Weekly Market Recap (22-26 April)

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The PBoC left the
LPR rates unchanged as expected:

  • 1-year LPR 3.45%.
  • 5-year LPR 3.95%.

The SNB raised the
minimum Reserve Requirement Ratio (RRR) from 2.5% to 4.0% with the change going
into effect from 1 July 2024:

arising from cancellable customer deposits (excluding tied pension provision)
will in future be included in full in the calculation of the minimum reserve
requirement, as is the case with the other relevant liabilities. This revokes
the previous exception whereby only 20% of these liabilities counted towards
the calculation.”

is a change to the National Bank Ordinance. On the move, the SNB says that
“the adjustments will ensure that implementation of monetary policy
remains effective and efficient” and that it “will not affect the
current monetary policy stance”.

The Canadian March PPI
came in line with expectations:

  • PPI M/M 0.8% vs.
    0.8% expected and 1.1 prior (revised from 0.7%).
  • PPI Y/Y -0.5% vs.
    -1.4% prior (revised from -1.7%).
  • Raw materials price
    index Y/Y -0.5% vs. -4.7% prior.
  • Raw materials price
    index M/M 4.7% vs. 2.1% prior.


The Australian April PMIs
showed Manufacturing almost jumping back into expansion while the Services PMI ticked
slightly lower:

  • Manufacturing PMI
    49.9 vs. 47.3 prior.
  • Services PMI 54.2
    vs. 54.4 prior.

The Japanese April PMIs
showed Manufacturing PMI almost jumping back into expansion while the Services
PMI increased further into expansion:

  • Manufacturing PMI
    49.9 vs. 48.0 expected and 48.2 prior.
  • Services PMI 54.6
    vs. 54.1 prior.

BoJ Governor Ueda didn’t
add anything new on the monetary policy front as the central bank remains data
dependent with particular focus on the inflation trend and wage growth:

  • Don’t have any
    preset idea on timing, pace of future rate hike.
  • If trend inflation
    accelerates in line with our forecast, we will adjust degree of monetary
    support through interest rate hike.
  • If our price
    forecast changes, that will also be a reason to change policy.
  • Future monetary
    policy guidance will depend on economy, price, market development at the
  • Didn’t say anything
    new on BoJ policy last week in Washington.
  • Trend inflation is
    still somewhat below 2%, so need to maintain accommodative monetary
    conditions for the time being.
  • If geopolitical
    risks, weak domestic demand cause disruptions in markets, BoJ will respond
    through flexible, nimble liquidity provisions.
  • Annual wage
    negotiations have been, and always will be, among important economic
    variables we look at in setting policy.
  • We decide on policy
    looking not just at wage talks, but various other economic variables.
  • We decided to change
    policy in March because strong wage talk outcome came on top of fairly
    solid readings in other sectors of economy.
  • Whether we will set
    policy with same emphasis on wage talk outcome will depend on conditions
    at the time.
  • It’s hard to say
    beforehand how long the BoJ should wait in gathering enough data to change
  • We would like to
    leave some scope for adjustment by not pre-committing to a certain policy
    too much.
  • Our basic stance is
    that we will look at moves in trend inflation to achieve our price goal,
    and take a data-dependent approach in setting policy.

The Eurozone April PMIs
showed Manufacturing PMI slipping further into contraction while the Services
PMI continues to tick higher:

  • Manufacturing PMI
    45.6 vs. 46.6 expected and 46.1 prior.
  • Services PMI 52.9
    vs. 51.8 expected and 51.5 prior.

The UK April PMIs showed
the Manufacturing PMI falling back into contraction while the Services PMI
continue to expand:

  • Manufacturing PMI
    48.7 vs. 50.4 expected and 50.3 prior.
  • Services PMI 54.9
    vs. 53.0 expected and 53.1 prior.

BoE’s Haskel (hawk –
voter) warned that inflation is unlikely to reach sustainably the target unless
there’s a weakening in the labour market:

  • High inflation to
    remain unless labour market weakens.
  • UK labour market is
    extremely tight.
  • Labour market
    tightness has been easing rather slowly.

BoE’s Pill (neutral –
voter) didn’t add anything new on the monetary policy front although he did say
that a rate cut is “still some way off”:

  • Seeing signs of a
    downward shift in inflation persistency.
  • Policy outlook has
    not changed substantially since March.
  • There has been
    little news in recent months on inflation persistence.
  • Now seeing signs of
    a downward shift in the persistent component of inflation dynamic.
  • A cut in the bank
    rate would not entirely undo the restrictive policy stance.
  • Will need to
    maintain a degree of restrictiveness in policy stance to squeeze out
    inflation persistency.
  • Absence of news and
    passage of time have brought a bank rate cut somewhat closer.
  • The timing for a
    rate cut is still some way off.
  • No reason for BoE to
    move rates in lockstep with either Fed or ECB.

