Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (Mar 17 – Mar 21)

Fed, BoE, BoJ and SNB meetings coupled with retail sales from the US and China as well as inflation from Canada, employment from Australia and Q4 GDP from New Zealand will highlight this jam packed week ahead of us.

USD

President Trump has added additional 25% tariffs on steel and aluminium coming from Canada that should have taken effect on March 12. After Ontorio Prime Minister decided to drop tariffs on energy exports to the US, Trump removed those additional tariffs and only initial 25% tariffs remained. Trump also announced 25% tariffs on EU imports and added a threat of a huge 200% tariff on wines and alcoholic products if they put tariffs on American whiskey. Major bank analysts are increasing probabilities of recession in the US and state uncertainty around tariffs as a major factor coupled with weak consumer confidence.

February inflation report showed headline number down to 2.8% y/y from 3% y/y in January. Monthly print came in at 0.2% vs 0.3% as expected with 0.216% unrounded. Shelter was once again main cause for increase increasing 0.3% m/m and 4.2% y/y which is a smallest yearly increase since December of 2021 . Airfares were the main reason for decline in inflation as they fell by 4% m/m. Core CPI declined to 3.1% y/y from 3.3% y/y the previous month while markets were expecting a 3.2% y/y print. Core m/m reading came in at 0.2% vs 0.3% as expected with 0.227% unrounded. Shelter less energy services rose 0.3% m/m. Supercore printed 0.182% m/m and 2.22% y/y. This decline, although still above 2% when annualized, 0.17% m/m is needed for 2% inflation, will be welcomed by Fed as core services and healthcare showed clearer signs of easing price pressures. PPI has come weaker than expected but figures that go into PCE calculation came in stronger.

The yield on a 10y Treasury started the week at 4.30%, rose to 4.34% and finished the week at around 4.32%. The yield on 2y Treasury started the week at 4.% and reached the high of 4.03%. Spread between 2y and 10y Treasuries started the week at 31bp and finished the week at 29bp as curve flattened. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 3%, while probability of a no cut is around 97%. June is the first meeting that sees above 50% probability of a rate cut. The index following "Magnificent Seven" tech stocks—Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla—plunged into a bear market, falling more than 20% from its highs. Gold has reached the $3000 level.

This week we will have retail sales data and Fed meeting. No change in rate is expected but we will get new SEP and dot-plot which will give us more insight in how Fed sees the economy.

Important news for USD:

Monday:​

• Retail Sales​

Wednesday:​

• Fed Interest Rate Decision​

EUR

Deadline for new stimulus package and debt brake to be voted in Germany is March 25. The inaugural session of the newly elected parliament is set for that date. CDU/CSU and SDP do not have necessary two thirds of new parliament, therefore they are trying to implement them while old parliament is still in session. There was already a push back from Green party stating that they will not support it as it is but that they are willing to work to find a deal. Green party wishes for defense spending proposal to be done with the old parliament while infrastructure spending should be done with the new parliament. On Friday report came out that the deal has been agreed upon.. Incoming Chancellor Merz stated that out of €500bn planned over 12 years €100bn will be spent by states with €100bn will be directed toward Climate and Transformation Fund. EU has announced €26bn in retaliatory tariffs on imports from the US. ECB policymaker and Bundesbank president Nagel warned that US tariffs could push Germany into recession this year.

GBP

UK started the year on a weak footing as GDP for January came in at -0.1% m/m vs 0.1% m/m as expected. Digging into the details we can see that weakness was concentrated in manufacturing and industrial output while services printed 0.1% m/m increase in line with expectations. ONS notes that strong sales in food and drink categories helped services print a positive number. Construction output continued to decline but number came in as expected.

This week we will have BoE meeting. No change in rate is expected, as one cut per quarter still remains as the main idea, but any hints regarding future rate cuts path will be carefully watched.

Important news for GBP:

Thursday:​

• BoE Interest Rate Decision​

AUD

February inflation data from China showed plunge back into deflation with a -0.7% y/y print. China’s statistics office stated that deflation is caused by base effects, holidays (Chinese New Year) and weather. It looks increasingly that CPI will return into positive territory in March. PPI improved a bit as it printed -2.2% y/y, a tick up from -2.3% y/y in January.

This week we will have employment data from Australia as well as industrial production and retail sales from China.​

Important news for AUD:

Monday:​

• Industrial Production (China)​
• Retail Sales (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

Electronic card data, encompassing almost 70% of total retail sales, for the month of February increased 0.3% m/m and dropped 4.2% y/y. Kiwi has been stuck in a range for the week, ending it on a top of the range against USD, but breaking it against CHF.

CAD

Mark Carney is the new Prime Minister of Canada. Former BoC and BoE governor has won majority of votes in party leadership and is now the new leader of Liberal Party after former Prime Minister Trudeau resigned. He is expected to call for new elections.

BoC has lowered rate by 25bp as was widely expected and brought it down to 2.75. They have cut its rate by 225bp since last June. The statement shows that Canada started 2025 on a solid foot but uncertainty surrounding tariffs will likely slow down the economy as “Recent surveys suggest a sharp drop in consumer confidence and a slowdown in business spending as companies postpone or cancel investments.” Inflation remains close to 2% but is expected to increase in March due to end of the tax break. Governing Council will remain vigilant to downward pressures on inflation from weaker economy and upward pressures on inflation from higher costs while also monitoring inflation expectations.

BoC governor Macklem concentrated on tariffs during his press conference. He stated that tariffs will weaken the economy and there is a need to do as much as possible to adjust to their effects. Tariffs are main concern for Canadian economy as almost 76% of Canadian exports go to the US which equates to around 20% of GDP. This data just emphasizes concern about devastating impact potential tariffs could have on the economy. Canada is planing to announce almost CAD30bn in retaliatory tariffs against the US.

This week we will have inflation data expected to go back above 2%.

Important news for CAD:

Tuesday:​

• CPI​

JPY

Labour cash earnings continued to grow in the month of January as they printed an increase of 2.8% y/y in nominal wages. However, when taking inflation into account, real wages plunged -1.8% y/y after being positive in December. Household spending dropped 4.5% m/m and saw increase of 0.8% y/y. The yield on a 10y JGB rose to 1.56%. Toyota, Nissan and Honda all granted their workers increases in line with union’s demands with other major corporations following suite. Rengo, Japan’s largest union, secured first-round wage hikes of 5.46% which comes after 5.10% increase seen previous year.

Final Q4 GDP was revised lower to 0.6% q/q and 2.2% annualized from 0.7% q/q and 2.8% annualized as preliminary reported. Last week’s data showing slowdown in capex in Q4 was the harbinger of downward revision. The deflator was revised up though to 2.9% y/y from 2.8% y/y as preliminary reported showing even stronger inflation pressures hitting the economy.

This week we will have BoJ meeting. Markets are pricing no change in rate with a small chance of surprise rate hike.

Important news for JPY:

Wednesday:​

• BoJ Interest Rate Decision​

CHF

SNB total sight deposits for the week ending March 7 came in at CHF444.1bn vs CHF437.4bn the previous week. The range is narrowing and movements lack direction as SNB lets market dictate Swissy’s strength.

This week we will have SNB meeting where yet another 25bp rate cut, sixth in a year, is expected.

Important news for CHF:

Thursday:​

• SNB Interest Rate Decision​

 

[katetrades]

Forex Major Currencies Outlook (Mar 24 – Mar 28)

Inflation data from the US and the UK coupled with preliminary PMI data from the Eurozone and the UK will highlight the week ahead of us. Please be mindful that this is the last trading week of Q1 so volatility can be increased due to rebalancing.

USD

OECD has cut global growth for 2025 and 2026 citing tariffs as the main culprit. Global GDP growth is seen at 3.1%, for 2025 and 3% for 2026, down from 3.3%, for both years, seen in December. US GDP has been revised to 2.2% in 2025 and 1.6% in 2026 from 2.4% and 2.1% respectively. Canada and Mexico saw their GDP numbers plunge with former printing 0.7% growth in both 2025 and 2026 (2% was seen previously for both years) while latter will see its GDP shrink 1.2% in 2025 and 0.6% in 2026.

