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In focus today

In the euro area, focus today is on final March inflation data for Germany, France, and Italy. The final data will allow us to estimate how much the timing of Easter impacted the March numbers and to what extent we should expect an effect on the April numbers.

From the US, University of Michigan's preliminary April consumer sentiment survey is due for release in the afternoon. The Fed focuses on the consumers' inflation expectations, which have so far remained well anchored close to the 2% target even if market-based inflation expectations measures have recently edged higher on the back of rising oil prices.

From China, trade data for March will be released. Export growth has trended higher over the past 3-4 months and PMI export orders have been strong in March. However, monthly export data are quite volatile so we could see a set-back after some strong months in January/February. We may also get credit and money growth for March but no specific date has been published.

From Sweden, we expect today's inflation print (March) to show that the disinflation process continues steadily, although the early Easter may cause disruptions to price patterns especially when it comes to travel. Food prices constitute a downside risk based on data from peers (Nordics). We forecast CPIF and CPIF excl. Energy at 2.6% y/y and 3.2% y/y, which is 0.1 percentage points below the Riksbank's new forecasts on both accounts.

Economic and market news

What happened overnight

In the space of geopolitics, the US tried to deescalate Israel-Iran tensions by engaging for China to urge restraint from Iran. Iran has vowed to respond after accusing Israel of an attack on their embassy in Damascus which killed high-ranking military personnel. This risks escalating tensions in the region.

From Asia, Bank of Korea kept monetary policy unchanged (tight) as inflation remains sticky, while the USD/JPY lost slightly but remained above 153 as Japanese Finance Minister Suzuki reiterated his intention to respond if there are excessive moves in the exchange rate.

What happened yesterday

The ECB left policy rates unchanged yesterday as unanimously expected, and as such market impact was muted. While there was no direct confirmation of a June rate cut they reiterated that it will be appropriate to reduce rates if the economy develops as expected. We expect the ECB to deliver three 25bp cuts this year, but risks are skewed towards fewer cuts due to somewhat sticky domestic inflation.

Several headlines out of China indicated that the country is done with fiscal and monetary stimulus, with the NDRC stating at a news conference strong support for investments and consumption. This comes after yesterday's weaker than expected CPI print.

From the US we got mostly hawkish signals. Initial jobless claims surprised slightly to the downside at 211k (cons: 215k), while the Fed's Williams, Collins and Barkin all suggested that a near-term rate cut would not be necessary.

In Sweden, Prospera inflation expectations were anchored at the target for all horizons. Riksbank's Jansson said that as he sees is, the main threat to a rate cut in May will be if other central banks postpone their rate cuts as this could weaken the SEK and through that channel raise inflation.

In Norway, the mainland GDP figure for February printed lower than expected at -0.2% m/m (consensus: -0.1%), although December growth was revised up to 0.6% (prev: 0.4%).

Equities: Global equities were higher yesterday, shrugging off fast Wednesday's CPI disappointment. Interestingly, this was mostly led by US cyclical growth stocks. Hence, 7 out 10 sectors in MSCI World were lower yesterday, and 14 out 25 industries were lower in the S&P 500 where cyclicals outperformed defensives by almost 2%. This massive rotation yesterday is hard to justify 1:1 from top-down data yesterday, but it underscores how one should be careful in being too negative and defensive when growth is strong even as we have a looming inflation challenge. In US yesterday, Dow -0.01%, S&P 500 +0.7%, Nasdaq +1.7% and Russell 2000 +0.7%. Most Asian markets are lower this morning led by China. Japan is moving more in tandem with the global/US trend and is higher this morning. US and European futures are higher this morning.

FI: Yesterday's ECB meeting was largely a non-event as judged by the market reaction. European rates traded mostly sideways through the ECB press conference, albeit 10y Bunds ended the day at 2.46%, which was 2bp higher than Wednesday's close. Italy was the underperformer by widened 4bp to core amid a minor curve steepening.

FX: Yesterday's session was mostly about digesting the strong US March CPI print. EUR/USD is approaching the 1.07 mark. Intervention jitters are still present in Japan, with USD/JPY above 153. EUR/GBP continues to trade within a very tight range around the 0.8550 mark. EUR/SEK is consolidating around 11.50. EUR/NOK is hovering around 11.60. EUR/DKK briefly rose above 7.46 yesterday and thus continues to trade at a relatively high level.