The US April PMIs missed
expectations across the board:

  • Manufacturing PMI
    49.9 vs. 52.0 expected and 51.9 prior.
  • Services PMI 50.9
    vs. 52.0 expected and 51.7 prior.


  • April saw an overall
    reduction in new orders for the first time in six months.
  • Companies responded
    by scaling back employment for the first time in almost four years.
  • Business confidence
    fell to the lowest since last November.
  • Rates of inflation
    generally eased at the start of the second quarter, with both input costs
    and output prices rising less quickly at the composite level.
  • However,
    manufacturing input cost inflation hit a one-year high.
  • Some service
    providers suggested that elevated interest rates and high prices had
    restricted demand during the month.


The Australian Q1 CPI
beat expectations across the board:

  • CPI Y/Y 3.6 vs. 3.4%
    expected and 4.1% prior.
  • CPI Q/Q 1.0% vs.
    0.8% expected and 0.6% prior.
  • Trimmed Mean CPI Y/Y
    4.0% vs. 3.8% expected and 4.2% prior.
  • Trimmed Mean CPI Q/Q
    1.0% vs. 0.8% expected and 0.8% prior.
  • Weighted Mean CPI
    Y/Y 4.4% vs. 4.1% expected and 4.4% prior.
  • Weighted Mean CPI
    Q/Q 1.1% vs. 0.9% expected and 0.9% prior.

ECB’s Nagel (hawk –
voter) warned that a rate cut in June does not mean that more rate cuts will
follow suit:

  • June rate cut not
    necessarily followed up by a series of rate cuts.
  • Services inflation
    remains high, driven by continued strong wage growth.
  • Not fully convinced
    that inflation will actually return to target in a timely, sustained
  • Given the
    uncertainty, we cannot pre-commit to a particular rate path.

The German April IFO
Business Climate Index beat expectations:

  • IFO 89.4 vs. 88.8
    expected and 87.9 prior (revised from 87.8).
  • Current conditions
    88.9 vs. 88.7 expected and 88.1 prior.
  • Expectations 89.9 vs.
    88.7 expected and 87.7 prior (revised from 87.5).

The Canadian February
Retail Sales missed expectations across the board:

  • Retail sales M/M
    -0.1% vs. 0.1% expected and -0.3 prior.
  • Retail sales Y/Y
    1.2% vs. 0.2% prior (revised from 0.9%).
  • Ex autos M/M -0.3%
    vs. 0.0% expected and 0.4% prior (revised from 0.5%).
  • Ex auto and gas M/M 0.0%
    vs. 0.4% prior
  • Sales down in 5 of 9
    subsectors led by fuel stations.
  • Advance March retail sales 0.0%.

The US March Durable
Goods Orders beat expectations:

  • Durable goods orders
    M/M 2.6% vs. 2.5% expected and 0.7% prior (revised from 1.3%).
  • Nondefense capital
    goods orders ex air M/M 0.2% vs. 0.2% expected and 0.4% prior (revised
    from 0.7%).
  • Ex transportation M/M
    0.2% vs. 0.3% expected and 0.1% prior (revised from 0.3%).
  • Ex-defense M/M 2.3% vs.
    1.5% prior (revised from 2.1%).

The BoC released the
Minutes of its April Monetary Policy Meeting:

  • Agreed that any
    monetary policy easing would probably be gradual.
  • There were different
    views on how much more assurance was needed to be confident that inflation
    was on a sustainable path back to target.
  • Some members felt
    there was a risk of keeping policy more restrictive than needed.
  • Governing Council
    was split over when to cut rates.
  • Felt rapid
    population increase and coming decline in non-permanent residents
    complicated outlook for activity and inflation.
  • Was more confident
    that inflation would continue to ease even as growth picked up.
  • Still more concerned
    about upside risks to inflation but viewed both upside and downside as
    less acute.


The US Jobless Claims
beat expectations:

  • Initial Claims 207K
    vs. 215K expected and 212K prior.
  • Continuing Claims
    1781K vs. 1814K expected and 1796K prior (revised from 1812K).

The US Advance Q1 GDP
missed expectations with a surprisingly hot Core PCE print:

  • Advance Q1 GDP 1.6% vs.
    2.4% expected and 3.4% prior.
  • Weakest since Q1 2023.


  • Consumer spending 2.5% vs. 3.3% prior.
  • Consumer spending on
    durables -2.1% vs. 3.2% prior.
  • GDP final sales 2.0%
    vs. 3.9% prior.
  • GDP deflator 3.1% vs.
    3.0% expected and 1.7% prior).
  • Core PCE 3.7% vs.
    3.4% expected and 2.0% prior).
  • Business investment 3.2% vs. 0.7% prior.

