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<\/figure>\n\n\n\nJPY \u2013 BoJ signals continuance of easy policy<\/h2>\n\n\n\n
JPY is about to end the week weaker against the GBP, the EUR and the USD, in a sign of wider weakness. On a macroeconomic level, we note that economic activity in Japan seems to have improved in the current month according to the preliminary PMI figures. On the demand side, the acceleration of the Chain store sales for March highlighted its resilience, which may also imply a continuous feeding of inflationary pressures in the Japanese economy. Yet Tokyo\u2019s CPI rates slowed down beyond market expectations, foreshadowing further easing of inflationary pressures in the Japanese economy as a whole. On a monetary level, BoJ released its interest rate decision during today\u2019s Asian session and as was widely expected remained on hold, keeping rates at 0-0.1%. Also, the bank highlighted its conviction that inflation rates are to remain near the bank\u2019s targets, in a rather optimistic note. The bank also tended to signal that it\u2019s prepared to hike rates further near the end of the year. Yet at the same press conference BoJ Governor Ueda also stated that the bank is to maintain easy financial conditions for the time being. Overall, the lack of clear forward guidance, given that the accompanying statement was exceptionally short, even for BoJ\u2019s standards, tended to weaken the JPY further. Yet on a fundamental level, the possibility of a market intervention to JPY\u2019s rescue, is now clearly on the horizon. The possibility of the Japanese Government actually intervening in the markets seems to have increased after Japan, S. Korea and the US have agreed to “consult closely” on foreign exchange markets, which could be perceived as a green light by the US for a market intervention. Yet we repeat our skeptisism, not on the possibility of a market intervention per se, but on its usefulness as the positive effect for JPY may prove to be temporary, as BoJ\u2019s dovishness remains intact and may reignite the weakening of JPY.<\/p>\n\n\n\n The common currency is about to end the week, stronger against the USD, the GBP and JPY, in a sign of wider strength. On a macroeconomic level, we note that the improved economic activity on a Eurozone level, may have been unterpinned by the services sector rather than the manufacturing sector, as per the preliminary PMI figures for April. The mixed signals intensified as Germany\u2019s business climate seems to be improving yet in France seems to be deteriorating. In the coming week, we highlight the release of the preliminary HICP rates for April. Should the rates slow down further nearing the ECB\u2019s target of 2%, we may see the EUR slipping as it would ease resistance for the bank to proceed with its first rate cut in its June meeting. Furthermore, we also note the release of the preliminary GDP rates for Q1 and a possible slowdown, even contraction of the rates could weigh on the EUR as the specter of a recession may worry EUR traders. On the monetary front, we note the market\u2019s expectations for the bank to proceed with its first post-pandemic rate cut in the June meeting and deliver another one, maybe two, until the end of the year. Yet there seem to be worries among ECB policymakers that the last mile may prove to be more bumpy than expected. In particular, the ECB seems to be concerned about prices in the services sector and should the HICP rates fail to slow down as expected, we may see the bank\u2019s stance hardening, possibly even putting a potential rate cut on ice in its next meeting on the 8th of May.<\/p>\n\n\n\n AUD recovered the losses of last week and is about to end the week in the greens against the greenback. On a macroeconomic level, we note the improvement of economic activity in Australia, according to the preliminary PMI figures for April. Yet the highlight of the past few days for Aussie traders, may have been the substantial easing of inflationary pressures in the 1st quarter of the year. The easing of inflationary pressures may allow RBA to ease on its hawkishness. Yet the market does not seem to expect any rate cuts to be delivered by the bank until the end of the year. Nevertheless, we note that the CPI rate has neared the bank\u2019s target range for inflation of 1.00%-3.00%. On a fundamental level, we note the market\u2019s perception of the Aussie being of a riskier nature as a commodity currency. Hence should the market sentiment tend to improve, we may see the Aussie getting some support while a more risk-averse approach of the market may weigh on the Aussie. In the coming week, we do not have any heavy-impact financial releases scheduled for Aussie traders, hence we expect fundamentals to lead the Aussie. Remaining on the fundamental level of the Aussie we also highlight the close Sino-Australian economic ties. In the coming week, we note the release of China\u2019s NBS and Caixin manufacturing PMI figures for April. Should both indicators remain above the reading of 50, they would align in implying an expansion of economic activity for the huge Chinese manufacturing sector. Such an expansion may provide support for the Aussie as it may imply more exports of raw materials from Australia to China.<\/p>\n\n\n\n The CAD is about to end the week slightly stronger for a second week in a row. On a fundamental level, we note that a possible improvement of the market sentiment may provide some support for the CAD as well. Also, we note that oil prices seem to have halted their drop which may have also provided some support for the Loonie. We note that the supply side of the international oil market tends to be rather tight and should oil prices rise in the coming week, they may provide some support for the Loonie given Canada\u2019s as a major oil-producing economy. On a macroeconomic level, we note that despite an improvement of the retail sales growth rate for February, the rate remained in the negatives, which may have been disappointing on a macroeconomic level. On the inflation front, we note that prices rose faster than expected on a month-on-month level for producers for March. In the coming week, we note the release of the GDP rate for February and a possible acceleration could brighten the economic outlook of Canada and provide some support for the Loonie. Also, the release of the manufacturing PMI figure for April and Canada\u2019s trade data for March could catch Loonie trader\u2019s attention. On a monetary level, we note the release of BoC\u2019s deliberations for the April meeting. The document on the one hand, tended to lean on the dovish side as the bank seems to recognise the easing of inflationary pressures in the Canadian economy. Characteristically the document stated that policymakers \u201cwere encouraged by the recent progress on CPI and core inflation\u201d. On the other hand, there are still worries for the potentially inflationary pressures caused by oil prices causing a number of policymakers to hesitate to start cutting rates.<\/p>\n\n\n\n Overall we tend to expect the USD to increase its influence over other currencies in the FX market, as the gravity and frequency of US stemming financial releases increases. Volatility though in general for the FX market is expected to rise as we get high-impact financial releases from other countries as well, which may allow some currencies to escape USD\u2019s influence and come under the spotlight. As for US equities, we note that on a fundamental basis, market worries that inflationary pressures in the US economy may prove to be persistent and force the Fed to maintain rates high for longer seem to be weighing. Yet it should be noted that major US stock market indexes sent out mixed signals. We expect though that besides the fundamentals surrounding US stock markets and the US financial releases, the earnings reports of high-profile companies may also catch the market\u2019s attention. In the coming week, we note the release of the earnings reports of NIO (#NIO), 3M (#MMM), Starbucks (#SBUX), Coca Cola (#KO), McDonalds (#MCD), Pfizer (#PFZ), eBay (#EBAY), Airbnb (#ABNB), Shell (#Shell) and Apple (#AAPL). On the other hand, gold\u2019s price is about to end the week in the reds. It should be noted that the negative correlation of the USD with gold\u2019s price was not present in the current week, and we may see that relationship being interrupted in the coming week as well.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2024\/04\/image-137.png\")
<\/figure>\n\n\n\nEUR \u2013 GDP and HICP rates to move EUR<\/h2>\n\n\n\n
AUD \u2013 Market sentiment to move the Aussie<\/h2>\n\n\n\n
CAD \u2013 February\u2019s GDP rate eyed<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2024\/04\/image-138.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n