Week Ahead – Fed, BoE Decisions, China’s Trade Data in the Spotlight

Economic

Summary:

Fed to sit on the sidelines amid tariff uncertainty.BoE to cut by 25bps, but could still disappoint the doves.China trade data to reveal wounds amid US-Sino trade war.Japan wages, Canada job numbers and AMD earnings also on tap.

Dollar slide pauses amid easing trade tensions

The US dollar recovered some ground this week as US President Trump continued to soften his stance on trade by signing orders to moderate the blow of his auto tariffs. The US administration also said that it is very close to signing trade deals with India and South Korea.

Still, the greenback recorded its weakest monthly performance in April since November 2022, with investors remaining fearful about serious economic consequences due to Trump’s tariffs against China, the world’s second-largest economy. It seems that it will be very difficult for the US-Sino conflict to deescalate as China does not seem willing to play Trump’s game. This is evident by a social media post this week from China’s Foreign Ministry that said, “China won’t kneel down.”

The elevated uncertainty and worries about the future of the global economy have prompted market participants to price in around 90bps worth of Fed rate cuts by the end of the year. This corroborates the notion that despite the easing tensions, the recovery in the US dollar, the recovery on Wall Street and the pullback in safe-haven assets, recession risks remain elevated – especially after this week’s GDP data revealed that the US economy contracted in Q1.

Week Ahead – Fed, BoE Decisions, China’s Trade Data in the Spotlight_1

How dovish will the Fed sound?

With that in mind, investors are likely to pay attention to Wednesday’s FOMC decision. At the March meeting, the Committee kept rates unchanged and noted that they are in no hurry to cut, continuing to signal only 50bps worth of additional reductions this year through their ‘dot plot.’

Next week’s meeting will be the first after Trump’s ‘Liberation Day,’ but it will not be accompanied by updated economic projections nor a new dot plot. Thus, given that policymakers are largely anticipated to stand pat, all the attention is likely to fall on the statement and Powell’s press conference.

After the tariff announcements and the resulting market turbulence, Fed officials, including Powell, reiterated the view that there is no urgency for a change in policy, as they seek more information to determine how tariffs are affecting the economy. And this despite snowballing pressure by Trump to lower borrowing costs. There are even some policymakers who are more concerned about the upside risks tariffs pose to inflation.

All this suggests that the Fed could sound somewhat more concerned about economic growth and provide hints about slightly more than 50bps worth of rate cuts by December, but officials are unlikely to sound more dovish than the market currently seems to be. Thus, a less-dovish-than-expected outcome will solidify the notion that the Fed continues to contact monetary policy without the influence of the US President and could help the dollar recover some more of its recently lost ground.

Week Ahead – Fed, BoE Decisions, China’s Trade Data in the Spotlight_2

The ISM non-manufacturing PMI for April on Monday will give more insights about how businesses behaved after Trump’s tariff announcements.

BoE to cut, guidance and projections in focus

On Thursday, the central bank torch will be passed to the Bank of England. With UK inflation remaining very sticky, the Bank has cut interest rates by less than the ECB and the Fed since last summer.

Its previous meeting was held on March 20, with policymakers deciding not to act. They warned against assumptions that they would cut over the next few meetings, reiterating that they are taking a “gradual and careful approach.”

Since then, GDP data showed that the UK economy grew 0.5% m/m in February after stagnating in January, taking the year-over-year rate up to 1.4% from 1.2%. What’s more, inflation slowed somewhat in March, but it remained well above the BoE’s objective of 2%, with the core CPI rate standing at 3.4%. Retail sales for the same month came in on the strong side as well.

Week Ahead – Fed, BoE Decisions, China’s Trade Data in the Spotlight_3

The PMIs for April raised concerns, as the composite index dropped into contractionary territory, reflecting the uncertainty among companies following Trump’s ‘Liberation Day’. BoE Governor Bailey also sounded concerned lately, saying that they are focused on the potential economic shock from Trump’s tariffs, but he added that the UK economy is not close to recession at the moment.

The PMIs and Bailey’s remarks justify expectations of a quarter-point rate cut at next week’s gathering, but they don’t explain the very dovish bets for the remainder of the year. According to UK Overnight Index Swaps (OIS), after next week’s reduction, investors are penciling almost three additional quarter-point cuts.