February retail sales showed rare miss on expectations in headline number (0.2% m/m vs 0.6% m/m as expected) but the real star of the show was control group. The control group measure jumped 1% m/m after dropping by the same amount in January. Control group excludes volatile components and is considered a better measure of consumption in the economy, as such it is used for GDP calculation. Ex autos and ex autos and gas categories also rose on the month with 0.3% m/m and 0.5% m/m increased respectively. The biggest contributor were nonstore retailers (online) with 2.4% m/m increase followed by health & personal care stores with 1.7% m/m. Department stores, food services & drinking places as well as gasoline stores all recorded drops bigger than 1% m/m.

Fed has left key interest rate unchanged at 4.25-4.50% range as was widely expected. They see economy continue to expand at a solid pace with labour market staying solid. Inflation is coming down but remains somewhat elevated. Starting in April the pace of QT will be slowed down "the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion." Governor Waller dissented as he wished to continue the same pace of run off. New dot plot showed no changes to interest rates as they remain at 3.9% for the end of 2025, 3.4% for the end of 2026 and 3.1% for the end of 2027. Longer-term rate was also left unchanged at 3%. GDP projections have been lowered to 1.7% in 2025 and 1.8% in 2026 from 2.1% and 2% seen in December dot plot. The unemployment rate for 2025 has been lifted to 4.4% form 4.3% seen in December. Inflation numbers were also lifted up and now PCE is expected to end at 2.7% for 2025 vs 2.5% in December while core PCE is seen at 2.8% vs 2.5% at their previous projection in December.

At the press conference Chairman Powell was persistently asked about impact of tariffs on inflation and he characterized it as “transitory”. This is a loaded word as it reminds people of central banks incompetence to properly grasp inflation threat during the pandemic, when they also labelled it as transitory. He dismissed the weakness seen in consumer sentiment and increase seen in consumer inflation expectations. He also emphasized importance of hard data and currently it is giving Fed room to wait with rate cuts. Powell acknowledged apparent moderation in consumer spending but added that wages are growing faster than inflation. Labor is not a source of serious inflation pressures and inflation is expected to reach a 2% target in 2027. Trade, immigration and fiscal policy will see changed by new administration. Uncertainty is unusually elevated and Powell stated that changes in SEP are largely due to trade policy.

The yield on a 10y Treasury started the week at 4.32%, rose to 4.32% and finished the week at around 4.25%. The yield on 2y Treasury started the week at 4.03% and reached the high of 4.04%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 31bp as curve proceeded to flatten. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 17%, while probability of a no cut is around 83%. June is the first meeting that sees above 50% probability of a rate cut. Gold has settled comfortably above the $3000 level.

This week we will have final reading of Q4 GDP as well as Fed’s preferred inflation measure PCE.

Important news for USD:

Thursday:​

• GDP​

Friday:​

• PCE​

EUR

German parliament voted with a 513 votes majority to implement fiscal stimulus and change to the debt brake. The package is for €500bn infrastructure fund over the next 12 years of which €100bn will be directed towards the Climate Transition Fund, that is what Greens pushed for in exchange for their votes in the parliament, while €300bn will be used by federal government and €by state governments. Defense spending of more than 1% of GDP will be exempted from the debt brake and state governments will be allowed to run annual deficits of up to 0.35% of GDP. Bundesrat, the upper house of parliament, has passed the debt reform.

Final February CPI showed 2.3% y/y increase in prices, a tick down from 2.4% y/y as preliminary reported with a 0.4% m/m increase instead of 0.5% m/m as preliminary reported. ECB president Lagarde stated that if US would impose 25% tariffs on imports from the EU it would result with Eurozone GDP decline of 0.3% in the first year and 0.5% if EU imposes retaliatory measures.​

This week we will have preliminary PMI data for the month of March.

Important news for EUR:

Monday:​

• S&P Manufacturing PMI (Eurozone, Germany, France)​
• S&P Services PMI (Eurozone, Germany, France)​
• S&P Composite PMI (Eurozone, Germany, France)​

GBP

Payrolls change for February saw economy add 21k jobs. January ILO unemployment rate stayed unchanged at 4.4%. Average weekly earnings rose 5.8% 3m/y vs 5.9% 3m/y as expected with ex bonus category staying at 5.9% 3m/y as was in December. ONS has provided the usual caveat about the quality of data but BoE will remain concerned with such a strong wage growth and its potential impact on inflation pressures.

BoE has left the bank rate unchanged at 4.50% as widely expected but there were interesting changes. First, the vote was 8-1 in favour of no change (Dhingra voted for a 25bp rate cut) vs 7-2 as markets were expecting with some even seeing potential for a 6-3 vote. Second, there was a sentence in the statement saying “A gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate”. This sentence indicates possibility that we will get less than one cut per quarter, which is currently priced in by markets, which in turn should lead to GBP strength. They have noted substantial progress on disinflation and emphasized increased uncertainties due to global trade policy, tariffs. If inflation pressures are pushed down it would warrant a less restrictive path of bank rate.

This week we will have preliminary March PMI data as well as February inflation data which will be followed closely now that BoE has shifted its focus back on inflation.

Important news for GBP:

Monday:​

• S&P Manufacturing PMI​
• S&P Services PMI​
• S&P Composite PMI​

Wednesday:​

• CPI​

AUD

February employment report was an ugly one. Employment change saw economy losing 52.8k jobs while expectations were for economy to add 30k jobs making it a miss of over 80k jobs. This is the first drop in employment since March of 2024. Looking into the details we see the unemployment rate remaining at 4.1% but only due to a plunge in participation rate to 66.8% from 67.2% in January. Full-time jobs saw a loss of 35.7k while part-time jobs declined by 17.1k. Additionally, previous month’s numbers were revised down and such an ugly report will nudge RBA towards rate cuts and AUD is feeling the pressure.

Data from China for the January-February period saw retail sales print 4% y/y as expected, up from 3.7% y/y in December. Communication appliances led the growth with a staggering 26.2% y/y followed by sports and recreation with 25% y/y while auto sales were down 4.4% y/y. Industrial production came in at 5.9% y/y vs 5.3% y/y as expected and down from 6.2% y/y seen in December. The rail, ships, and aeroplane category led the way with 20.8% with the auto sector growing of 12%. Industrial robots and service robots showed biggest increases in terms of products.

Over the weekend State Council of China published a 30 point plan on how to boost consumption. Boosting consumption was given top priority at last week’s Two Sessions. The main focus will be on increasing capacity and willingness of households to consume. The plan includes steps to improve minimum wage and jobs market as well as support the stock market. In order to improve willingness to spend the plan says it will take measures to increase pensions and improve health insurance. Bonds in the amount of CNY300bn will be issued to help spur consumption, specifically for automobiles, home appliances and electronics.

NZD

Q4 GDP showed growth of 0.7% q/q s 0.3% q/q as expected. The economy returns to growth after declining for past two quarters. GDP continues to shrink on y/y basis as it printed a -1.1%. Current account deficit for the final quarter of 2024 increased by more than expected.

CAD

February inflation data saw headline number jump to 2.6% y/y from 1.9% y/y in January while a 2.2% y/y print was expected. CPI rose 1.1% m/m. All three of core measures increased with median and trim printing 2.9% y/y while common printed 2.5% y/y increase in prices. With tariff threats looming inflation data has taken the backseat. BoC stated previous week that they are focused on keeping price stability but they put tariff risk at the forefront of their concerns.

BoC governor Macklem stated that the main goal in setting monetary policy is to minimize the risk of errors which will mean being less forward-looking than normal but it also means acting quicker when data show greater clarity. He emphasized the potential threat of tariffs on inflation and added that the greater the threat the more focus will have to be on anchoring inflation expectations. Macklem stated that February data fundamentally changed bank’s view and reiterated their commitment to controlling inflation. BoC seems to move to the pause for now as they assess impact of tariffs but they will be ready to act faster than usual in any direction as needed. Prime Minister Carney scheduled elections for April 28.

