Nevertheless, Governor Kazuo Ueda emphasized that stronger-than-expected wage growth and persistent food price inflation could keep upward pressure on underlying prices, indicating that the case for another rate hike remains very much alive.

Fed’s Bostic sees just one rate cut in 2025, warns tariffs may reinforce inflation

Atlanta Fed President Raphael Bostic said in a Bloomberg interview that he's now projecting just one cut by year-end, down from his earlier expectation of two.

Bostic explained the shift was due to his view that inflation will be "very bumpy and not move dramatically and in a clear way to the 2% target”. With inflation unlikely to return to target until 2027, he believes the path to neutral must also be delayed.

Bostic also expressed concern about the inflationary impact of rising tariffs. While such measures are often assumed to cause a one-off increase in prices, Bostic suggested the current environment could be different.

In his view, businesses and consumers may have grown more tolerant of elevated inflation following the pandemic, making price hikes more likely to stick. He noted that many business leaders now feel confident about "a complete pass-through" of higher costs on to customers without fear of losing market share.

BoE’s Bailey calls for trade cooperation and embraces AI as growth catalyst

BoE Governor Andrew Bailey urged greater international cooperation to resolve growing strains in the global trading system. In a speech overnight, he pointed to the disruptions caused by US President Donald Trump’s trade policies, emphasizing that resolving these challenges requires "multilateral setting rather than set tariffs bilaterally".

In a more optimistic tone, Bailey also pointed to artificial intelligence as a transformative force for the UK and global economy. Comparing AI to electricity in the early 20th century, he said the technology could meaningfully raise growth and per capita income over time. He called for policy support to facilitate AI’s development as the "most likely general purpose technology,” capable of driving broad-based economic gains in the years ahead.

ECB’s Escriva warns of extreme uncertainty and skewed growth risks

In remarks delivered overnight, Spanish ECB Governing Council member Jose Luis Escriva highlighted that “growth risks are more downside than upside.” While he acknowledged that supportive fiscal policy could offer some near-term uplift, he stressed that the broader risks — particularly to the downside — are dominating the economic outlook.

Escriva painted a grim picture of the current global backdrop, describing it as “extremely uncertain.” He noted that today’s uncertainty global index levels are at their highest since records began — exceeding those during the Covid-19 pandemic, the war in Ukraine, the 9/11 attacks, and even the peak of the Great Financial Crisis.

Despite the fact that worst-case, disruptive scenarios have yet to materialize, Escriva emphasized that ECB must be “readier than ever” to revise its forecasts and relevant action should conditions change".

Looking ahead

German Ifo business climate ins the main focus in European session. Later in the day, US will release consumer confidence, house prices and new home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.4287; (P) 1.4322; (R1) 1.4354; More...

Range trading continues in USD/CAD and intraday bias remains neutral for now. Overall, price actions from 1.4791 are seen as a corrective pattern. On the upside, break of 1.4541 will extend the second leg from 1.4150 to retest 1.4791 high. On the downside, break of 1.4238 will argue that the third leg has already started through 1.4150 support.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

Short Term Elliott Wave view in USDJPY suggests that rally from 3.11.2025 low is in progress as a double zigzag structure. A double zigzag structure is a 7 swing double three Elliott Wave structure. There are 2 sets of ABC zigzag structure connected together, thus why the name is double zigzag. Up from 3.11.2025 low, wave A ended at 149.2 and wave B ended at 147.4. Wave C higher ended at 150.1 and this completed the first zigzag structure and end wave (W) in higher degree as the 45 minutes chart below illustrates. Pullback in wave (X) ended at 148.1 and pair has resumed higher in wave (Y).

Internal subdivision of wave (Y) is unfolding as another zigzag structure. Up from wave (X), wave ((i)) ended at 149.66 and wave ((ii)) pullback ended at 148.6. Up from there, pair is nesting higher in wave ((iii)). Wave (i) ended at 149.95 and wave (ii) pullback ended at 149.48. Wave (iii) higher ended at 150.94. Expect pullback in wave (iv) to find support for more upside. Near term, as far as pivot at 148.16 low stays intact, expect dips to find buyers in 3, 7, or 11 swing for further upside.

USDJPY 45 Minutes Elliott Wave Chart

USDJPY Video

https://www.youtube.com/watch?v=7-b4izTOKPk