Given the data and the fact that the UK was only subject to the US administration’s 10% baseline tariff, this assessment seems overly dovish, and the BoE is unlikely to satisfy it. Even if the BoE sounds somewhat more dovish than it did at its latest meeting, the new economic projections are unlikely to paint a picture more worrisome than the market’s current pricing. A less-dovish-than-expected outcome could help the pound drift higher.

China trade numbers to attract special interest

Investors are also likely to pay extra attention to China’s import and export numbers for April, due out on Friday. China’s factory activity contracted at the fastest pace in 16 months during last month according to the PMIs as Trump’s tariffs snapped two months of recovery. Thus, should the trade data point to severely hit exports, calls for further stimulus by Chinese authorities will intensify.

Week Ahead – Fed, BoE Decisions, China’s Trade Data in the Spotlight_4

The aussie and kiwi could suffer given that China is Australia’s and New Zealand’s main trading partner, but also due to perhaps another round of deterioration of the broader market sentiment. Stocks could pull back and gold could gain on speculation that China will accelerate its gold purchases to further loosen its dependency on the US dollar and Treasuries.

Kiwi traders will also have to digest New Zealand’s employment report early in the Asian session Wednesday.

Japanese wages and Canada’s jobs reports also on tap

In Japan, the overall wage income of employees for March is coming out, also on Friday. Although yen traders have significantly scaled back their BoJ rate hike bets due to the global tariff turbulence, comments by Governor Ueda that the Bank remains committed to raising interest rates and the acceleration in Tokyo CPIs prompted them to bring some of their bets back to the table.

That said, just yesterday, the BoJ held interest rates unchanged, with Ueda tying the timing of the next hike to Trump’s tariff plans. Currently, investors are assigning a less-than-50% chance of another 25bps increase by year-end, and strong wage data is needed to drive that probability up again.

Canada releases employment data later in the day. Around two weeks ago, the BoC held its policy rate unchanged at 2.75%, the first pause after seven consecutive reductions. The Bank said that the uncertainty surrounding tariffs made it impossible to issue economic forecasts and instead they produced two scenarios of what could happen. Governor Macklem said that they would proceed carefully from here onwards.

Week Ahead – Fed, BoE Decisions, China’s Trade Data in the Spotlight_5

Investors are also confused about how the BoC may proceed, assigning a 60% chance for a rate cut at the next gathering, with the remaining 40% pointing to a pause. Therefore, should the employment data come in on the strong side, the likelihood of policymakers keeping their hands off the rate-cut button could increase, thereby adding more support to the surprisingly strong loonie.

AMD announces earnings amid trade uncertainty

On the earnings front, Advanced Micro Devices (AMD) will deliver its quarterly earnings. On April 16, the firm announced that it expects a hit of up to $800mn due to Trump’s restrictions on exports of advanced processors to China. Although the US administration has made some tariff exemptions for electronics, including semiconductors, it warned that separate levies could come in the future. Thus, even though the results will not reflect the turbulence that started on April 2, the firm’s guidance for the future may suggest a much more cautious approach.

Source:XM

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Gerik

Commodity

Investor focus shifts from earnings to capital discipline

As first-quarter earnings season unfolds for the world's largest oil companies—beginning with BP and ending with ExxonMobil, Chevron, and Shell—investors are watching less for profit growth and more for signals of financial strategy under pressure. With oil prices having fallen 12% year-to-date, analysts now expect a number of energy giants to announce reduced share repurchase programs this week, scaling back on promises made during Q4 2024 earnings calls.

This shift comes as a reflection of weakening market fundamentals and increased investor scrutiny. Oil firms that had previously used soaring post-pandemic profits to fund generous buybacks may now be forced to redirect capital toward shoring up balance sheets and navigating margin volatility.

Oil price volatility dampens repurchase appetite

Since early January, crude oil benchmarks have seen a sustained downward trend, driven by macroeconomic uncertainty, trade disruptions, and concerns over global demand. This slide has put pressure on the energy sector’s ability to maintain the high shareholder returns that characterized 2022 and 2023. For companies whose capital discipline was built around oil at $80–90 per barrel, the current lower-price environment challenges assumptions about free cash flow and payout ratios.