JPY

BoJ left short-term policy rate unchanged at 0.5% as was widely expected. Accompanying statement showed that economy is recovering moderately while consumer spending is increasing at a moderate pace. Inflation expectations are showing gradual increase while “Underlying inflation expected to align with the BoJ’s price target in the latter half of the three-year outlook period.“ Economy is expected to continue growing above potential. Uncertainty around economic and price outlook remains high with trade tensions the biggest worrying factor.

Governor Ueda stated at the press conference that wage growth from spring negotiations were was in line with their January view then adding that wage growth is on track or maybe even stronger than anticipated. Neutral rate remains unknown and it is hard to tell how tariffs will impact the economy in the short-term. BoJ will watch tariff developments, remain data-dependent and committed to policy normalization. There was no push for faster rate hikes or much hawkish tones in statement and in his remarks but the door for potential rate hike in May has been left open.

February national CPI slowed down to 3.7% y/y from 4.% y/y in January due to renewed government energy subsidies and decline in fresh food prices. Markets were expecting a 3.5% y/y print so this still shows stronger inflation pressures. Additionally, CPI ex fresh food and energy, so-called “core-core” and the one that BoJ closely follows, ticked up to 2.6% y/y from 2.5% y/y the previous month. Domestic services are keeping prices elevated. Rengo, Japanese largest trade union, announced that in second-round data they see an average wage increase of 5.40%. This would mark it a second year of above 5% wage increases and will keep inflation pressures on. Inflation report combined with wage data should give more credence to BoJ rate hike in May.

CHF

SNB total sight deposits for the week ending March 14 came in at CHF448.5bn vs CHF444.1bn the previous week. Deposits are moving from the lower bound as uncertainties around world make Swissy look attractive to some investors. Swiss government has lowered GDP forecasts for 2025 to 1.4% and for 2026 to 1.6% from 1.5% and 1.7% as seen previously. CPI fr 2025 was left unchanged at 0.3% while 2026 CPI was lowered to 0.6% from 0.7% previously. Global trade uncertainty caused by tariffs was the main reason for the downgrade.

SNB has cut interest rate to 0.25% as was widely expected. They have reiterated their willingness to act in FX market if necessary. Emphasis was put on uncertainties troubling global and Swiss economic growth. Inflation trajectory is moving in line with expectations and it is expected to further ease gradually in the coming quarters. New projections see CPI around 0.3% in Q2 and 0.4% for 2025, previous projection was for 1.1% CPI in 2025, with average inflation increasing to 0.8% in 2026 and 2027. GDP was unchanged and it is still seen in the range of 1-1.5% in 2025. Governor Schlegel stated that monetary conditions are now appropriate and that probability of further easing is low.​

 

[katetrades]

Forex Major Currencies Outlook (Mar 31 – Apr 4)

April 2 is the main day, the so-called Liberation Day, where new and reciprocal tariffs will be applied. In addition, we will have NFP, ISM PMI, inflation data from from the Eurozone an Switzerland, PMI data from China and employment data from Canada will highlight the week ahead of us.

USD

The week started with new talks about tariff adjustments. Now instead of targeting entire industries tariffs will be targeted towards countries with significant trade surplus with the US. Exemptions for autos, pharma and chip makers are expected. On Wednesday President Trump announced 25% tariffs on all cars and light trucks made outside of the US. This tariff will also take place on April 2, “Liberation Day”, they will be added on top of other tariffs and will remain in place throughout his mandate. Mexico. Japan, Germany and Canada will be hit the hardest by these new tariffs. Trump has also announced a one month tariff exemption for auto-parts that will last until May 3.

Headline PCE for the month of February was unchanged at 2.5% y/y with a 0.3% m/m print (0.340% vs 0.325% the previous month). Core PCE ticked up to 2.8% y/y from 2.7% y/y in January with a 0.4% m/m vs 0.3% m/m as expected print (0.380% vs 0.285% the previous month). There was almost a full percentage increase in m/m core reading and with it being more than double the necessary 0.17% m/m for a 2% annualized reading it is hard to see chances for a rate cut increasing. Personal income came in at 0.8% m/m vs 0.4% m/m as expected with personal spending increasing 0.4% m/m vs 0.5% m/m as expected, both were higher than in January. Final Q4 GDP reading was revised up to 2.4% from 2.3% annualized in previous readings. Private consumption was revised down while net exports and government consumption were revised up. Atlanta Fed GDP tracker now sees Q1 GDP at -2.8%, down from -1.8% previously.

The yield on a 10y Treasury started the week at 4.26%, rose to 4.40% and finished the week at around 4.27%. The yield on 2y Treasury started the week at 3.97% and reached the high of 4.06%. Spread between 2y and 10y Treasuries started the week at 30bp and finished the week at 38bp as curve returned to bear steepening. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 10%, while probability of a no cut is around 90%. June is the first meeting that sees above 50% probability of a rate cut. Gold has settled comfortably above the $3000 level reaching a new high of $3085.

This week we will have ISM PMI data for the month of March, tariff day on April 2 and NFP data on Friday. Headline number is projected to be at 128k with the unemployment rate remaining at 4.1%.

Tuesday:

• ISM Manufacturing PMI​

Wednesday:​

• “Liberation Day”​

Thursday:​

• ISM Services PMI​

Friday:​

• NFP​
• Unemployment Rate​

EUR

Preliminary March PMI data saw manufacturing PMI rise to 48.7 from 47.6 in February. Manufacturing PMI surge due to front running the threat of tariffs. It is also buoyed by the infrastructure stimulus from Germany with both France and Germany printing big jumps and getting closer to expansion territory. New orders are still contracting, but at a slower pace while export orders could remain under pressure given the trade war and weaker global demand. The report states that manufacturers expanded their output for the first time in two years. Services ticked down to 50.4 from 50.6 the previous month. Domestic demand is more important for services sector than tariff threat and if this is a sign that consumer is stumbling it could be worrisome. Composite was propelled to 50.4 by strong manufacturing readings.

Preliminary CPI data for March showed French reading unchanged at 0.8% y/y while markets were expecting a 0.9% y/y print. Spanish reading dropped to 2.3% y/y from 3% y/y in February, more than 2.4% y/y expected. ECB survey of inflation expectations showed no change in the next twelve months and three years. In combination with softer preliminary prints this will increase chances of another rate cut in April.

This week we will have preliminary inflation reading expected to tick down further and add more credence to the April rate cut talk.

Important news for EUR:

Tuesday:​

• CPI​

GBP

The division between two sectors in the UK economy has deepened further as shown by the preliminary PMI readings for the month of March. Manufacturing PMI declined to 44.6 from 46.4 in February which is new 18-month low while services jumped to 53.2 from 50.9 the previous month, a new six-month high. Composite was lifted by services and printed 52 from 50.5 seen in February.

BoE Governor Bailey stated that raising potential growth of the economy proves to be a challenging task. He emphasized importance of AI and general-purpose tech as well as skilled labor. Additionally, signs appear that businesses delay investments to due to uncertainties surrounding global trade.

February inflation data surprised to the downside with headline number printing 2.8% y/y after a 3% y/y print seen in January. Core reading dropped to 3.5% y/y from 3.7% y/y the previous month while markets were expecting a 3.6% y/y print. Digging into the details we see that the drop was caused by drop in prices of goods while services inflation remains at a very high level of 5%. The report shows both encouraging and worrying signs and it is not sure to move BoE towards further rate cuts.

Chancellor of the Exchequer Reeves unveiled Spring statement which showed that GDP is expected to be around 1% in 2025 and average around 1.75% over the rest of the decade. The statement shows further spending as cuts to welfare budget and government spending will come in effect in four years’ time. The debt issuance for the next twelve months has not been changed and stays at £300bn.

AUDFederal budget announcement saw GDP for 2026 at 2.25% and 2.5% for 2027. Tax cuts were also announced such as the tax rate for the $18,201 to $45,000 threshold will be reduced to 15% from 16% from July 1 2026 with additional cut to 14% from July 1 2027. This is seen as a political move to gather support for the second term of current Prime Minister Albanese. February CPI reading ticked down to 2.4% y/y from 2.5% y/y as seen in January. Although monthly reading does not encompass full scope of inflation seeing it go down will be welcomed by the RBA.

