MNI EUROPEAN OPEN: BoJ On Hold But Lowers Inflation Forecasts
EXECUTIVE SUMMARY
- UKRAINE, US SIGN MINERALS DEAL SOUGHT BY TRUMP - RTRS
- TRUMP TRADE CHIEF SAYS DEALS ‘CLOSE’, MORE MEETINGS THIS WEEK - BBG
- EU TO PRESENT NEW TRADE PROPOSALS TO US NEGOTIATORS NEXT WEEK - BBG
- BOJ KEEPS RATE AT 0.50%, KEEPS RATE HIKE STANCE - MNI BRIEF
- BOJ SEES FY25 CPI AT 2.2%, DELAYS 2% TARGET TIMING - MNI BRIEF
Fig 1: BoJ Revises Down Inflation Forecasts
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
POLITICS (BBC): “Voters are set to head to the polls for local and mayoral elections being held in some parts of England on Thursday. A by-election in Runcorn and Helsby will also decide who becomes the new MP for the constituency in Cheshire.”
EU
TRADE (BBG): “The European Union is planning to share a paper with the US next week that will set out a package of proposals to kick-start trade negotiations with the Trump administration.”
FISCAL (MNI BRIEF): Twelve out of 27 EU member states have applied for an "escape clause" from the Union's fiscal rules in order to increase their defence spending, the European Commission has stated.
EU (MNI INTERVIEW): The take-up of the EU's proposed national escape clause from the bloc's fiscal rules to allow increased defence spending is likely to be "much less" than the EUR650 billion fiscal space initially estimated by the European Commission, fiscal expert Zsolt Darvas told MNI.
TRADE (POLITICO): “The European Commission presented to EU countries on Wednesday a list of the concessions it is willing to make to the Donald Trump administration as well as a new list of goods it is going to slap with tariffs if negotiations fail, an EU official and an EU diplomat told POLITICO.”
GREECE (POLITICO): “Greece’s opposition parties are demanding an investigation into the government’s ties to a politically connected communications company that they link to shadow financing and online propaganda for the ruling New Democracy party.”
US
US/UKRAINE (RTRS): “Ukraine and the U.S. on Wednesday signed a deal heavily promoted by U.S. President Donald Trump that will give the United States preferential access to new Ukrainian minerals deals and fund investment in Ukraine's reconstruction.”
TARIFFS (WSJ): “A bid to reject President Trump's worldwide "Liberation Day" tariffs fell short in the Senate on Wednesday, as most Republicans stayed aligned with the White House despite growing concerns about the economy. The measure championed by Republican Sen. Rand Paul (R., Ky.) failed to win a majority, with 49 in favor and 49 against, hurt by the absences of two tariff opponents -- Sen. Sheldon Whitehouse (D., R.I.), who was returning from an event in South Korea, and Sen. Mitch McConnell (R., Ky.).”
TRADE/TARIFFS (BBG): ‘ President Donald Trump’s trade representative said that the US was nearing an announcement of a first tranche of trade deals that would see the White House reduce planned tariffs on trading partners, as fresh data fanned new doubts about the state of the economy.”
FED (MNI INTERVIEW): The Federal Reserve is likely to cut interest rates a few times by the end of the year as tariffs cause a meaningful U.S. slowdown in the second half, but huge trade policy uncertainty could also see outcomes as dire as a global recession or as bright as a domino effect of trade deals, former St. Louis Fed President James Bullard told MNI.
FED (MNI BRIEF): The Federal Reserve must keep a close eye on inflation expectations and work to maintain anchored prices, likely resulting in its being slow to lower interest rates in the coming months, former New York Fed President William Dudley said Wednesday.
FED (MNI): The Federal Reserve should consider rolling back many of the changes it made to its operating framework in 2020 so its principles are clearer and more robust to a wider range of economic circumstances, a G30 working group led by former New York Fed President Bill Dudley said in a report Wednesday, calling for more comprehensive changes than the central bank has signaled it will undertake.
OTHER
JAPAN (MNI BRIEF): The Bank of Japan board decided unanimously to keep policy interest rate at 0.50% amid high uncertainties over the outlook for the economy and inflation. The board's decision was largely anticipated.
JAPAN (MNI BRIEF): The Bank of Japan on Thursday lowered its median forecasts for economic growth in fiscal 2025 and 2026 to 0.5% and 0.7%, down from 1.1% and 1.0% projected in January, due to the growing impact of U.S. trade policies on Japan’s economy. For fiscal 2027, the BOJ projected growth at 1.0%, marking its first forecast for that year. The central bank also cut its core consumer price index forecasts, projecting 2.2% inflation this fiscal year and 1.7% in fiscal 2026, down from 2.4% and 2.0%. Core CPI for fiscal 2027 is forecast at 1.9%.