While share buybacks remain a favored tool for rewarding investors, their viability is now contingent on stable margins and healthy upstream performance. According to analysts cited by Reuters, firms like Chevron and BP may cut back on buyback volumes, choosing instead to prioritize liquidity buffers or investment flexibility.

Diverging strategies across Big Oil

Although overall sentiment reflects caution, some companies are faring better than others. Shell, for instance, expects a rebound in its Chemicals and Products division, with Q1 performance likely matching or surpassing Q2 and Q3 of 2024. This is due to improved refining margins and stronger utilization of refining and petrochemical plants, which help offset weaker LNG liquefaction volumes.

ExxonMobil is expected to post $2 billion more in Q1 earnings compared to the previous quarter, benefiting from both improved commodity pricing and refining margins. This financial cushion may allow Exxon to sustain its shareholder distributions for now, though analysts note that even the strongest performers are reevaluating how aggressively they return cash to investors amid ongoing volatility.

Meanwhile, Italy’s Eni has opted for a more conservative path—cutting its capital expenditure plan for 2025 and committing to further cost reductions while keeping its shareholder distribution intact. This underscores an emerging pattern where operational austerity and capital preservation coexist with attempts to maintain investor confidence.

Strategic tension: Shareholder returns vs. long-term resilience

The current pullback in buybacks illustrates a fundamental tension for Big Oil: maintaining shareholder confidence through generous capital returns, while also preserving flexibility to respond to market shocks and fund energy transition initiatives. The decline in oil prices (A) has led to reduced operating margins (B), which in turn has weakened the financial case for aggressive buybacks (C), particularly for companies with higher breakeven costs.

Moreover, the changing macroeconomic landscape—including geopolitical instability, trade friction, and a potential slowdown in global industrial output—adds uncertainty to revenue forecasts. In this environment, investor focus is not solely on profitability but also on how companies manage risk through capital discipline and diversified revenue models.

A recalibration, not a retreat

The anticipated slowdown in share buybacks does not signal financial distress for Big Oil, but rather a recalibrated response to evolving market conditions. Companies like Chevron and BP are likely to scale back commitments made in a higher-price environment, while others like Shell and Exxon may continue payouts at moderated levels, supported by downstream strength.

Ultimately, the correlation between oil prices and buyback intensity is becoming more visible. As prices decline, so too does the aggressiveness of capital returns, particularly when long-term planning must balance short-term shareholder rewards with strategic investment and operational resilience. In this new phase of lower margins and heightened volatility, the oil majors are shifting from reward maximization to risk management.

Source: Oil Price

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Thomas

Central Bank

What’s Next: Fed & BoE Rate Decisions_1

On Wednesday, Powell and Сo are expected to keep the key rate unchanged, but the intrigue is all about signalling how soon to expect policy easing. The main obstacles are extremely high inflation expectations and forecasts of real price rises due to tariffs.

What’s Next: Fed & BoE Rate Decisions_2

The Bank of England is set to announce its policy decision on Thursday, with markets anticipating a fourth rate cut in the current cycle — bringing the benchmark rate down to 4.25% from the current 4.5%. While the fate of the US tariffs creates the same uncertainty for everyone, it still manifests itself in the form of inflation in the US and economic pressure in the rest of the world. Hence, Europe’s response is to cut rates.

What’s Next: Fed & BoE Rate Decisions_3

Friday’s Canadian labour market data will be key to assessing the impact of U.S. tariffs on its trading partners. While employment growth is forecast at 22,000, the potential for significant surprises remains.

Source: FxPro

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Damon

Central Bank

We expect the Bank of England to cut the Bank Rate to 4.25% on Thursday 8 May in line with consensus and market pricing. We expect the vote split to be 8-1 with the majority voting for a 25bp cut and dove Dhingra voting for a larger 50bp cut. Note, this meeting will include updated projections and a press conference following the release of the statement.