This week we will have RBA meeting where no change is expected. Additionally, we will get official March PMI data from China.

Important news for AUD:

Monday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

Tuesday:​

• RBA Interest Rate Decision​

NZD

Consumer confidence for the month of March continued to deteriorate and printed 93.2 vs 96.6 in February. Kiwi was stuck in the range for most of the week as markets were unwilling to push it either way due to quarter end rebalancing flows and incoming tariffs.

CAD

Canada started the year on a strong footing with GDP increasing 0.4% m/m vs 0.3% m/m as expected. Increases were broad based as 13 out of 20 sectors saw improvements. The increase was led by goods producing industries while services rose modestly. Advanced February reading sees GDP coming in flat. Tariff concerns are the main driver of CAD so April 2 is critical for future of the economy.​

This week we will have employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

Preliminary March PMI data showed all three numbers printing below 50. For services and composite this is the first drop into contraction since October. Manufacturing came in at 48.3, down from 49 in February as output and new orders showed stronger declines. Positives can be seen in growing new export orders and employment while both input and output prices declined. Services dropped to 49.5 from 53.7 the previous month and dragged composite with them to 48.5 from 52 in February. Services sector recorded outright decline in output while new orders, new export orders and employment showed weaker growth. Output prices showed weaker inflation while input prices showed stronger inflation due to rising wages. Services showed weaker positive outlook while manufacturing showed stronger positive outlook.

Minutes from the last week#s BoJ meeting showed members getting increasingly confident that underlying inflation will reach 2% target. Additionally, some members feel that even when rates get increased real rates will still stay deep in negative territory due to high inflation. There were no hints on future path of monetary policy. Yield on 10y JGB reached a new high of 1.58%.

Governor Ueda had some comments during the week that negatively impacted JPY. He stated that cost-push inflation will likely dissipate in time and that if the food price increases prove to be only temporary then BoJ should not respond using monetary policy tools. He clarified that if increase in food prices proves to be sustained and pushes up services prices as a result then it could lead to wide-range inflation which will warrant further rate hikes.

March inflation data for the Tokyo area saw all three measures come hotter than expected and all three print above BoJ’s 2% target. Headline number came in at 2.9% y/y vs 2.8% y/y the previous month while markets were expecting a slowdown to 2.7% y/y. Ex fresh food component printed 2.4% y/y vs 2.2% y/y as expected and in February while ex fresh food, energy component printed 2.2% y/y vs 2% y/y as expected and up from 1.9% y/y the previous month. Governor Ueda is unwilling to commit to rate hikes until he has more information about tariff developments but this hot inflation print increases chances of a May hike.

CHF

SNB total sight deposits for the week ending March 21 came in at CHF440.4bn vs CHF440.7bn the previous week. Virtually no change as SNB lets market dictate Swissy’ strength.

This week we will have inflation data.

Important news for CHF:

Thursday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Apr 7 – Apr 11)

RBNZ meeting, inflation data from the US and China as well as the FOMC meeting will highlight the week ahead of us that will be dominated by reciprocal tariff implementation on April 9 at 12:01 am.

USD

ISM manufacturing for the month of March came in at 49 vs 49.5 as expected and down from 50.3 in February. Production dropped below 50 while both new orders and employment dropped deeper into contraction. Prices paid component surged to 69.4, highest since June of 2022, as front running of tariffs led to bloating of input prices. Tariff uncertainty is hurting the sector.

February JOLTS data showed 7568k job openings vs 7762k in January. Quits rate came in at 2%. It has been steadily declining indicating that there are fewer jobs available or that they are less attractive. Declining quits rate leads to employers having less concern about keeping employees and thus it lowers their need to increase wages.

US President Trump delivered on his threats on “Liberation Day”. Countries were slapped with massive tariffs with imports from China being hit by 34% tariff on top of 20% for a total of 54%! Switzerland was hit with 31%, Japan with 24%, EU with 20%, United Kingdom and Australia with 10%. Tariffs are much bigger than markets expected and they could have devastating effect on the world trade, potentially plunging world into a recession. Goods that comply with USMCA continue to be exempt from tariffs so now new tariffs on Mexico and Canada. They are still tariffed for fentanyl and migration issues. The baseline tariffs of 10% will be imposed on April 5 at 12:01am. Reciprocal tariffs will be imposed on April 9 at 12:01am. This all leaves plenty room for further renegotiations of tariffs. China has announced on Friday that it will put a 34% tariff on all US goods as a retaliation. China tariffs will take place on April 10.

March ISM services PMI printed 50.8 vs 53 as expected, a drop from 53.5 in February. Business activity increased while prices paid component decreased. On the other hand, new orders barely managed to stay in expansion with a 50.4 print while new export orders plunged into contraction territory. The biggest drop was seen in employment index which plunged to 46.2 from 53.9 the previous month. Tariff effects are the main concern for employers and majority of them is not looking to add more stuff until they get more clarify on the economic outlook.

Employment report for the month of March saw economy add 228k jobs vs 135k jobs as expected. The unemployment rate ticked up to 4.2% but it was followed by an uptick in participation rate (62.5% vs 62.4% in February). U6 underemployment rate ticked down to 7.9% but it is still very elevated. Wages rose 0.3% m/m, after a 0.2% m/m increase in February, but yearly figure slowed down to 3.8% increase from 4% increase the previous month. Healthcare added 54k jobs, leisure and hospitality added 43k jobs while government added 19k jobs. Next month’s employment report should show us first effects of DOGE cuts as well as cuts connected to the newly implemented tariffs.

The yield on a 10y Treasury started the week at 4.24%, rose to 4.24%, dropped below 4% after tariff announcement and finished the week at around 4%. The yield on 2y Treasury started the week at 3.92% and reached the high of 4.06% and then finished the week below 4%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 33bp as curve stayed unchanged. FedWatchTool sees the probability of a 25bp rate cut at May meeting surging to around 30%, while probability of a no cut is around 70%. Gold had a violent week as gold fell to around $3050 on deleveraging. WTI crude has fallen bellow $61, a two-year low and finished the week at around $62.

This week we will have FOMC minutes and reciprocal tariff implementation as well as March inflation figures.

Important news for USD:

Wednesday:

• FOMC Minutes
• Reciprocal Tariffs

Thursday:

• CPI

EUR

Preliminary March inflation for the Eurozone printed 2.2% y/y as as expected, a tick down from 2.3% y/y seen the previous month. Services inflation also came down and printed 3.4% y/y. German reading printed matched the Eurozone reading while data from Italy showed a jump to 2% y/y from 1.6% y/y in February. Core CPI also came down printing 2.4% y/y down from 2.6% y/y the previous month and lower than 2.5% y/y as expected. Good news for the ECB.

GBP

Final manufacturing PMI for the month of March was revised up to 44.9 from 44.6 as preliminary reported. Still, the reading represents a 17-month low with lowest business optimism since November of 2022. Output, new orders and new export orders all recorded steeper drops. The report shows that companies are facing deteriorating market conditions and rising costs due to increases in national minimum wage. Services printed 52.5, lower than 53.2 as preliminary reported, but still an improvement from 51 seen in February. Composite was lifted to 51.5 from 50.5 the previous month.

AUD

RBA has left cash rate unchanged at 4.10% as was widely expected. Accompanying statement shows that underlying inflation is moderating while level of uncertainty is increasing. Members still see monetary policy as restrictive and warn that risks to inflation are on the both sides. The bank remains data-dependent.

Governor Bullock reiterated that bank’s main goal is to return inflation back to their 2-3% target which necessitates restrictive monetary policy. She added that there was no explicit talk of rate cuts at the meeting and that the decision to keep rates unchanged was made by consensus. Tariff threats are creating uncertainties. Inflation along with labor data and tariff impact will be closely monitored when deciding on future rate moves. At the moment, the bank is in “wait and see” mode.