JAPAN (MNI BRIEF): Japan’s economy is expected to have shrunk in the January–March quarter for the first time in four quarters, as weak private consumption and falling net exports outweigh gains in capital investment, private economists predicted.
CANADA (MNI): Bank of Canada officials saw elevated shelter costs distorting core inflation measures, minutes of their latest decision published Wednesday showed, casting further doubt on the ability to accurately track price trends through major shifts in the economy like the pandemic and the U.S. trade war.
CHINA
TRADE/TARIFFS (BBG): “US President Donald Trump’s administration has been seeking contact with Beijing to initiate talks on the massive tariffs Washington has imposed on China, according to a state-run media outlet.”
MARKET DATA
AUSTRALIA S&P GLOBAL APRIL MANUFACTURING PMI 51.7; PRE. 51.7; MAR. 52.1
AUSTRALIA MARCH TRADE SURPLUS A$6.90B; EST. A$3.20B; FEB. A$4.92B
AUSTRALIA MARCH EXPORTS +7.6% M/M; FEB. -4.2%
AUSTRALIA MARCH IMPORTS -2.2% M/M; FEB. +1.8%
AUSTRALIA Q1 EXPORT PRICES +2.1% Q/Q; Q4 +3.6%
AUSTRALIA Q1 IMPORT PRICES +3.3% Q/Q; Q4 +0.2%
AUSTRALIA CORELOGIC HOME VALUES APR +0.2% M/M; MAR. +0.4%
JAPAN JIBUN BANK PMI MFG APR. F 48.7; PRE. 48.5; MAR. 48.4
JAPAN APRIL CONSUMER CONFIDENCE 31.2; EST. 33.8; MAR. 34.1
S. KOREA APR. TRADE BALANCE $4.88B; EST. $4.30B; MAR. $4.92B
S. KOREA APR. EXPORTS +3.7% Y/Y; EST. -2.0%; MAR. +3.0%
S. KOREA APR. IMPORTS -2.7%; EST. -6.7%; MAR. +2.3%
MARKETS
US TSYS: Asia Wrap - Quiet session
TYM5 has traded sideways within a range of 112-05 to 112-10+ during the Asia-Pacific session. It last changed hands at 112-07, unchanged from the previous close.
- The US 10-year yield is a little higher, dealing around 4.18%, up from its close around 4.16%.
- The US 2-year yield is a little higher, dealing around 3.62%, up from its close around 3.6027%
- Earlier comments from US President Trump touted pledged tech investment into the US, while also re-iterating calls for lower interest rates.
- NVIDIA CEO Jensen Huang: "We're going to build NVIDIA's technology, the next generation of that, all here in the United States. Without the President's leadership, his policies, his support, and very importantly his strong encouragement -- manufacturing in the United States wouldn't have accelerated to this pace."
- BOJ left rates unchanged and sees downside risk to the economy in FY25 and 26.
- The 10-year Yield, drifts back towards the first target of 4.10%. Through this level we could get another wave of demand. Buyers should return on any bounce back towards 4.30%.
- Data/Events : US Initial Jobless Claims, S&P US Man PMI, ISM Man PMI
JGBS: Richer After BoJ's GDP & CPI Forecast Downgrades
JGB futures are sharply higher but off session highs, +49 compared to settlement levels.
- As widely expected, the BoJ left its policy rate unchanged at 0.50%, which was a unanimous decision of 9-0 by the board.
- The economic outlook was downgraded though in terms of both lower GDP and inflation forecasts. It also notes prices and growth risks for the 2025 and 2026 fiscal years rest to the downside.
- The central bank retained its bias that if the outlook is realised it will raise rates further, but the central bank places a caveat on that given extreme uncertainties around the trade outlook.
- Cash US tsys are dealing ~2bps cheaper in today's Asia-Pac session. Today's US calendar will see Initial Jobless Claims, S&P Manf PMI and ISM Manf PMI.
- Cash JGBs are 1-5bps richer on the day across benchmarks out to the 20-year and 1-2bps cheaper beyond. The benchmark 10-year yield is 3.6bps lower at 1.282% versus the cycle high of 1.596%.
- Swaps have twist-steepened with rates 4bps lower to 1bp higher, pivoting at the 30-year.
- Tomorrow, the local calendar will see Jobless Rate, Job-To-Applicant Ratio, Monetary Base and Weekly International Investment Flow data alongside an enhanced liquidity auction for OTR 1-5-year JGBs.
AUSSIE BONDS: Modestly Cheaper, Subdued Session, Jun-35 Supply Tomorrow
ACGBs (YM -2.0& XM -3.5) are modestly weaker, with trading relatively subdued.