We expect the BoE to deliver a dovish twist to its guidance on Thursday signalling that the bar for consecutive rate cuts has been lowered. We think they will stick to the formal guidance repeating that a “gradual and careful approach to removing monetary policy restraint remains appropriate“. Removing the notion of a “gradual” cutting cycle would be a strong signal of the MPC considering consecutive cuts. Inflation has surprised to the downside and with energy prices moving lower since the February meeting, the inflation forecast will likely be revised downwards although the conditional market implied rate path is significantly lower than in the February forecast. Wage growth has likewise been slightly lower than expected with private sector regular wage growth coming in at 5.9% (vs Boe forecast of 6.2% for Q1). Growth has been slightly better than expected and retail sales point to improvement in private consumption but the impact from tariffs poses a downward risk. We think the former will lift the 2025 forecast and the latter will be reflected in a downward revision of the GDP forecast in 2026. PMIs have shown tentative signs of a more stagflationary backdrop with price pressures accelerating and growth being more muted.

BoE call. We expect the BoE to stick to quarterly cuts, leaving the Bank Rate at 3.75% by YE 2025, which is a higher level than markets are expecting. Markets are pricing around 97bp for the remainder of the year. However, we highlight that the risk is skewed towards a swifter cutting cycle in 2025 given the downside risks to growth from the trade war.

Market reaction. We expect markets to react by sending UK yields lower and EUR/GBP higher on the dovish twist to the BoE’s communication. More broadly, while we see domestic factors as GBP positives, we think the global investment environment will be in the driver’s seat for EUR/GBP in the coming months. An investment environment characterised by elevated uncertainty, widening credit spreads and a positive correlation to a USD negative environment, in our view, favours a weaker GBP. We therefore expect EUR/GBP to move higher towards 0.88 on a 6-12-month horizon.

Source: ACTIONFOREX

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Gerik

Forex

Economic

A cautious pause, not a pivot

The Bank of Japan (BOJ) has decided to hold its benchmark interest rate at 0.5%, marking a strategic pause rather than a policy reversal in its tightening cycle. During the monetary policy meeting that concluded on May 1, BOJ Governor Kazuo Ueda cited “exceptionally high uncertainty” in the economic outlook and noted a slight delay in achieving the central bank’s 2% core inflation target.

Analysts widely interpret this as a temporary halt, driven in part by growing concerns over the impact of U.S. President Donald Trump’s aggressive tariff policies. These developments risk undermining Japan’s export-driven recovery and complicating efforts to stabilize inflation.

Tariffs and economic fragility: A complex feedback loop

The intensification of global trade tensions poses significant downside risk for Japan, whose economy is heavily reliant on exports. The potential slowdown in global trade, paired with costlier imports from a weakened yen, may suppress domestic demand and dampen inflation momentum.

The BOJ's latest economic projections reflect this fragility. For fiscal year 2025, CPI growth (excluding fresh food) is expected to range from 2.2% to 2.2%, but could drop as low as 1.1% in 2026 before stabilizing near 2% in 2027. These projections suggest a softening of price momentum that challenges the central bank’s confidence in sustained inflation.

However, persistent food price inflation, wage pressures stemming from a shrinking labor force, and the risk of currency depreciation could reignite inflation in ways that are not immediately reflected in forward guidance. Thus, the pause in rate hikes is more precautionary than conclusive.

A policy bind: Between inflation resilience and market pressure

Historically, Japan has struggled to normalize interest rates. For three decades, short-term rates have failed to rise meaningfully above zero due to deflationary inertia and wage stagnation. Yet today’s conditions present a different challenge: inflation has stayed above 2% for three consecutive years, driven by rising input costs and broader pass-through pricing behaviors.

Governor Ueda has acknowledged that labor shortages are forcing firms to raise wages and service prices, creating a self-reinforcing loop that may keep inflation moderately elevated. For instance, food price inflation reached 3.6% in March, driven by a spike in rice prices. The BOJ now warns of possible second-round effects, where food cost increases could bleed into broader, more persistent inflation.

If the central bank appears overly dovish in this environment, it risks triggering further depreciation of the yen. A weaker yen not only elevates import prices—adding to domestic inflation—but could also provoke criticism from international trading partners, particularly the U.S., which has long accused Japan of currency manipulation to boost exports.

Market outlook: Analysts revise rate expectations, but risks remain

In light of recent developments, analysts at Morgan Stanley have revised their outlook, no longer expecting a rate hike before early 2026. However, they acknowledge that a September hike remains possible should domestic inflation rise sharply or the yen weaken significantly.