Official PMI data for the month of March from China saw manufacturing rise to 50.5, highest since the March of 2024. Production and new orders index both moved further into expansion while new export orders inched closer to returning into expansion by posting a highest print in almost a year. Prices paid continues to decline confirming overwhelming deflationary pressures in the economy. Services PMI rose to 50.8 from 50.4 which helped push composite to 51.4 from 51.1 in February. Caixin manufacturing printed 51.2, up from 50.8 thus making it six consecutive months in expansion. The report shows similar results as official reading, increases in output and new orders, slight improvement in employment and weak pricing environment.
This week we will get inflation data from China.

Important news for AUD:

Thursday:

• CPI (China)

NZD

Business confidence ticked down in March to 57.5 from 58.4 in February. Biggest increases were seen in residential construction, profit expectations and ease of credit categories. Cost expectations and price intentions increased as well warning about persistent inflation pressures as indicated by rising inflation expectations. Declines were seen in export, investment and employment intentions.

This week we will have RBNZ meeting. Rate cut has been telegraphed in advance but now since NZD has been hit pretty hard after tariff announcement we will see what changes to the economic outlook will bank members make.

Important news for NZD:

Wednesday:

• RBNZ Interest Rate Decision

CAD

March employment report saw economy lose 32.6k jobs vs adding 10k jobs as was expected. The details point to even more worrying picture. The unemployment rate ticked up to 6.7% but unlike in the US, this increase was followed by a tick down in participation rate to 65.2% from 65.3% in February. Composition of jobs showed that economy lost 62k full-time jobs while it added 29.5k part-time jobs. Wage growth has slowed down to 3.6% y/y from 3.8% y/y the previous month. Canada has managed to avoid reciprocal tariffs and goods that comply with USMCA agreement are exempted from tariffs but the cracks in labor market are mounting.

JPY

February retail sales showed increase of 0.5% m/m and 1.4% y/y while industrial production, for the same month, showed a strong 2.5% m/m increase. The unemployment rate ticked down to 2.4%. BoJ has decided to lower purchases of JGB in the 10-25y tenor. Reduction in demand from BoJ will lead to higher yields on those bonds which in turn will be supportive of JPY. Liberation Day caused a stir in the markets and a massive risk off sentiment and JPY was the biggest beneficiary with USDJPY rising to the highest level in past three weeks.

CHF

SNB total sight deposits for the week ending March 28 came in at CHF451.2bn vs CHF449.2bn the previous week. Deposits have been steadily increasing for four consecutive weeks and are moving towards the upper bound of a range. March CPI saw no changes with headline number printing 0.3% y/y while core printed 0.9% y/y. Swissy was the biggest beneficiary of Trump tariffs, although Switzerland was slapped with 31% in reciprocal tariffs.

 

[katetrades]

Forex Major Currencies Outlook (Apr 14 – Apr 18)

ECB and BoC meetings, inflation from the UK, Canada and New Zealand, employment from the UK and Australia, retail sales from the US and China will be of great importance on the economic news side of things, but tariff talks will still take the center stage and dominate markets.

USD

On Wednesday April 9 at 12:01am reciprocal tariffs went into full effect. Then during Wednesday President Trump stated that reciprocal tariffs would be postponed by 90 days on all countries except on China which will be hit by staggering 145% tariffs. Sudden pull back of tariffs led to massive risk on mood in the markets with NASDAQ finishing the day up 12%, second best day in the history of index, while S&P was up 8% for eight-best day in history.

March inflation report saw inflation decline by more than expected with headline number printing 2.4% y/y vs 2.6% y/y as expected and down from 2.8% y/y in February while core reading printed 2.8% y/y vs 3% y/y as expected, down from 3.1% the previous month. Headline number saw deflation as it printed -0.1% m/m while core reading rose by 0.1% m/m. Airlane fares saw the biggest price drop (-5.3%). These data points are from before introduction of tariffs so although they are very encouraging they cannot be taken at face value.

The yield on a 10y Treasury started the week at 3.86%, rose to 4.52%! due to disorderly action in the Treasuries market and finished the week at around 4.48%. The yield on 2y Treasury started the week at 3.43% and reached the high of 3.81%. Spread between 2y and 10y Treasuries started the week at 36bp and finished the week at 52bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at May meeting surging to at around 22%, while probability of a no cuts is around 78%. Gold has dropped below $3000 at the start of the week only to rise to new all time highs above $3200 as dip buyers stepped in. WTI crude has fallen bellow $55 for a new two-year low, then surged to $62 after reciprocal tariffs were postponed only to finish week at around $60. VIX has surged to over 50 on Wednesday.

This week we will have retail sales data. They will not have their usual usefulness as report will capture period before the tariffs, but still it will give us clues regarding health of US consumer.

Important news for USD:

Wednesday:​

• Retail Sales​

EUR

Germany has formally agreed on coalition, CDU, CSU and SPD, that will lead the government. New policies state that government will examine possible reactivation of some nuclear power plants which would be a huge help for the industry and economy on the whole. The goal will also be a medium-term free trade agreement with US as well as reduction in import tariffs on both sides. Plan is also to cut corporate tax by 1% for five years starting in 2028.

This week we will have ECB meeting. Another rate cut is expected, bringing rate down to 2.25%.

Important news for EUR:

Thursday:​

• ECB Interest Rate Decision​

GBP

February GDP saw a jump to 0.5% m/m from being flat in January and much stronger than 0.1% m/m as expected. Services sector contributed strongly with 0.3% m/m vs 0.1% m/m as was expected. Q1 GDP will show economy growing but UK was also hit with a 10% tariffs so it will reflect badly on Q2 GDP.

This week we will get employment and inflation data.

Important news for GBP:

Tuesday:​

• Payrolls Change​
• Unemployment Rate​

Wednesday:​

• CPI​

AUD

Impacted by huge tariffs Chinese Yuan plunged to the lows of 7.43 against the USD. China has retaliated by increasing tariffs on imports from the US to 84% and then again on Friday to 125%! China state that it will not retaliate further even if US continues ramping tariffs on them. March inflation report saw headline CPI print -0.1% y/y, second month in a row of negative prints, after a -0.7% y/y print in February. PPI, on the other hand, accelerated its decline as it printed -2.5% y/y vs -2.2% y/y the previous month. Both food and non-food inflation declined m/m. Beef prices led declines in food inflation while transportation facility prices had biggest decline in non-food inflation. Deflation is holding firm in China and with tariffs surging it should prompt PBoC to cut interest rates.

This week we will get employment data from Australia and industrial production and retail sales from China.

Important news for AUD:

Wednesday:​

• Industrial Production (China)​
• Retail Sales (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

RBNZ delivered a 25bp rate cut as was widely expected and brought official cash rate to 3.50%. Tariffs are front and centre of their concerns and as their effects become clearer RBNZ will have room to cut further. Global trade barriers put global growth in danger and in turn hurt the New Zealand economy. Future policy decisions will be determined by the outlook for inflationary pressure over the medium term and monetary policy response to tariffs will focus on the medium-term implications for inflation.

This week we will get Q1 inflation data.

Important news for NZD:

Thursday:​

• CPI​

CAD

Building permits for the month of February rose by 2.9% after falling by 4.3% in January. CAD has been moved by risk on/risk off mood in the markets for the entire week. The currency benefited from broad USD weakness and reached previous resistance from 2022 now turned to support in USDCAD.

This week we will get inflation data and BoC meeting. BoC has stated at their previous meeting that they are pausing and evaluating effects of tariffs so there should be no change to rate at this meeting, but a 25bp rate cut cannot be ruled out.

Important news for CAD:

Tuesday:​

• CPI​

Wednesday:​

• BoC Interest Rate Decision​

JPY

February labor cash earnings saw a growth of 3.1% y/y after a downwardly revised 1.8% y/y growth in January. Still, with inflation being high, real wages have printed -1.2% y/y for the month making it a second consecutive month of declining real wages. Spring wage negotiations are in full force and those wage increases should help propel real wages back in positive territory. Japan economy minister will start negotiations with US on tariffs on April 17.

