New Zealand Dollar Forecast to Stay Pressured by Commerzbank

Economic

Summary:

NZD to stay weak despite U.S. dollar softness, with sharper declines expected against the euro.

All eyes turn to the Reserve Bank of Australia (RBA) next Tuesday, where a 25 basis point interest rate cut will be issued.

The cut is already wrapped into the value of AUD, meaning the currency reaction rests with the guidance issued by Governor Michelle Bullock and her colleagues.

"There remains a solid positive impulse to underlying inflation. So while the fall in inflation will allow the RBA to cut rates next week, it will be a hawkish cut," says David Forrester, Senior FX Strategist at Crédit Agricole.

A 'hawkish cut' is financial market jargon that describes a cut that comes with warnings attached that we shouldn't expect any further generosity. This differs from a 'dovish cut' in which a central bank points to a weaker economy and indicates it stands ready to deliver more.

Under the hawkish scenario, we might expect Australian bond yields to rise, which in turn attracts foreign buyers to Aussie bonds, driving up the currency's value.

According to Crédit Agricole, the investment bank, money markets have reduced the amount of rate cuts it expects for the rest of 2025 from around 90bp earlier in the week to about 75bp following the release of above-consensus wage and labour market data.

"The trade truce between the U.S. and China is also contributing to the reduction in market pricing for rate cuts," says Forrester.

"A hawkish cut by the RBA next week could see investors further reduce their rate cut expectations," he adds. Crédit Agricole is a buyer of the Aussie Dollar against the Euro.

Australia announced this week that the economy added 89K jobs in April, up from 36.4K and breezing past expectations for 20K.

In response, economists at ANZ update their forecasts for future RBA cuts, "given there is less urgency to ease over the coming months."

A strong labour market aside, economists at ANZ reckon the decision by the U.S. to step back from its maximalist tariff position will also give the RBA reason to take it slow.

Following the April 02 'Liberation Day' tariffs, ANZ had expected 25bp cuts in May, July and August, getting the cash rate to around a neutral level of 3.35%.

"We now expect 25bp rate cuts in May and August this year, with the final 25bp of easing in Q1 2026. That latter cut comes with a little more uncertainty than the 2025 easings," says ANZ economist Adam Boyton.

Source: Poundsterlinglive

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Adam

Forex

The Japanese yen is steady on Friday, after gaining 2% over the past three days. In the European session, USD/JPY is trading at 145.52, down 0.09% on the day.

Japan's economy shrinks for first time in a year

Japan's GDP report was a major disappointment, as the economy contracted for the first time in a year. The economy declined by 0.7% in the first quarter, a sharp reversal from the upwardly revised 2.4% gain in Q4 2024. This was below the -0.2% market estimate. Quarterly, GDP declined 0.2%, down from 0.6% in the fourth quarter and weaker than the market estimate of -0.1%.

The weak GDP report preceded the US tariffs which took effect in April. The tariffs will be felt in the second quarter and will likely dampen growth. Japan's export sector is under pressure due to escalating trade tensions and domestic consumption has been weak. This had led to calls from some lawmakers to increase fiscal spending to cushion the expected blow from the the tariffs.

The Bank of Japan can't be pleased with the soft GDP numbers. The Bank is looking for stronger consumption and higher wage growth before it raises interest rates. The uncertainty over Trump's trade policy has forced the BoJ into a wait-and-see stance, hoping that US tariff policy will become more clear in the following months.

The US releases UoM consumer sentiment and inflation expectations for May later today. Consumer sentiment is expected to improve to 53.4 from an upwardly revised 52.2. Inflation expectations surged in April to 6.5% from 4.7% and are projected to rise to 6.6%, as consumers remain anxious about inflation.

USD/JPY Technical

USD/JPY is testing support at 145.51. Below, there is support at 145.22145.72 and 146.01 are the next resistance lines

Japan's GDP declines, yen rally stalls_1

USDJPY 1-Day Chart, May 16, 2025

Source: marketpulse

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Warren Takunda

Economic

The British economy grew at its fastest rate in a year during the first quarter of 2025, official figures showed Thursday, in a welcome boost to the Labour government, which has made lifting the country's growth its top priority.

The Office for National Statistics said growth, as measured by gross domestic product, increased by 0.7% in the first quarter of the year from the final three months of 2024, with the country's dominant services sector doing particularly well.

The first quarter increase makes the British economy the fastest-growing among the Group of Seven leading industrial nations.

Growth was modestly ahead of market expectations for a 0.6% increase. It was also the biggest increase since the first quarter of 2024, when the economy expanded by 0.9%.

Treasury chief Rachel Reeves welcomed the growth leap, and said the figures showed the choices made by Labour since it was elected last July were beginning to pay off.

"We're set to be the fastest growing economy in the G-7 in the first three months of this year and that's incredibly welcome, but I know that there is more to do," she said while on a visit to a Rolls-Royce factory in Derby, northern England.

Most economists think it is likely to slow down in the second quarter of the year, partly because of the global uncertainty generated by US President Donald Trump's tariff policies.

Though most tariffs were paused for 90 days following the ensuing market turmoil, including the 10% baseline tariff applied to UK goods entering the US, the backdrop for the global economy remains highly uncertain, particularly if the US-China trade war persists.

Some of that uncertainty, concerning the British economy, was lifted on Thursday when both Trump and British Prime Minister Keir Starmer separately outlined details of a trade deal between the US and the UK. Though Trump kept the 10% baseline tariffs on the UK, he agreed to reduce the levies on British autos, steel and aluminium.

Sanjay Raja, chief UK economist at Deutsche Bank, said the growth uptick will likely be short-lived, especially during the second quarter when trade uncertainty will be at its peak.

