Dollar Weakens in Mixed Markets, Gold Extends Rebound

Overall, markets are mixed in Asia today. While stocks in Hong Kong suffer from further selling, Japan and Singapore are stable. Gold is driven by the general weakness of the dollar. The Yen selloff looks increasingly exhausted even though it is still the worst performer of the week, followed by the Euro and the Greenback. On the other hand, commodity currencies remain firm, led by the Aussie. Sterling is mixed and would look to retail sales data for inspiration.

Technically gold’s rebound from 1894.77 resumed breaking minor resistance at 1949.55. Further upside should be seen until the 61.8% retracement from 2070.06 to 1894.77 at 2003.09, which is close to the 2000 handle. It is still early to conclude that the pattern at 2070.06 is completed. Thus, price actions would remain choppy and directionless from a broader perspective. Nonetheless, the development could be an indication of some dollar weakness. Attention would turn to see if EUR/USD could break through 1.1120 with some conviction to be confirmed.

In Asia, the Nikkei closed up 0.09%. Hong Kong’s HSI index is down -2.32%. China Shanghai SSE is down -0.87%. Singapore Strait Times is up 0.43%. Japan’s 10-year JGB yield is up 0.0069 at 0.247, pressing the 0.25 handle. Overnight, the DOW rose 1.02%. The S&P 500 rose 1.43%. The NASDAQ rose 1.93%. The 10-year yield rose 0.02 to 2.341.

Fed Evans comfortable with 25bps hike, open 50bps

Chicago Fed President Charles Evans said yesterday that he was “comfortable” with a 25 basis point rise and “open” to a 50 basis point move.

“We want to be careful, we want to be humble and nimble, and get to neutral before too long – maybe 50 assists, I’m open to that,” he said in a Q&A after. a speech. “I would be comfortable with each meeting increasing by a quarter point.”

“It’s a sign of more general pressure from aggregate demand on current supply,” he said in his speech. “If monetary policy did not respond to these broader pressures, we would see higher inflation build into inflation expectations, and we would have even more work to do to contain it.”

“Policymakers need to be cautious, humble and nimble as we navigate the way forward,” Evans said. “Monetary policy is not on a predefined trajectory” but will be decided at each Fed meeting.

BCE Schnabel leaves the door ajar on asset purchases

ECB executive board member Isabel Schnabel said yesterday she had “left the door ajar” for more asset purchases if the impact of Russia’s invasion of Ukraine turned out to be much worse.

“If we now fall into a deep recession due to the Ukraine crisis, we will have to rethink that,” she said. “Otherwise, we will end bond purchases in the third quarter and once we have done that, we can raise rates at any time depending on the evolution of inflation.”

In addition, the member of the Governing Council Mario Centeno underlined that “the normalization of the monetary policy of the ECB will be carried out gradually and proportionally at the end of this year”.

BoJ Kuroda: Yen weakness generally positive for Japanese economy

BoJ Governor Haruhiko Kuroda told parliament: “There is no change in my view, a weak yen is generally positive for the Japanese economy.”

He also reiterated the view that “cost inflation that is not accompanied by wage increases will hurt the Japanese economy.” And as such, “it will not lead to the sustainable achievement of our price target. This is why the BOJ will continue to maintain strong monetary easing.

Reported from Japan, the Tokyo CPI core rose from 0.5% y/y to 0.8% y/y in March, above expectations of 0.7% y/y. The business services price index rose 1.1% y/y in February, below expectations of 1.2% y/y.

UK Gfk consumer confidence fell to -31, wall of worry faces

The UK Gfk consumer confidence index fell from -26 to -31 in March. This is the lowest level since November 2020. Personal financial situation over the past 12 months fell from -11 to -13. Personal financial situation over the next 12 months has gone from -14 to -18. The general economic situation over the past 12 months has fallen slightly from -50 to -51. The general economic situation over the next 12 months has fallen from -43 to -49.

Joe Staton, Director of Client Strategy at GfK, said: “A wall of worry is hanging over consumers this month and there is an unmistakable sense of crisis in our numbers. Consumers across the UK are feeling the impact of the soaring cost of living with 30 year high levels of inflation, record fuel and food prices, a recent rise in interest rates and the prospect of further increases to come, as well as higher taxation – all against a backdrop of stagnant wage increases that cannot compensate for the financial constraint. It is the fourth consecutive month that British consumer confidence has fallen.

Look forward

UK Retail Sales, Germany Ifo Business Climate and Eurozone M3 Money Supply will be released during the European session. The US will release pending home sales later today.

AUD/USD daily report

Daily pivots: (S1) 0.7477; (P) 0.7503; (R1) 0.7538; Continued…

AUD/USD rally has resumed after a brief retreat and intraday bias is back up for resistance at 0.7555. A decisive break there should confirm that the entire corrective decline from 0.8006 has been completed at 0.6966. Further rise should then be seen to retest 0.8005. On the downside, minor support below 0.7465 will once again become neutral in terms of intraday bias.

Overall strong rebound from key structural support at 0.6991 keeps medium term uptrend. That is, the full uptrend from 0.5506 is still on for another uptrend to 0.8006 at a later stage. However, a sustained break of 0.6991 will indicate that the entire uptrend from 0.5506 may end at 0.8006, having been rejected by long-term resistance at 0.8135. A deeper decline would then amount to a 61.8% retracement from 0.5506 to 0.8006 to 0.6461.

Economic Indicators Update

GMT Ccy Events Real Forecast Previous amended
23:30 JPY Tokyo CPI Core A/A March 0.80% 0.70% 0.50%
23:30 JPY Business services price index Y/Y Feb 1.10% 1.20% 1.20%
00:01 GBP GfK Consumer Confidence March -31 -30 -26
07:00 GBP M/M retail sales February 1.00% 1.90%
05:30 GBP Retail sales Y/Y Feb 3.90% 9.10%
07:00 GBP Retail sales excluding fuel M/M Feb. 1.30% 1.70%
05:30 GBP Retail sales excluding fuel Y/Y Feb 5.00% 7.20%
09:00 USD Germany IFO Business Climate March 94.5 98.9
09:00 USD Germany IFO Expectations March 97.2 99.2
09:00 USD Current evaluation of the IFO in Germany Mar 97.4 98.6
09:00 USD Euro area M3 money supply Y/Y Feb 6.30% 6.40%
14:00 USD Door-to-door sales pending M/M February 1.40% -5.70%
14:00 USD Michigan Consumer Confidence Index Mar F 59.7 59.7