EUROZONE DATA: Record Trade Surplus Likely Driven By Tariff Front-Running
The Eurozone trade surplus rose to a record-high E27.9bln in March on a seasonally-adjusted basis. This is E5.2bln more than February's upwardly revised value of E22.7bln, and means in Q1'25, the EZ trade surplus was E64.2bln - around twice the tentative E32.3bln from Q4'24.
- The jump comes not as a surprise following the US March trade data - the takeaway there was that tariff front-running in particular in the pharmaceutical sector was in place, and Ireland was one of the countries standing out in that regard.
- It is only logical that a similar pattern was observed in the Eurozone trade data in March, and higher exports in the pharma sector could already have been observed in some national-level data out over the last days.
- The data confirms that is is highly likely that net exports contributed strongly to the Eurozone Q1 GDP figure, which came in at +0.3% Q/Q - above the ECB's estimate of 0.2%. There remain question marks over the extent of the reversal in the net exports contribution over the next quarters, if it was indeed pure tariff front-running ahead of April reciprocal tariffs and specific threats of pharmaceutical tariffs.
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MNI: EUROZONE MAR FINAL HICP +0.6% M/M, +2.2% Y/Y
- MNI: EUROZONE MAR FINAL HICP +0.6% M/M, +2.2% Y/Y
- EUROZONE MAR FINAL CORE HICP +1% M/M, +2.4% Y/Y
FOREX: USDJPY Bounces After Printing New Cycle Low
- USDJPY traded steadily lower overnight amid the weaker tone for risk, and lower yields in the US. Price action culminated in the pair reaching a new cycle low of 142.05, just two pips below last Friday’s low.
- Subsequently, the pair has bounced significantly, spiking to 142.93 in recent trade amid the China headlines, eroding a solid portion of the overnight decline. Session highs are located at 143.28, however initial resistance remains much further out at 144.64.
- Bearish trend conditions continue to place the focus on a potential move to key medium-term support around the 140.00 handle.
- BoJ Governor Ueda made comments to local newspaper Sankei today, noting the central bank will have to monitor the tariff impact and may need to respond if the economy is impacted. The next BoJ policy meeting is at the start of May, and market expectations for rate hikes have been sharply scaled back over the past month in response to President Trump's announcement of reciprocal tariffs.
- On Thursday, a speech by BoJ Board Member Nakagawa is scheduled.
US-CHINA: BBG-China Open To Talks If Trump 'Shows Respect' & 'Consistency'
(MNI) London - Bloomberg reports that according to Chinese officials, China is open to talks on trade if US President Donald Trump "shows respect" and names a point person for negotiations. Wire headlines claim "China wants Trump to rein in cabinet members, show consistency". Says that talks with the US should address concerns on sanctions and other issues. These headlines chime with other comments from the Chinese gov't that have said Beijing is seeking to address trade issues with Washington, D.C., in a constructive manner.
- The two sides may now be engaged in a standoff, waiting for the other to make the first call. On 11 Apr, CNN reported, "Two senior White House officials tell CNN that the US will not reach out to China first. Trump has told his team that China must be the first to make the move, as the White House believes it is Beijing that has chosen to retaliate and further escalate the trade war."
- BNN Bloomberg wrote on 15 Apr, "China will only engage in talks with the U.S. if its leaders show respect toward Beijing, according to a former top Chinese economic official. “If the U.S. wants China to totally accept the U.S. proposal, to accept the U.S. conditionality, I think there’s no negotiation,” Zhu Guangyao, who was China’s Vice Minister of Finance from 2010 to 2018, said in an interview in Singapore."