A notable risk scenario involves prolonged yen depreciation during active U.S.-Japan trade negotiations. If the yen weakens excessively, Washington may pressure Tokyo to act, interpreting monetary policy inaction as deliberate currency weakening. In that context, the BOJ could be forced to raise rates earlier than anticipated—not purely for economic reasons but to ease diplomatic tension.

Despite signaling no immediate hikes, Governor Ueda emphasized that the BOJ remains committed to its inflation mandate. He reiterated that the central bank sees the recent inflation slowdown as temporary and remains prepared to act if inflationary momentum returns.

A strategic pause amid unpredictable headwinds

The BOJ’s decision to pause rate hikes reflects a prudent response to a highly volatile global economic environment. While inflation has softened in the short term, underlying structural pressures—such as food prices, wage growth, and yen volatility—persist. The central bank’s current stance is neither strictly neutral nor decisively hawkish; instead, it reflects a balancing act between domestic inflation dynamics and external shocks, especially from U.S. trade policy.

The causal chain between tariffs, economic uncertainty, and monetary policy is growing more complex. Rising tariffs from the U.S. (A) dampen Japan’s exports and growth outlook (B), which in turn weakens inflation momentum (C), prompting the BOJ to pause its rate hikes (D). However, if inflation surprises to the upside or the yen depreciates further, the BOJ may be compelled to act. In short, the tightening cycle is not over—it’s merely on hold, with the next move contingent on both domestic resilience and external developments.

Source: Reuters

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Damon

Economic

The Labor Department's closely watched employment report published on Friday, which also showed the unemployment rate held steady at 4.2% last month, helped to assuage fears that the economy was close to recession after gross domestic product contracted in the first quarter amid a tariff-induced flood of imports. Nonetheless, it is too early for the labor market to show the impact of Trump's on-and-off again tariff policy.Labor market resilience gives the Federal Reserve cover to keep its benchmark overnight interest rate in the 4.25%-4.50% range next week.

"The 'R' word that the labor market is demonstrating in this report is resilience, certainly not recession," said Olu Sonola, head of U.S. economic research at Fitch Ratings. "For now, we should curb our enthusiasm going forward given the backdrop of trade policies that will likely be a drag on the economy."

Nonfarm payrolls increased by 177,000 jobs last month after rising by a downwardly revised 185,000 in March, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast 130,000 jobs added last month after a previously reported 228,000 advance in March. Estimates ranged from 25,000 to 195,000 jobs added.

The survey of establishments also showed February's payrolls count was revised down by 15,000 jobs to 102,000.

The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. The household survey from which the unemployment rate is derived showed employment increased 436,000, absorbing most of the 518,000 people who entered the labor force.

Healthcare continued to dominate job growth, adding 51,000 positions across hospitals and ambulatory services. Transportation and warehousing employment increased by 29,000, mostly warehousing and storage, couriers and messengers as well as air transportation.Financial activities payrolls rose 14,000, while social assistance employment increased 8,000 and government hiring overall rose 10,000.

But federal government employment declined 9,000 and is down 26,000 since January amid the Trump administration's unprecedented and often chaotic campaign spearheaded by tech billionaire Elon Musk's Department of Government Efficiency, or DOGE, to drastically shrink the government.Despite news headlines of mass firings at government agencies, the decline in federal payrolls has been relatively modest. That is because fired employees who have been reinstated by court and subsequently put on paid leave are counted as employed. The same applies to those who have accepted buyout offers. Economists expect federal payrolls to drop significantly after September, when severance pay runs out for many.

The dollar fell against a basket of currencies. U.S. Treasury yields rose.

Manufacturing payrolls declined, reflecting the strain from the tariffs. Trump's "Liberation Day" tariff announcement ushered in sweeping duties on most imports from the United States' trade partners, including boosting duties on Chinese goods to 145%, sparking a trade war with Beijing and tightening financial conditions.

Trump later delayed higher reciprocal tariffs for 90 days, which economists said was essentially a pause on the whole economy as it left businesses in a state of paralysis and risked a recession if there was no clarity soon.

