JPY: Goldman Revises USD/JPY Forecasts But Still Expects Firmer Yen Outlook
Goldman Sachs: "JPY: Takin' it slower, but still into you. The tariff detente has pushed down the odds of recession and justifiably, in our view, driven some further removal of risk premium across assets — and, of course, particularly the safe havens. But we still see two main reasons for continued Yen appreciation over time, even if the US does manage to avoid recession. First, Japan—like Europe and Taiwan— has been a major source of increasingly unhedged US portfolio inflows in recent years. This leaves scope for meaningful increases in hedge ratios, especially if the BoJ begins hiking again sooner than expected (i.e., further lowering hedging costs). Second, the Yen tends to have a positive beta to the Renminbi in pro-risk backdrops. If we see a gradual grind lower in USD/CNY and other key crosses in the regions, as we expect, that should also weigh on USD/JPY without additional recession concerns. We also expect there to be some lasting premium in the Yen, given its attractiveness as a portfolio hedge (it remains our favorite). As a result, we are revising our Yen forecasts to show a more gradual but still strengthening path. Our new forecast path is 142, 138 and 135 in 3, 6 and 12 months (from 138, 136 and 135 previously). That said, we think the risks still look skewed towards more rapid appreciation as recession risk remains elevated and markets have now shifted back to a more benign baseline."
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LOOK AHEAD: Eurozone Timeline of Key Events (Times BST)
| Date | Time | Country | Event |
| 25-Apr | 0745 | FR | Manufacturing Sentiment |
| 29-Apr | 0700 | DE | GFK Consumer Climate |
| 29-Apr | 0800 | ES | HICP (p) / GDP |
| 29-Apr | 0900 | EU | M3 / Consumer Expectations Survey |
| 29-Apr | 0900 | IT | ISTAT Confidence Indices |
| 29-Apr | 1000 | EU | Consumer Confidence, Industrial Sentiment |
| 30-Apr | 0630 | FR | GDP (p) / Consumer Spending |
| 30-Apr | 0700 | DE | Import/Export Prices / Retail Sales |
| 30-Apr | 0745 | FR | HICP (p) / PPI |
| 30-Apr | 0855 | DE | Unemployment |
| 30-Apr | 0900 | DE | GDP (p) / State level CPI |
| 30-Apr | 0900 | IT | GDP (p) |
| 30-Apr | 1000 | EU | GDP preliminary flash est. |
| 30-Apr | 1000 | IT | HICP (p) |
| 30-Apr | 1100 | IT | PPI |
| 30-Apr | 1300 | DE | HICP (p) |
JGBS: Twist-Steepener Holds Going Into W/E, BoJ Gov Ueda Reiterates Caution
JGB futures are stronger, +18 compared to settlement levels, sitting near the middle of the range after a choppy session.
- “Governor Kazuo Ueda reiterates his stance that the central bank will carefully monitor if its economic outlook will be realized, accounting for the effects of US tariff measures, without preconception. The BoJ will raise the benchmark rate if the outlook is realized, Ueda says in response to questions in parliament.” (per BBG)
- “Fukoku Mutual Life Insurance Co. plans to invest in Japan's super-long government bonds this fiscal year after their yields skyrocketed. The company aims to increase domestic government bond holdings by ¥30 billion, with gross purchases potentially reaching ¥300-400 billion.” (per BBG)
- Earlier today, Headline CPI for March showed +3.6% y/y versus +3.7% estimate. Core and Core-Core printed +3.2% y/y and +2.9% y/y, respectively, versus estimates of +3.2% and +2.9% and priors +3.0% and +2.6%.
- Cash US tsys are closed today for the Good Friday holiday.
- Cash JGBs have twist-steepened, pivoting at the 20-year, with yields 2bps lower to 5bps higher.
- Swap rates are 2bps lower to 2bps higher, with a steepening bias.
- On Monday, the local calendar will see Tokyo Condominiums for Sale data.
CHINA: Bond Futures Marginally Up Despite Liquidity Injection.
- China’s bond market reacted very little to a second day of sizeable liquidity injection.
- China’s 10YR bond future is up just +0.03 at 109.04 and remains firmly above all major moving averages. The nearest being the 20-day EMA at 108.61.
- The 2YR bond future is down -0.02 at 102.46; remaining below all major moving averages – the nearest being the 20 day EMA at 102.52.
- The 10YR CGB is marginally lower in yield at 1.64%