CHF

SNB total sight deposits for the week ending April 4 came in at CHF443.7bn vs CHF451.2bn the previous week. Another small move within well-established range. Due to risk off mood in the markets caused by tariff implementation Swissy has strengthened a lot so it would be interesting to see if SNB will use sight deposits to fight Swissy strength.​

 

[katetrades]

Forex Major Currencies Outlook (Apr 21 – Apr 25)

Preliminary April PMI data from the Eurozone, UK and Japan will be the most important economic news events in the week ahead of us. Trump posts and headlines regarding the tariffs and trade war will again drive the market. Also note that European markets will be closed on Monday due to Easter Monday.

USD

Fed Governor Waller stated that in a case of recession he would vote for deeper and faster rate cuts. On the impact of tariffs he divided situation into two scenarios. Scenario 1 sees tariffs of 25% on average or more which would cause inflation to peak at around 4-5% after which it would drop meaningfully with the unemployment rate rising to as high as 5%. He said that in this situation he would opt for faster and bigger cuts than previously thought. He labelled these cuts as “bad news” cuts. Scenario 2 sees tariffs of 10% on average which would cause inflation to peak at around 3%. Since these tariffs would not increase the chance of recession Fed would most likely cut in the second half of the year and those cuts were labelled as “good news” cuts.

Retail sales report for the month of March saw headline number come in at 1.4% m/m vs 1.3% m/m as expected and up from 0.2% m/m in February. Motor vehicle parts and dealers saw the biggest increase followed by building materials and garden equipment while gasoline stations showed the biggest decline. Control group, excluding volatile components and thus a better gauge of consumer health, rose by 0.4% m/m vs 0.6% m/m as expected, however, February reading was revised up to 1.3% m/m from 1% m/m as previously reported. This is a good report, showing a healthy consumer, with caveat that jump in motor vehicle parts sales may be due to frontrunning of tariffs.

The yield on a 10y Treasury started the week at 4.45%, rose to 4.50% and finished the week at around 4.34%. The yield on 2y Treasury started the week at 3.92% and reached the high of 3.98%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week at 53bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 9%, while probability of a no cuts is around 91%. Gold has settled above $3300. WTI crude rose on new sections on Iran oil and finished the week at around $64.

EUR

German ZEW survey for the month of April saw current conditions improve to -81.2 from -87.6 in March but expectations category plunged to -14 from 51.6 the previous month on the back of concerns regarding tariff impact. Expectations for the Eurozone fared similarly as they dropped to -18.5 from 39.8 the previous month. Final inflation numbers for March were both unchanged at 2.2% y/y for headline number and 2.4% y/y for core.

ECB has delivered a 25bp rate cut thus bringing the deposit rate to 2.25% as expected. The statement emphasized that disinflation process is well on track and that Governing Council remains committed to bringing it down to the 2% target. The part regarding policy rate “becoming meaningfully less restrictive” has been omitted. Additionally, Governing Council is not pre-committing to any rate path as they remain in data-dependent and meeting-by-meeting decision mode.

President Lagarde stated during the press conference that downside risks have increased and it will bring down Eurozone growth through lower exports. She clarified that the decision to cut by 25bp was unanimous and added that strong EUR will help push inflation down towards their target. There was a debate about a 50bp insurance cut but it did not gain traction. Additionally, she stated that the economy is facing a negative demand shock caused by tariffs and did not comment on neutral rates.

This week we will have preliminary April PMI data.

Important news for EUR:

Wednesday:

• Manufacturing PMI (Eurozone, Germany, France)
• Services PMI (Eurozone, Germany, France)
• Composite PMI (Eurozone, Germany, France)

GBP

Payrolls change for the month of March saw a decline of 78k jobs which followed a drop of 8k jobs seen in February. ILO unemployment rate for February stayed at 4.4% while wages saw slower growth with weekly earnings rising 5.6% 3m/y vs 5.7% 3m/y as expected and ex bonus category printing 5.9% 3m/y vs 6% 3m/y as expected. These data are still tainted by the surveying issues stated by the ONS but they do hint to some weakening in the labor market.

March inflation data saw headline number tick down to 2.6% y/y from 2.8% y/y in February. Core reading also ticked down to 3.4% y/y as expected from 3.5% y/y the previous month. Additionally, services inflation declined to 4.7% y/y from 5% y/y seen in February. This print will be well received by the BoE which are expected to provide a rate cut at their meeting in May.

This week we will have preliminary April PMI data.

Important news for GBP:

Wednesday:

• Manufacturing PMI
• Services PMI
• Composite PMI

AUD

Minutes from the April RBA meeting showed that it is not yet possible to determine timing of next move in rates and that more clarity will be at the May meeting. The Board saw both upside and downside risks for the economy and inflation and emphasized that it will be very important to safeguard progress made on inflation and not to ease prematurely. They have also expressed their concerns regarding tightness of the labor market and added that wage growth could continue to slow.

March employment report saw a bounce back from February as employment change showed 32.3k jobs added after a drop of 57.4k the previous month. The unemployment rate ticked up to 4.1% from downwardly revised 4% in February while expectations were for it to print 4.2%. Participation rate also ticked up, 66.8% from 66.7% the previous month. Full-time jobs increased by 15k while part-time jobs expanded by 17.2k.

March trade balance from China saw effects of frontloading due to incoming tariffs. Trade surplus was $102.64bn with exports surging 12.4% y/y vs 4.6% y/y as expected. Seminconductors and LCD displays saw biggest increases in exports. Exports to the US have increased despite the initial 20% tariffs. On the other hand, imports declined by 4.3% y/y indicating weak domestic demand. Car imports plunged almost 50% followed by double digit declines in steel and lumber. In the coming months we will have a much more different picture of trade data as April tariffs start distorting global trade.

Q1 GDP saw a growth of 1.2% q/q vs 1.4% q/q as expected and down from 1.6% q/q in Q4 of 2024. On a yearly basis economy grew by 5.4% beating expectations of 5.1%. Miss on quarterly growth print caused many analysts to downgrade their assessment of China’s GDP for 2024 towards lower half of 4%. This means that more support, fiscal and monetary, is needed for China to reach its 5% target. Economic data for the month of March saw industrial production surge 7.7% y/y from 5.9% y/y in February as frontloading of tariffs put factories into overdrive. Retail sales jumped to 5.9% y/y from 4% y/y seen the previous month.

NZD

RBNZ Chief Economist Conway warned that the balance of risks shifted to the downside as tariffs will impact global economic activity and thus lead to lower than expected growth in New Zealand. Q1 inflation data came in higher than expected with 0.9% q/q print vs 0.5% q/q in Q4 and 2.5% y/y vs 2.2% y/y in the previous quarter. RBNZ’s preferred inflation measure, sectoral factor model, printed 2.9% y/y, down from 3.1% y/y in the previous quarter and back into the targeted range of 1-3%.

CAD

March inflation report saw headline number drop further to 2.3% y/y from 2.6% y/y in February. Core measures were also down with common and trim at 2.3% y/y and 2.8% y/y vs 2.5% y/y and 2.9% y/y respectively. Median was unchanged at 2.9% y/y.

BoC left rates unchanged at 2.75% as was widely expected by the markets. Tariffs are again taking central stage in the statement showing high uncertainty regarding economic outlook regardless of the tariff scenario. Two scenarios are mentioned. First, “uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year.” They also clarify that there are many other scenarios possible. Tariffs are slowing down economy as they negatively impact both consumer and business confidence. There was no clear guidance on policy but the statement ends with “Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians."

The bank has provided projections based on two scenarios stated in the previous paragraph. In the case of first scenario, limited tariffs, 2025 GDP is seen at 1.6%, 2026 at 1.4% and 2027 at 1.7%. CPI is seen at 1.8% in 2025, 2% in 2026 and 2.1% in 2027. In the case of second scenario, a protracted trade war, 2025 GDP is seen at 0.8% with 2026 seen at -0.2% before bouncing back to 1.6% in 2027. CPI is seen at 2% in 2025, then jumping to 2.7% in 2026 and reverting back to 2% in 2027. Governor Macklem spoke at the press conference and highlighted that BoC is navigating carefully adding that they did consider cutting rates.