Daily Pivots: (S1) 1.0697; (P) 1.0727; (R1) 1.0755; More...

Intraday bias in EUR/USD stays on the downside for the moment. Decisive break of 1.0694/0723 support zone will resume whole fall from 1.1138. Next target is 100% projection of 1.1138 to 1.0694 from 1.0980 at 1.0536. On the upside, above 1.0766 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 1.0884 resistance holds, in case of recovery.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern to rise from 0.9534 (2022 low). Rise from 1.0447 is seen as the second leg. While further rally could cannot be ruled out, upside should be limited by 1.1274 to bring the third leg of the pattern. Meanwhile, sustained break of 1.0694 support will argue that the third leg has already started for 1.0447 and possibly below.

Daily Pivots: (S1) 1.2516; (P) 1.2548; (R1) 1.2584; More...

Intraday bias in GBP/USD remains on the downside for the moment. Decisive break of 1.2517 support will carry larger bearish implication. Next near term target will be 61.8% projection of 1.2892 to 1.2538 from 1.2708 at 1.2489. Firm break there could trigger downside acceleration to 100% projection at 1.2354. On the upside, above 1.2581 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 1.2708 resistance holds, in case of recovery.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to up trend from 1.0351 (2022 low). Rise from 1.2036 is seen as the second leg, which might still be in progress. But upside should be limited by 1.3141 to bring the third leg of the pattern. Meanwhile, firm break of 1.2517 support will argue that the third leg has already started for 38.2% retracement of 1.0351 (2022 low) to 1.3141 at 1.2075 again.

Daily Pivots: (S1) 0.9068; (P) 0.9107; (R1) 0.9140; More....

Intraday bias in USD/CHF is turned neutral first with current retreat, and some consolidations would be seen. But further rally is expected as long as 0.8996 support holds. Break of 0.9146 will resume whole rally from 0.8332. Next target is 161.8% projection of 0.8550 to 0.8884 from 0.8728 at 0.8818.

In the bigger picture, price actions from 0.8332 medium term bottom as tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Further rise would be seen as long as 0.8728 support holds. But upside should be limited by 0.9243 resistance, at least on first attempt.

Daily Pivots: (S1) 152.92; (P) 153.12; (R1) 153.48; More...

Intraday bias in USD/JPY stays on the upside for the moment. Current rally would target 155.20 fibonacci projection level next. On the downside, below 152.63 minor support will turn intraday bias neutral and bring consolidations. But outlook will stay bullish as long as 150.80 support holds.

In the bigger picture, correction from 151.87 (2023) high could have completed at 140.25 already. Rise from 127.20 (2023 low), as part of the long term up trend, is probably ready to resume. Decisive break of 151.93 resistance (2022 high) will confirm this bullish case. Next medium term target will be 61.8% projection of 127.20 to 151.89 from 140.25 at 155.20. This will remain the favored case as long as 146.47 support holds, in case of another pullback.

Daily Pivots: (S1) 0.6509; (P) 0.6531; (R1) 0.6560; More...

Intraday bias in AUD/USD stays mildly on the downside at this point. Decisive break of 0.6480 support will argue that is ready to resume through 0.6442. Next target will be 61.8% projection of 0.6870 to 0.6442 from 0.6643 at 0.6378. For now, risk will stay mildly on the downside as long as 0.6643 resistance holds, in case of recovery.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which might still be in progress. Overall, sideway trading could continue in range of 0.6169/7156 for some more time. But as long as 0.7156 holds, an eventual downside breakout would be mildly in favor.

Daily Pivots: (S1) 1.3658; (P) 1.3692; (R1) 1.3723; More...

Intraday bias in USD/CAD remains on the upside for the moment. Current rise from 1.3176 is in progress, and further rally would be seen towards 1.3897 resistance. In the downside, below 1.3660 minor support will turn intraday bias neutral first and bring consolidations. But near term outlook will remain bullish as long as 1.3477 support holds.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Overall, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 at a later stage.