- There was a $4bn widening in Australia’s merchandise trade surplus in March after narrowing $2.5bn in the previous month. The move to the highest surplus at $6.9bn in over a year was driven by a strong pickup in goods exports driven by Australia’s mining commodities, while imports contracted on the month. Through the volatility though, the trend in the trade surplus is steady.
- Opinion polls continue to point to a return of the incumbent Labor government following Saturday’s federal election but it remains unclear whether it can hold onto its majority, which is likely to depend on developments in a number of individual seats.
- Cash ACGBs are 1-3bps cheaper with the AU-US 10-year yield differential at +2bp.
- Cash US tsys are dealing ~2bps cheaper in today's Asia-Pac session.
- The bills strip is little changed.
- RBA-dated OIS pricing is slightly firmer across meetings today. A 50bp rate cut in May is given a 4% probability, with a cumulative 112bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond.
BONDS: NZGBS: Closed With A Modest Twist-Steepener, US Claims & PMI Data Due
NZGBs closed showing a modest twist-steepener, with benchmark yields 1bp lower to 1bp higher.
- NZ-US and NZ-AU 10-year yield differentials were unchanged on the day.
- Cash US tsys are dealing ~2bps cheaper in today’s Asia-Pac session. Today’s US calendar will see Initial Jobless Claims, S&P Manf PMI and ISM Manf PMI.
- Today’s local supply showed moderate demand with cover ratios ranging from 2.84x (May-54) to 3.77x (May-30).
- “The New Zealand unemployment rate is expected to rise to 5.3% in the March quarter from 5.1% in the December 2024 quarter as job growth is not fast enough to meet population growth, Westpac said in a Wednesday report.” (MT Newswires). The Q1 Employment is due next Wednesday.
- Swap rates closed flat to 3bps higher, with the 2s10s curve steeper and implied swap spreads wider.
- RBNZ dated OIS pricing closed flat to 4bps firmer across meetings, with early 2026 leading. 26bps of easing is priced for May, with a cumulative 81bps by November 2025.
- Tomorrow, the local calendar will see Building Permits data.
FOREX: G10 Wrap - Can The USD Catch Up With Stocks ?
The BBDXY has had an Asian range of 1223.83 - 1226.48, Asia is currently trading around 1226. Bloomberg - “The EU is planning to present a package of proposals to the US next week that would lower trade and non-tariff barriers, boost investments in the US and bolster purchases of US LNG and tech, people familiar said. The bloc is also moving forward with retaliatory measures should negotiations fail.” The unchanged decision from the BOJ today was well expected, but the downgrade to both GDP and inflation forecasts is weighing, particularly in terms of likely further rate hikes. The next focus point will be Governor Ueda's press conference a little later on.
- EUR/USD - Asian range 1.1300 - 1.1332, Asia is currently trading 1.1310. Intra-day support is around 1.1300, should this area not hold demand should remerge on dips back to 1.1100. Month end USD demand could have contributed to the overnight price action but with risk outperforming a sustained move below 1.1300 could see some longs pared back.
- GBP/USD - Asian range 1.3293 - 1.3333, the GBP momentum seems to be stalling towards the decent Weekly resistance around 1.3500. Intra-day support is around the 1.3250 area, then the pivotal 1.30/31 support is next.
- USD/JPY - Asian range 142.88 - 143.82, has drifted higher for most of the Asia session after the BOJ downgrades weigh on sentiment. Watch for a break back above 144.00 which could trigger some shorts to pare back, then more importantly the 145/146 area which should once more offer good levels for sellers to reengage.
- USD/CNH - Asian range 7.2664 - 7.2779, Onshore market was closed for Labor Day holidays. Will need to get back above 7.3000 again to start thinking about moving higher again. The longer it stays below there the higher the chance of weaker longs being forced to pare back exposure.
- Cross asset : SPX +1.07%, Gold $3226, US 10-Year yield 4.17%, BBDXY 1226, Crude oil $58.13.
- Data/Events : US Initial Jobless Claims, S&P US Man PMI, ISM Man PMI
Fig 1: USD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg
FOREX: Antipodean Wrap - AUD & NZD Outperform In The Crosses
This Asian session has seen another decent leg higher in risk as Microsoft and Meta beat earning expectations. The BOJ left rates unchanged and downgraded both inflation and GDP forecasts. The AUD and NZD continue to benefit from the better outlook for risk.
- AUD/USD - Asian range 0.6389 - 0.6427, the AUD is currently dealing around 0.6410. AUD continues its attempts to hold onto its gains above 0.6400, managing to shrug off the bounce in the USD for now. While the support around 0.6350 holds the focus will be on building upward momentum. Should 0.6350 break shorts will be keen to add again.
