JPY Carry trade: Downside Pressure Mounts as Global Demand Faces Headwinds

Commodities and growth proxies JPY crosses are leading the decline in G10 JPY carry trade basket. A widening of the US high-yield corporate bonds credit spread may spark a higher volatile movement in the JPY crosses. Key US earnings releases from Visa, Microsoft, and Alphabet are indicating slower global demand spending despite expectations beat.

Australia March CPI

Australia Headline CPI 1.4%qtr/7.0%yr; Trimmed Mean 1.2%qtr/6.6%yr; Weighted Median 1.2%qtr/5.8%yr. The more modest rise in the Trimmed Mean is highlighting that the current disinflationary force, particularly for goods, appears to be greater than we thought.

AUD/USD Falls Below 0.66 on Lower Inflation, Banking Jitters

Australia’s inflation levels have been falling and the downward trend continued in the first quarter. The headline figure slowed to 7.0%, down from 7.8% in Q4 and a notch above the market consensus of 6.9%. On a quarterly basis, headline CPI from 1.9% to 1.3%, versus the market consensus of 1.4%. The monthly CPI for March fell from 6.8% to 6.1%, below the estimate of 6.6%.

Sunset Market Commentary

EUR/USD resumed its uptrend with the pair in a technical acceleration moving beyond the YTD highs in the 1.1070/75 area. First resistance stands at 1.1274 (62% retracement on drop between early 2021 and September 2022).

Temporary First Republic-Related Stress to Fade Further

Overall, we expect the temporary First Republic-related stress to fade further with especially European yields supported by the upcoming ECB meeting. The narrowing short term yield differential between the US and Europe should keep EUR/USD supported as well.

USD/JPY – Yen Eyes Tokyo CPI, US GDP

USD/JPY is trading quietly at 133.84, up 0.13% on the day. The yen’s lack of movement could change today with a host of key releases. Japan will release Tokyo Core CPI, while the US publishes Preliminary GDP for the first quarter and unemployment claims. Japan releases Tokyo Core CPI for April early on Friday, which is expected to remain steady at 3.2%.

Sunset Market Commentary

In the March policy statement, the BoE made further tightening conditional on evidence of more persistent inflationary pressures, ‘including the tightness of labour market conditions and behaviour of wage growth and services inflation’. After yesterday’s and today’s data, this condition is (more than) fulfilled.

New Zealand Dollar Eyes Fourth-Quarter Inflation

New Zealand releases inflation for the first quarter later today. It has been a light data week so far in both New Zealand and the US, which explains why NZD/USD is almost unchanged this week. That could change in a hurry following the inflation report, which should be treated as a market-mover.

First Impressions: NZ Consumers Price Index

Consumer prices rose 1.2% in the March quarter and are up 6.7% over the past year. The March result was below our forecast, and much lower than the RBNZ's expectation.

AUD/USD – Aussie Shrugs as Business Confidence Falls, RBA Review Released

Australian Treasurer Chalmers released the findings of a review of the Reserve Bank of Australia today. The central bank last underwent major changes in the 1990s and the report had some 51 recommendations. The key suggestions include setting up a separate policy board, press conferences after each policy meeting and reducing board meetings from 11 to 8, in order to give households more time to react to rate decisions.