The forex markets turned quieter in Asian session today with minimal movements. Dollar is consolidating this week's strong gain but there is no sign of extended pullback for now. There is still prospect for more upside before weekly close, and U of Michigan consumer sentiment and inflation expectation would be a trigger for another round of buying.

Meanwhile, Sterling remains steady as investors await UK GDP data. Money markets have significantly trimmed their expectations for BoE rate cuts this year, reducing the projected total easing to just 49 bps, the lowest since October. That's a stark contrast to more than 70 bps anticipated just a week ago. Moreover, the markets now price in the first full quarter-point reduction by September. Robust GDP data today could reinforce the belief that the UK has fully emerged from last year's recession, affirming more conservative monetary policy easing ahead.

Overall in the currency markets, Dollar is currently the strongest one, with Kiwi a distant second, and then Sterling. Euro is the worst performer, followed by Yen and then Swiss Franc. Canadian and Aussie are positioned in the middle.

Technically, EUR/GBP's outlook is staying bearish as it struggled to stay firm above 55 D EMA. Break of 0.8529 support will argue that larger fall from 0.8764 is ready to resume through 0.8491/7 support zone. Today's UK GDP release will be pivotal in determining whether this downside breakout will materialize.

In Asia, at the time of writing, Nikkei is up 0.30%. Hong Kong HSI is down -1.73%. China Shanghai SSE is down -0.04%. Singapore Strait Times is down -0.29%. Japan 10-year JGB yield is down -0.0101 at 0.847. Overnight, DOW fell -0.01%. S&P 500 rose 0.74%. NASDAQ rose 1.68%. 10-year yield jumped 0.016 to 4.576.

Fed's Collins signals reduced urgency for rate cuts and lesser easing in 2024

Boston Fed President Susan Collins suggested that the recent economic data do not necessitate an immediate adjustment in monetary policy, indicating that less easing might be required this year than previously anticipated.

At an even overnight, Collins highlighted that while recent data have not significantly altered her economic outlook, they but "highlight uncertainties related to timing" of economic developments. She stressed the importance of patience, acknowledging that "disinflation may continue to be uneven".

"This also implies that less easing of policy this year than previously thought may be warranted," she added.

Furthermore, "incoming data have eased my concerns about an imminent need to reassess the stance of monetary policy," she explained. And, "it may just take more time than previously thought for activity to moderate, and to see further progress in inflation returning durably to our target."

IMF Georgieva: Possible Fed rate cut in late 2024, but don't hurry

In an interview with CNBC overnight, IMF Managing Director Kristalina Georgieva projected that by the end of the year, Fed would be positioned to lower interest rates. Nevertheless, She emphasized the importance of data-driven decisions, advising against premature action.

"We remain on our projection that we would see, by the end of the year, the Fed being in a position to take some action in a direction of bringing interest rates down," adding, "But again, don't hurry until the data tells you you can do it."

Georgieva also highlighted reasons for optimism regarding the US economy's future. She pointed out that the US is experiencing less upward pressure on labor costs compared to other regions, which helps in maintaining economic stability without the immediate threat of overheating.

NZ BNZ manufacturing falls to 47.1, 13th month of contraction

New Zealand BusinessNZ Performance of Manufacturing Index PMI fell from 49.1 to 47.1 from 49.1 in February, marking the lowest level since last December and indicating that the sector has been in contraction for 13 consecutive months.

Key components painted a concerning picture. Production experienced a notable decline from 49.1 to 45.7. Employment also fell from 49.2 to 46.8, suggesting that businesses are reducing their workforce in response to reduced demand. New orders, a critical indicator of future activity, decreased from 47.5 to 44.7.

Finished stocks were the only component of the index to show an increase, from 48.8 to 49.2. This could indicate that products are remaining in inventory longer due to lower sales volumes. Delivery times also worsened from 51.1 to 47.8, which could reflect logistical issues or supply chain disruptions.

The proportion of negative comments from survey respondents increased to 65% in March, up from 62% in February and 63.2% in January. Many cited a lack of orders and the general economic slowdown as major concerns.

Gold surges to new record, but anticipates stiff resistance at 2500

Gold's bullish momentum appears unstoppable for now as it surged to new record high in Asian session, now eyeing 2400 mark. This surge is driven by a confluence of factors that indicate broader market apprehensions, particularly about resurgence of inflation risks, with geopolitical tension in the background.

