Can Chinese PMIs Solidify the Economy's Recovery Prospects?

On Tuesday, the April Chinese PMI surveys will be released. The market reacted positively to the recent upside GDP surprise for the first quarter of 2024. However, the positive headline figure masked the mixed underlying details. The pickup in growth was almost entirely driven by a decent increase in industrial production.

GDP Data to show Canadian Economy Lost Momentum Late in First Quarter

On Tuesday, we expect Canadian gross domestic product in February to show a more subdued 0.1% increase than the 0.6% jump in January and below the 0.4% advance estimate released a month ago.

Weekly Economic & Financial Commentary: The Long and Winding Road to Easing

The case for rate cuts this summer continued to weaken as this week’s economic data painted a scene of stubborn inflation against the backdrop of defiant consumer demand. We got our first look at Q1 GDP, which downshifted to a 1.6% annualized pace and was accompanied by a hot core PCE deflator reading. Consumers remain unfazed by high rates and inflation as Q1 personal consumption expenditures and March personal spending both came in strong.

The Weekly Bottom Line: Canada – Rate Cuts on the Horizon

Themes that have recently characterized Canadian financial markets generally held true again this week. The Canadian dollar was broadly unchanged, hanging at a low level of 73 U.S. cents which will do no favours for inflation. Meanwhile, the 10-year Canada yield moved somewhat higher (as of writing), as U.S. rate cut expectations continue to be pared back. Meanwhile, the WTI oil benchmark climbed by about $2, reflecting an unanticipated drawdown in inventories.

Japanese Yen Drops to 34-Year Low

In Japan, the yen weakened briefly past 160 against the greenback (USDJPY) as of this morning, thus reaching its lowest level against the dollar since April 1990. The increasingly weak yen has been fuelling speculation in markets that the Bank of Japan may soon intervene to counter any further decline of its currency.

Crypto Market Retreats Due to Overhang of Sellers

The crypto market has lost 3.3% in the last 24 hours to $2.3 trillion. The last time this level of capitalisation was on 19th April. Most worrying is the reversal of the trend from up to down last Wednesday. If the market easily pulls back below the previous local lows ($2.2 trillion), the downtrend in the market will be confirmed.

USD/JPY 160 the Line in Sand for (Hhidden) Interventions?

as USD/JPY 160 the line in the sand for (hidden) interventions? Japanese authorities see value in keeping their cards close to their chest and didn’t comment, but news agencies, referring to sources familiar with the matter, reported that interventions indeed occurred.

Euro Area Inflation in the Spotlight

Today, focus is on euro area inflation for April. Inflation has declined significantly in recent months but the underlying momentum in service inflation has picked up. We expect inflation will remain unchanged at 2.4% y/y due to food inflation and rising energy inflation while core inflation should decline to 2.6% y/y. This call is further supported by the fact German and Spanish inflation both came in aligned with expectations yesterday (read more on this below).

Core Bonds Gained Ahead of a Busy Week

Core bonds gained ahead of a busy week. US yields dropped between 1.9 and 5.3 bps with the long end outperforming. The US Treasury unexpectedly lifted its quarterly borrowing estimate by $41bn compared to its January estimate (cf. infra). While only temporary, the small yield spike it triggered at the long end of the curve does reveal some market sensitivity to the matter.

USD/JPY Stabilizes After Roller-Coaster Monday

The Japanese yen is lower on Tuesday. In the European session, USD/JPY is trading at 156.88, up 0.34%. It has been a relatively quiet day for the yen after massive movement over the past two days. On Friday dollar-yen jumped 1.7% and broke above 158, but the real drama unfolded on Monday, when the yen went on a wild ride that saw it swing more than 550 basis points. The yen fell as low as 160.23 but then recovered and closed at 156.30, gaining 1.25% on the day.