Percentage point changes:

  • Net trade pp -0.86
    vs. 0.32 pp prior.
  • Inventories -0.37 pp vs. -0.47 pp prior.
  • Govt 0.21pp vs. 0.79 pp prior.

ECB’s Panetta (dove –
voter) didnt’ say anything new as he just prefers to gradually cut rates to
counter weak demand:

  • We must weigh the
    risk of monetary policy becoming too tight.
  • Timely, small rate
    cuts would counter weak demand, and would be paused at no cost.
  • Hesitations in
    adjusting rates would hurt investment productivity.
  • Rate cuts could
    create a credibility issue.


The Tokyo April CPI
missed expectations across the board by a big margin, although it was
attributed to a one-off factor as high school tuition was eliminated in Tokyo
and took effect in April:

  • CPI Y/Y 1.8% vs. 2.6%
    expected and 2.6% prior.
  • Core CPI Y/Y 1.6%
    vs. 2.2% expected and 2.4% prior.
  • Core-Core CPI Y/Y
    1.4% vs. 2.7% expected and 2.9% prior.

The BoJ left interest
rates unchanged at 0.00-0.10% as expected:

  • Removes reference
    from statement that it currently buys about 6 trillion yen of JGBs per
  • Vote was 9-0.
  • Prior vote was 7-2.
  • Risks to the economy
    are generally balanced.
  • There are extremely
    high uncertainties on Japan’s economic and price outlook.
  • Japan’s economy has
    recovered moderately although there is some weakness.
  • Output gap
    improving, likely to gradually expand.
  • Medium and long term
    inflation expectations heightened moderately.
  • Financial conditions
    have been accommodative.
  • More firms starting
    to pass on rising wages to sales prices.
  • Expect positive
    cycle of rising wages and inflation to continue.
  • Vigilance needed for
    currency and market movements and their impact on the economy and prices.
  • Consumption likely
    to gradually increase.
  • Expect accommodative
    monetary conditions to continue for the time being.

Moving on to the BoJ
Governor Ueda’s Press Conference:

  • Will adjust degree
    of monetary easing if underlying inflation rises.
  • Easy financial
    conditions will be maintained for the time being.
  • Monetary policy
    conduct from now on will depend on state of economy, prices at the time.
  • Will not judge
    policy based on one single indicator.
  • Economy outlook,
    risk overshoot may also be a reason for policy change.
  • Japanese economy has
    recovered moderately but some weakness is still seen.
  • Must pay attention
    to financial, FX market moves and their impact on economy, prices.
  • Monetary policy not
    aimed to control exchange rate directly.
  • If FX fluctuations
    affect underlying inflation, that could be a consideration for monetary
  • Weak yen is not
    having a big impact on trend inflation so far.
  • But weak yen did
    have some impact to an extent on higher inflation forecasts.
  • Likelihood of
    achieving 2% inflation target is gradually rising.
  • Chance of a
    prolonged weakness in the yen is not zero.
  • We can pre-emptively
    judge if weak yen affects inflation, spring wage talks next year.
  • But FX impact on
    inflation is usually tentative.
  • If our forecasts
    materialise, achievement of 2% inflation target is extremely close.
  • Underlying inflation
    has been gradually rising.
  • Inflation is not
    necessarily weak if you look at other service prices.
  • If prices move in
    line with our forecasts, it would be reasonable to adjust policy and hike
    rates further.

The US March PCE came in
line with expectations:

  • PCE Y/Y 2.7% vs.
    2.6% expected and 2.5% prior.
  • PCE M/M 0.3% vs.
    0.3% expected and 0.3% prior.
  • Core PCE Y/Y 2.8%
    vs. 2.7% expected and 2.8% prior.
  • Core PCE M/M 0.3% vs.
    0.3% expected and 0.3% prior.

spending and consumer income for March:

  • Personal income 0.5% vs. 0.5% estimate. Prior month 0.3%.
  • Personal consumption
    0.8% vs. 0.6% estimate. Prior month 0.8%.
  • Real personal
    spending 0.5% vs. 0.5% last month (revised from 0.4%).

highlights for next week will be:

  • Tuesday: Japan Industrial
    Production and Retail Sales, Australia Retail Sales, China PMIs, Eurozone
    CPI, Canada GDP, US ECI, US Consumer Confidence.
  • Wednesday: New Zealand Jobs
    data, Canada Manufacturing PMI, US ADP, US ISM Manufacturing PMI, US Job
    Openings, FOMC Policy Decision.
  • Thursday: Switzerland CPI,
    Swiss Manufacturing PMI, US Jobless Claims.
  • Friday: Eurozone
    Unemployment Rate, US NFP, Canada Services PMI, US ISM Services PMI.

That’s all folks. Have a
nice weekend!

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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