- AUD/JPY - Asian range 91.35 - 92.06. Price goes into the London trading around 92.04, testing the upper boundary of the 0.8950/0.9200 range. If risk remains on the front foot there is a chance we see this gain momentum above 0.9200.
- NZDUSD - Asian range 0.5930 - 0.5951, going into London trading around 0.5940. Demand should return first around 0.5900, then around the 0.5800 area.
- AUD/NZD - Asian range 1.0760 - 1.0801, the Asian session currently trading 1.0785. Sellers are capping the 1.0800 area for now, expect more supply towards 1.0850.
Fig 1 : AUD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg
OIL: Crude Holds Onto Week’s Losses, WTI Finding Support at $58 & Brent At $61
Oil prices are moderately lower again today after falling sharply over the week and are now down more than 7% this week as the market remains nervous about the impact of tariffs on global demand and will watch today’s US April manufacturing PMI data and Friday’s payrolls closely for early signs of their impact. Q1 US GDP contracted as imports jumped. The USD index is 0.2% higher, which is likely also to be weighing on dollar-denominated crude.
- WTI is down 0.2% to $58.11/bbl off the intraday low of $58.01. It appears to find support at $58, with only a brief move below on Wednesday. Brent is 0.1% lower at $61.02/bbl after a trough of $60.91 with moves below $61 difficult to hold.
- OPEC meets on Monday to decide its production quotas from June. Following its larger-than-expected increase in April which amounted to 3 months of increases in one, Reuters reported that Saudi Arabia is not overly concerned about lower prices suggesting that it may focus on market share instead.
- Later April US manufacturing ISM/PMI, Challenger job cuts, March construction and jobless claims print. The UK S&P Global manufacturing PMI for April is also released. Europe is shut.
- Gold’s decline continued in the Asian trading day, having opened at US$3,288.73.
- Following a mixed bag of US economic data last night confused signals and sent gold lower after an unexpected contraction in GDP was followed by Core PCE and strong pending home sales questioned whether rate cuts were imminent.
- Much of gold's rise can be attributed to it's 'safe haven status' and as US Treasury Secretary Bessent indicates that some trade deals are about to be announced, gold has the potential to fall further from here.
- Gold lost further ground today down -1.7% to $3,229.25
- Having reached a new high earlier in April of $3,423.98 gold has retreated over 5% since.
- Year to date gold remains one of the best performing assets up over 23% but as hedge fund positioning has turned more neutral it seems likely to be in for a period of consolidation as the world assesses the next phase of the trade war.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 01/05/2025 | 0630/0830 | ** |  CH | Retail Sales |
| 01/05/2025 | 0830/0930 | ** |  GB | BOE Lending to Individuals |
| 01/05/2025 | 0830/0930 | ** | GB | BOE M4 |
| 01/05/2025 | 0830/0930 | ** | GB | S&P Global Manufacturing PMI (Final) |
| 01/05/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 01/05/2025 | 1230/0830 | *** | US | Jobless Claims |
| 01/05/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 01/05/2025 | 1345/0945 | *** | US | S&P Global Manufacturing Index (final) |
| 01/05/2025 | 1400/1000 | *** | US | ISM Manufacturing Index |
| 01/05/2025 | 1400/1000 | * | US | Construction Spending |
| 01/05/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 01/05/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 01/05/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 02/05/2025 | 0130/1130 | * |  AU | Producer price index q/q |
| 02/05/2025 | 0130/1130 | *** | AU | Retail trade quarterly |
| 02/05/2025 | 0130/1130 | ** | AU | Retail Trade |
| 02/05/2025 | 0630/0730 | GB | DMO to announce details of long syndication for W/C 19 May | |
| 02/05/2025 | 0715/0915 | ** |  ES | S&P Global Manufacturing PMI (f) |
| 02/05/2025 | 0745/0945 | ** |  IT | S&P Global Manufacturing PMI (f) |
| 02/05/2025 | 0750/0950 | ** |  FR | S&P Global Manufacturing PMI (f) |
| 02/05/2025 | 0755/0955 | ** |  DE | S&P Global Manufacturing PMI (f) |
| 02/05/2025 | 0800/1000 | ** |  EU | S&P Global Manufacturing PMI (f) |
| 02/05/2025 | 0900/1100 | *** | EU | HICP (p) |
| 02/05/2025 | 0900/1100 | ** | EU | Unemployment |
| 02/05/2025 | 1130/2030 | * |  JP | Labor Force Survey |
| 02/05/2025 | 1230/0830 | *** | US | Employment Report |