This shift in sentiment is evident in the sharp increase in benchmark treasury yields across various regions, including US, Europe, and even Japan. Concurrently, major stock indices are showing signs of a looming correction.

Judging from these developments, Gold's rally is more fueled by safe-haven flows, partly as hedge against selloff in stocks and bonds, and partly on geopolitical risks.

Technically, near term outlook in Gold will stay bullish as long as 2319.18 support holds. Next target is 2500 psychological level. Strong resistance is expected there to limit upside, at least on first attempt, to bring a notable correction.

Overbought condition, as seen in weekly RSI is a factor that could limit Gold's momentum ahead. More importantly, 2500 represents a cluster medium and long term projection levels. There lies 161.8% projection of 1614.60 to 2062.95 from 1810.26 at 2535.69, and 100% projection of 1160.17 to 2074.84 at 1614.60 at 2529.27.

Looking ahead

UK GDP is the main focus in European session, and trade balance will also be released. Germany will publish CPI final. Later in the day, US will release import price index and U of Michigan consumer sentiment.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3658; (P) 1.3692; (R1) 1.3723; More...

Intraday bias in USD/CAD remains on the upside for the moment. Current rise from 1.3176 is in progress, and further rally would be seen towards 1.3897 resistance. In the downside, below 1.3660 minor support will turn intraday bias neutral first and bring consolidations. But near term outlook will remain bullish as long as 1.3477 support holds.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Overall, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 at a later stage.

Economic Indicators Update

Gold's bullish momentum appears unstoppable for now as it surged to new record high in Asian session, now eyeing 2400 mark. This surge is driven by a confluence of factors that indicate broader market apprehensions, particularly about resurgence of inflation risks, with geopolitical tension in the background.

This shift in sentiment is evident in the sharp increase in benchmark treasury yields across various regions, including US, Europe, and even Japan. Concurrently, major stock indices are showing signs of a looming correction.

Judging from these developments, Gold's rally is more fueled by safe-haven flows, partly as hedge against selloff in stocks and bonds, and partly on geopolitical risks.

Technically, near term outlook in Gold will stay bullish as long as 2319.18 support holds. Next target is 2500 psychological level. Strong resistance is expected there to limit upside, at least on first attempt, to bring a notable correction.

Overbought condition, as seen in weekly RSI is a factor that could limit Gold's momentum ahead. More importantly, 2500 represents a cluster medium and long term projection levels. There lies 161.8% projection of 1614.60 to 2062.95 from 1810.26 at 2535.69, and 100% projection of 1160.17 to 2074.84 at 1614.60 at 2529.27.

Key Highlights

• USD/JPY started another increase and cleared the 152.50 resistance.
• A key bullish trend line is forming with support at 152.70 on the 4-hour chart.
• EUR/USD and GBP/USD gained bearish momentum.
• Gold prices surged further above the $2,380 level.

USD/JPY Technical Analysis

The US Dollar remained well-bid above the 150.00 level against the Japanese Yen. USD/JPY formed a base and started another increase above 151.20.

Looking at the 4-hour chart, the pair settled above the 152.00 resistance, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). There was also a clear move above the 152.50 resistance.

The pair traded to a new yearly high at 153.31 and currently consolidating gains. Immediate support is near the 152.75 level. There is also a key bullish trend line forming with support at 152.70 on the same chart.

The next major support is at 152.00. If there is a downside break below the 152.00 support, the pair could decline toward the 151.65 support. Any more losses might send the pair toward the 150.20 level in the near term.

On the upside, the pair is facing hurdles near 153.30. The first key resistance is near the 153.50 zone. A clear move above the 153.50 resistance could send the pair further higher. In the stated case, USD/JPY could rise toward the 155.00 level.

Looking at Gold, the price started another increase and broke the $2,380 resistance. It might soon test the $2,400 level.

Economic Releases

• US Import Price Index for March 2024 (MoM) – Forecast +0.3%, versus +0.3% previous.
• US Export Price Index for March 2024 (MoM) – Forecast +0.3%, versus +0.8% previous.