JPY

BoJ Governor Ueda stated that tariffs may warrant a policy response. The bank will spend more time assessing the impact of tariffs on the economy but risks surrounding U.S. tariff policy have moved closer towards ‘bad’ scenario BoJ envisioned. March inflation data for the entire country of Japan saw headline number tick down to 3.6% y/y from 3.7% y/y in February, but core inflation numbers rose. Ex fresh food component rose to 3.2% y/y as expected from 3% y/y the previous month while ex fresh food and energy component, core-core, rose to 2.9% y/y as expected from 2.6% y/y in February. Rising inflation should pressure BoJ into action but tariff uncertainty keeps them waiting. President Trump stated that talks with Japan regarding trade deal are progressing nicely and that sides are getting close to the deal. We are not hearing the same from the Japanese side, but given the history between two countries we can easily see deal being negotiated soon. After that BoJ will have much clearer picture on how to proceed with monetary policy.

CHF

SNB total sight deposits for the week ending April 11 came in at CHF446.9bn vs CHF443.7bn the previous week. The print is highest for the year, but barely and it could be said that it is sitting at the top of the range more than it is a breakout.

 

[katetrades]

Forex Major Currencies Outlook (Apr 28 – May 2)

BoJ meeting, preliminary Q1 GDP from the US and Eurozone, inflation data from the US, Eurozone and Australia as well as official PMI data from China will dominate the economic news in the week ahead of us while statements from the White House and President Trump surrounding tariffs will continue to have big impacts on markets and investors.

USD

President Trump has toned down his rhetoric. Now he sees deal being struck soon although there were no official communication between him and president Xi. On the other hand, he backtracked his previous calls for firing of Fed Chairman Powell. In his previous posts he called him “Too Late” and urged him to cut interest rates adding that Powell’s "termination can't come soon enough". Then on Wednesday there was a report from Wall Street Journal that White House is considering lowering tariffs on China in order to de-escalate. New tariffs would consist of 35% tariff on nine strategic items, 100%+ tariffs on goods tied to national security and they would be phased in over five years. Markets were happy with the change of tone as well as attempts to de-escalate and as a result risk assets enjoyed a good week.

On Friday, Trump gave an interview to Time Magazine in which when asked “If we still have high tariffs, whether it's 20% or 30% or 50%, on foreign imports a year from now, will you consider that a victory?” he replied with “Total victory”. These are not the words that markets would enjoy so the rally stalled and indices consolidated.

The yield on a 10y Treasury started the week at 4.34%, rose to 4.44% and finished the week at around 4.29%. The yield on 2y Treasury started the week at 3.82% which was the high and finished the week at around 3.74%. Spread between 2y and 10y Treasuries started the week at 53bp and finished the week at 55bp as curve bear steepened further. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 5%, while probability of a no cuts is around 95%. Gold has reached new highs as it touched $3500, then plunged bellow $3300 but managed to finish the week above $3300.

This week we will have preliminary Q1 GDP reading as well as Fed’s preferred inflation reading PCE. Additionally, we will get ISM Manufacturing PMI for the month of April and NFP on Friday. Headline number is expected to come at around 140k with the unemployment rate staying at 4.2%.

Important news for USD:

Wednesday:

• GDP
• PCE

Thursday:

• ISM Manufacturing PMI

Friday:

• NFP
• Unemployment Rate

EUR

Preliminary PMI data for the month of April showed weakness in the Eurozone economy, but less than feared. This report shows the first glimpses of the economy after the Liberation Day (April 2). Manufacturing managed to tick up to 48.7 from 48.6 in March as they increased production and slowed the pace of job cuts. Services sector is where the real weakness is as it dropped into contraction with a 49.7 print. The sector saw a faster drop in new businesses. Inflation pressures are painting a brighter picture as they show input prices staying relatively steady while increase in output prices slowed significantly. Composite barely managed to stay in expansion as it printed 50.1, down from 50.9 the previous month.

This week we will have preliminary Q1 GDP reading as well as preliminary April inflation reading.

Important news for EUR:

Wednesday:

• GDP

Friday:

• CPI

GBP

BoE policymaker Greene stated in an interview that pricing is reflective of global factors and that supply side issues concern him more. She added that weak USD would be disinflationary for the UK and that services pose a bigger threat to inflation than wage growth, especially given the inflation persistence seen in services. According to her, neutral rate is now higher than it was and it is not unreasonable to see it between 3.25-3.50%.

Flash PMI readings for the month of April saw further deterioration in economic conditions as manufacturing printed 44, down from 44.9 in March with services falling into contraction with 48.9 vs 51.5 as expected and down from 52.5 the previous month. This is the first time services dropped into contraction since October of 2023. The report highlights aggressive job cuts and faster declines in business optimism across the economy. Composite was also dragged down into contraction with a 48.2 reading vs 51.5 in March. Q2 has started on a weak note and, although it is still too early. indicates a negative growth for the quarter.

AUD

Spokesperson for the Chinese Foreign Ministry stated that they are prepared to fight tariff war if needed. He added that countries are not in talks on tariffs at and that US needs to stop with threats if they wish to start talking. Chinese Commerce Ministry reiterated that there are no negotiations between US and China at the moment and added that if US really wants to start trade negotiations they should lift all unilateral tariffs levied against China.

This week we will have inflation data from Australia and official PMI data from China.
Important news for AUD:

Wednesday:

• CPI
• Manufacturing PMI (China)
• Services PMI (China)
• Composite PMI (China)

NZD

March saw bigger trade surplus than in February. This along with a risk on move in the markets helped Kiwi rebound against risk off currencies such as JPY and CHF. Currency also appreciated against EUR, AUD and GBP but lost ground against USD strength.

CAD

Survey of incoming federal elections sees Liberals winning the outright majority of 170 votes followed by Conservatives with around 120. This will officially put former BoE and BoC governor Mark Carney as Prime Minister of Canada. Retail sales for February came in as expected at -0.4% m/m but advanced March reading sees them rising by 0.7% m/m.

This week Federal Elections will be held.

Important news for CAD:

Monday:

• Federal Elections

JPY

Preliminary April PMI data showed manufacturing tick up to 48.5 from 48.4 in March thus keeping the sector in contraction for the tenth straight month. New orders dropped to the levels not seen in more than a year while business confidence plunged to the levels not seen in the past five years. The report highlights uncertainties surrounding economic outlook, trade environment, staff shortages and ageing population. Services jumped to 52.3 from 50 the previous month, returning into expansion. Inflation pressures are continuing to increase in both sectors. Composite was lifted back to expansion to 51.1 from 48.9 in March. Services PPI ticked up in March to 3.1% y/y from 3% y/y back in February showing more inflationary pressures building.

Tokyo area inflation data surged in April. Companies set new prices in April and it is reflected in report. Headline CPI printed 3.5% y/y vs 3.3% y/y as expected and up from 2.9% y/y in March. Inflation pressures were broad based which poses additional concern regarding high running inflation. Ex fresh food component printed 3.4% y/y, a full percentage point higher than 2.4% y/y the previous month, as well as higher than 3.2% y/y as expected. BoJ is expected to stand pat at next week’s meeting due to high uncertainties surrounding tariffs, but this reading may prompt them to hike in June.

This week we will have BoJ meeting. No change in rate is expected as bank is still grappling with potential effects of tariffs on the economy.

Important news for JPY:

Thursday:

• BoJ Interest Rate Decision

CHF

SNB total sight deposits for the week ending April 18 came in at CHF448.3bn vs CHF446.9bn the previous week. Another week of miniscule increase as deposits try to break the ceiling for the year.

 

[katetrades]

Forex Major Currencies Outlook (May 5 – May 9)

Fed and BoE meetings coupled with employment data from Canada and New Zealand as well as ISM services PMI will highlight the week ahead of us.

USD

Treasury expects to borrow $514bn in Q2 with assumption for an end-of-June cash balance of $850bn. The borrowing estimate is $391bn higher than announced in February 2025, primarily due to the lower beginning-of-quarter cash balance and projected lower net cash flows. For the Q3 Treasury expects to borrow $554bn with assumption for an end-of-September cash balance of $850bn. QRA showed unchanged issuance from the first quarter.