The labor market continues to show resilience amid a reluctance by employers to let go of workers after struggling to find labor during and after the COVID-19 pandemic, but warning signs are accumulating.

Business sentiment continues to plummet, which economists expect will at some point give way to layoffs. Already, airlines have pulled their 2025 financial forecasts, citing uncertainty over spending on nonessential travel because of tariffs.

General Motors (GM.N), opens new tab cut its 2025 profit forecast on Thursday and said it expected a $4-$5 billion tariff hit.

China has ordered its airlines not to take further deliveries of Boeing (BA.N), opens new tab planes. Ryanair (RYA.I), opens new tab, Europe's largest low-cost carrier, on Thursday threatened to cancel orders for hundreds of Boeing aircraft if the tariff war leads to materially higher prices.

Surveys, including from the Institute for Supply Management, the Conference Board and University of Michigan, have uniformly painted a bleak economic picture. Most economists anticipate the tariff drag could become evident by summer in the so-called hard data, including employment and inflation reports.

For now the labor market is holding up. The average workweek was unchanged at an upwardly revised 34.3 hours in April. The workweek was previously reported to have averaged 34.2 hours in March. Economists expect businesses will reduce hours first before embarking on mass layoffs.Average hourly earnings rose 0.2% after gaining 0.3% in March. That left the annual increase in wages unchanged at 3.8% in April, enough to support consumer spending and the economy for now.

Source: Kitco

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Manuel

Cryptocurrency

Crypto venture funding reached $4.9 billion in the first quarter of 2025, marking a strong comeback for the industry, according to a May 1 report by Galaxy.

The total capital raised was 40% higher than the previous quarter and came from 446 deals, which also reflected a 7% growth during the period. This makes the first quarter the most active period for crypto fundraising since late 2022. Crypto Funding Hits $4.9B in Q1 2025 With US Firms Leading the Charge_1

Crypto Funding Hits $4.9B in Q1 2025 With US Firms Leading the Charge_1

MGX’s $2 billion investment in Binance was a major contributor to this figure, which accounted for over 40% of the capital raised. Excluding this single deal, first-quarter funding would have stood at $2.8 billion, reflecting a 20% decline compared to the fourth quarter of 2024.

Crypto investments by category

The Binance investment pushed the Trading, Exchange, Lending, and Investing sector to the top of the funding chart. This category attracted $2.55 billion, with a 47.9% growth rate. If Binance is excluded, the DeFi sector would have led the quarter with $763 million in capital inflows.

Web3-related projects saw the highest number of deals. These included gaming, NFTs, DAOs, and metaverse initiatives, with 73 rounds representing 16% of all transactions. Trading-related firms followed with 62 deals. Crypto Funding Hits $4.9B in Q1 2025 With US Firms Leading the Charge_2

Crypto Funding Hits $4.9B in Q1 2025 With US Firms Leading the Charge_2

Galaxy also reported a shift in investor focus. For the first time since the first quarter of 2021, most of the capital, about 65%, went to later-stage companies. Early-stage rounds, mainly pre-seed deals, saw a slight dip but remained strong compared to previous cycles.

US startups dominated the funding scene, accounting for 38.6% of the total deal count. The UK came next with 8.6%, while Singapore and the UAE followed with 6.4% and 4.4% respectively. The uptick in US investment may reflect growing government support for digital assets.

Bitcoin price correlation

The report noted a recovery in the correlation between Bitcoin’s price movements and venture investment. The trend, which had weakened since early 2023, shows signs of strength over a multi-year horizon. Crypto Funding Hits $4.9B in Q1 2025 With US Firms Leading the Charge_3

Crypto Funding Hits $4.9B in Q1 2025 With US Firms Leading the Charge_3

Galaxy also said that fundraising remains difficult despite the year-over-year growth. Factors such as cautious allocator sentiment and the lingering impact of the 2022–2023 downturn continue to weigh on the market.

Additionally, the rise of AI has shifted investor focus away from crypto. The AI sector now commands the level of attention that crypto held in 2021 and early 2022. This is evident with the decline in funds raised by crypto-focused venture funds, which fell to $1.9 billion during the first quarter.

Despite these challenges, Galaxy remains optimistic, noting that 2025 is already on pace to outdo the previous year’s fundraising figures.