United States and Ukraine signed an agreement on Wednesday to establish United States-Ukraine reconstruction investment fund. “Treasury Department and the U.S. International Development Finance Corporation (DFC) will work together with the Government of Ukraine to finalize program governance and advance this important partnership. “

Advanced reading of Q1 GDP printed -0.3% vs 0.3% annualized as expected. Consumer spending has plunged to 1.8% from 4% in the previous quarter and contributed just 1.21pp to the overall reading. The biggest detractor from the GDP was, of course, net trade which took away 4.83pp as imports surged 41.3% during the quarter in order to avoid tariffs. Government spending also negatively contributed to the GDP as it detracted 0.25pp. Additionally, PCE price index jumped to 3.6% from 2.4% in the previous quarter indicating that inflation remains sticky.

March PCE report saw headline number drop to 2.3% y/y from 2.5% y/y in February with monthly inflation coming in flat and even in deflation when unrounded (-0.04%). Core reading printed 2.6% y/y as expected and came down from upwardly revised figure of 3% y/y. Monthly figure also printed flat with unrounded number at 0.028%. Services inflation increased 0.15% m/m, lower than 2% target if annualized, while services ex shelter came down to 3% y/y from 3.4% y/y seen in February. Fed will be very happy with these data points.

ISM manufacturing PMI for the month of April slipped further into contraction with a 48.7 reading vs 49 in March thus beating expectations of 48. Improvements were seen in new orders and employment indexes with prices index also ticking up, but that is not a good sign as it shows sticky inflationary pressures. On the other hand, production and new export orders plunged with backlog of orders also showing decline.

April employment report saw headline NFP number at 177k vs 130k as expected. The unemployment rate remained at 4.2% while participation rate ticked higher to 62.6% from 62.5% in March. Undermployment rate (U6) ticked down to 7.8%. Average hourly earnings cooled as they came in at 0.2% m/m and 3.8% y/y vs 0.3% m/m and 3.9% y/y as expected. Average weekly hours ticked up though to 34.3 from 34.2 the previous month. Government added only 10k jobs while the rest (167k) were private payrolls. There was also a surge in full-time jobs which rose by 305k. Healthcare continued to add jobs with 51k jobs added followed by transportation and warehousing with 29k jobs. Leisure and hospitality saw almost no change to jobs. This report shows no worrying signs for the labor market and odds of a June cut are diminishing.

The yield on a 10y Treasury started the week at 4.24%, rose to 4.33% and finished the week at around that level. The yield on 2y Treasury started the week at 3.74%, rose to 3.83% and finished the week at around that level. Spread between 2y and 10y Treasuries started the week at 50bp and finished the week at 50bp. FedWatchTool sees the probability of a 25bp rate cut at May meeting at around 2%, while probability of a no cuts is around 98%. Chances of a June rate cut fell below 50% after NFP.

This week we will have ISM service PMI and Fed meeting. No change is expected at this meeting but we should be getting some clearer hints about potential June cut.

Important news for USD:

Monday:​

• ISM Services PMI​

Wednesday:​

• Fed Interest Rate Decision​

EUR

Preliminary Q1 reading of Eurozone GDP came in at 0.4% q/q and 1.2% y/y vs 0.2% q/q and 1.1% y/y as expected. French Q1 GDP saw it improve to 0.1% q/q from -0.1% q/q in Q4 of 2024. The details are not encouraging as they showed no contribution from consumption and a big drop in exports. Changes in inventory managed to propel GDP into positive category. German GDP grew by 0.2% q/q as expected and same as in the first quarter of 2024, after a -0.2% q/q in the previous quarter.

Final manufacturing PMI for the month of April was revised up to 49 from 48.7 as preliminary reported. Both German and French readings were revised up and now show increases for every month of the 2025, four consecutive increases. Additionally, Italian reading smashes expectations while Spanish reading came in below. Output has increased as a result of falling input prices.

Preliminary April inflation report for the Eurozone saw headline number drop to 2.2% y/y from 2.5% y/y in March while a drop to 2.1% y/y was expected. More worrying is the jump in core reading to 2.7% y/y from 2.4% y/y the previous month which was bigger than 2.5% y/y markets expected. Rise in core will give headaches to the ECB. French inflation remained at 0.8% y/y for the third straight month while German ticked down to 2.1% y/y from 2.2% y/y in March but markets were expecting a 2% y/y print.

GBP

Final manufacturing PMI reading for the month of April saw a positive revision to 45.4 from 44 as preliminary reported thus making the reading improve from 44.9 in March. The details are not encouraging at all. The main reason for better than preliminary reading was increase in input prices which rose to a 28-month high. New orders and especially new export orders as well as employment all decreased.

This week we will get BoE meeting where a 25bp rate cut is penciled in.

Important news for GBP:

Thursday:​

• BoE Interest Rate Decision​

AUD

Q1 inflation data saw headline number come in at 2.4% y/y, unchanged from previous quarter, but higher than 2.2% y/y as expected. Core measure dropped to 2.9% y/y, as expected, from 3.2% y/y seen in Q4 of 2024. RBA targets core inflation in 2-3% range and with it falling into the range for the first time since Q4 of 2021 it significantly raises odds of another rate cut in May. Elections will be held on May 3.

Official PMI data for the month of April showed first deterioration in economic activity caused by “Liberation Day” tariffs. Manufacturing dropped down into contraction with a 49 reading vs 50.5 in March. The biggest drop was seen, of course, in the new orders index which plunged to 44.7 from 49 the previous month. Non-manufacturing PMI fared better as it printed 50.6, staying in expansion and helped keep composite in expansion as well with a 50.2 print, down from 51.4 the previous month. Caixin manufacturing PMI managed to stay in expansion with a 50.4 reading but details paint a worrisome picture. New orders managed to increase slightly but new export orders plunged. There were drops in jobs and input prices while business optimism decreased sharply. PBoC deputy governor stated that RRR and interest rates will be cut at an appropriate time as focus is on economic growth.

NZD

Kiwi has enjoyed risk on mood in the markets spurred by rumours about trade talks between US and China. Any deescalation or lowering of tariffs between two countries is seen as good for the commodity currencies and China proxies and kiwi gained against all majors.

This week we will get Q1 employment data.

Important news for NZD:

Wednesday:​

• Employment Change​
• Unemployment Rate​

CAD

Liberals won election Carney officially new Prime Minister. However, they have won 169 seats in the parliament but 172 are needed for majority. New cabinet should be announced on May 18.

February GDP saw economy shrink by 0.2% m/m vs coming in flat as expected. This decline comes after 0.4% m/m growth in January and with advanced reading for March seen at 0.1% m/m it should bring a positive Q1 reading for Canada. The issues will start in April and Q2 when we see effects of tariffs on economic activity.

This week we will get employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

BoJ has left rate unchanged at 0.50% as was widely expected but come out with less hawkish, more dovish tone. Inflation forecasts have been slashed down and core CPI is now seen at 2.2% y/y for 2025, down from 2.4% y/y in January. Core-core reading is seen at 2.3% y/y vs 2.1% y/y in January, but it is seen coming down below 2% to 1.8% y/y in 2025 vs 2.1% y/y as was seen in January. Growth expectations have also been revised down with 2025 GDP now seen at 0.5% vs 1.1% in January. Uncertainty surrounding economy is very high and risks towards economic outlook and inflation are skewed to the downside. On the trade barriers caused by tariffs the bank sees case for higher input costs and thus lower demand if disruptions in global logistics lead to restructuring of supply chains. BoJ Governor Ueda repeated dovish messages but at the end added that "delay in price goal timing doesn't mean a delay in hikes" indicating that intention is still to continue with rate hikes.

CHF

SNB total sight deposits for the week ending April 25 came in at CHF451.1bn vs CHF448.3bn the previous week. Deposits have been rising for four straight weeks and now reach levels seen at the end of March. Additionally, SNB is lowering the threshold factor for the remuneration of sight deposits of account holders subject to minimum reserve requirements from 20 to 18, effective as of 1 June 2025. This move should move funds deposited in the bank into real economy.​