"Exporters will likely see reduced demand as well from higher US tariffs and weaker global demand," he said.

Economists said growth will likely falter in the second quarter as new taxes on businesses were imposed in April. Also, a raft of price rises during the month, including domestic energy and water bills, are expected to keep a lid on consumer demand.

Source: Euronews

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Glendon

Economic

Forex

The Japanese yen is steady on Friday, after gaining 2% over the past three days. In the European session, USD/JPY is trading at 145.52, down 0.09% on the day.

Japan’s economy shrinks for first time in a year

Japan’s GDP report was a major disappointment, as the economy contracted for the first time in a year. The economy declined by 0.7% in the first quarter, a sharp reversal from the upwardly revised 2.4% gain in Q4 2024. This was below the -0.2% market estimate. Quarterly, GDP declined 0.2%, down from 0.6% in the fourth quarter and weaker than the market estimate of -0.1%.

The weak GDP report preceded the US tariffs which took effect in April. The tariffs will be felt in the second quarter and will likely dampen growth. Japan’s export sector is under pressure due to escalating trade tensions and domestic consumption has been weak. This had led to calls from some lawmakers to increase fiscal spending to cushion the expected blow from the the tariffs.

The Bank of Japan can’t be pleased with the soft GDP numbers. The Bank is looking for stronger consumption and higher wage growth before it raises interest rates. The uncertainty over Trump’s trade policy has forced the BoJ into a wait-and-see stance, hoping that US tariff policy will become more clear in the following months.

USD/JPY Technical

USD/JPY is testing support at 145.51. Below, there is support at 145.22
145.72 and 146.01 are the next resistance lines

USDJPY 1-Day Chart, May 16, 2025

Source: ACTIONFOREX

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Michelle

Economic

Forex

Deutsche Bank (ETR:DBKGn) analysts on Friday projected a significant increase in the U.K.’s consumer price index (CPI) for April, with expectations set for a year-over-year rise to 3.42%.

This forecast comes as the country faces a confluence of factors that are likely to drive up inflation, including substantial hikes in energy and water bills, adjustments to vehicle excise duty, and the impact of the National Living Wage (NLW) and employer National Insurance Contributions (NICs).

The analysts at Deutsche Bank anticipate that these changes will particularly affect food, core goods, and certain service sectors, such as hospitality and leisure.

They also expect the core CPI, which excludes volatile food and energy prices, to jump to 3.72% year-over-year.

Services CPI is predicted to escalate even further, potentially reaching 4.92% year-over-year, with the Retail Price Index (RPI) climbing to 4.26% year-over-year.

Deutsche Bank’s analysis suggests that the timing of the index collection day, which they assume will be April 15, could significantly influence the inflation figures, especially in the context of hotel prices, package holidays, and airfares due to the later than usual Easter weekend.

In the housing sector, private rents are expected to remain steady, but social rents are forecasted to rise by 1% month-over-month. Other housing-related costs, including sewerage bills, could see an increase of nearly 21%.

For transportation, the analysts predict that airfares will see a 17% month-over-month increase, while vehicle excise duty and air passenger duty changes are expected to add 5-7 basis points to the headline CPI.

Communication prices are also set to rise, with broadband and mobile phone bills anticipated to see increases of 6.3% and 4%, respectively. The communication price basket overall is projected to go up by 4.4% month-over-month in the CPI measure.

For recreation and personal services, minimum wage and employer NICs increases are expected to be significant factors. Deutsche Bank estimates that catering prices will rise by 1.1% month-over-month in the CPI, with hotel prices potentially increasing by 6%. Package holiday prices are forecasted to go up by 0.3% month-over-month.

Core goods inflation is also expected to see a variety of price rises, with health goods, clothing, and furniture prices all anticipated to experience seasonal gains. In the food, alcohol, and tobacco categories, the analysts predict an overall rise of 0.4% month-over-month for the CPI basket, with an annual rate increase to 3.8%.

In the energy sector, while pump prices are expected to decrease, the Ofgem Price Cap is projected to push inflation higher. The energy basket is estimated to rise by 1.6% month-over-month, resulting in an annual CPI rate of -0.8%.

Looking ahead, Deutsche Bank expects a bumpy two quarters before inflation begins to descend.

They foresee headline CPI stalling at around 3.4% year-over-year for the rest of the year, peaking at 3.65% year-over-year in September.

Core CPI is also expected to remain elevated at 3.6% year-over-year over the same period. However, a gradual slowdown in services CPI is anticipated, dropping to around 4.4% year-over-year in Q4-2025.

The analysts project an average annual CPI rate of 3.3% for this year, 2.4% for next year, and 2% for 2027. For RPI, the annual rate is expected to track around 3.9% this year before slowing to 3.3% next year.

Source: Investing

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Warren Takunda

Stocks

London stocks had risen further by midday on Friday, with St James’s Place the standout gainer on the back of an upbeat broker note.

The FTSE 100 was up 0.7% at 8,695.14.

Russ Mould, investment director at AJ Bell, said: "The FTSE 100 continued its ascent as investors loaded up on pharma and energy stocks.

"AstraZeneca, Shell and GSK were the biggest contributors to the FTSE 100 in terms of index points, suggesting that investors were fishing for opportunities among areas that have recently been weak.

"Pharma stocks have been volatile of late amid fears of tariffs on the sector, while a pullback in oil prices dragged down the big oil producers yesterday.

"All sectors on the UK market were in positive territory apart from industrials and real estate. Land Securities was the biggest FTSE 100 faller despite reassuring investors that it hadn’t seen an impact of economic uncertainty on customer demand or investment markets.

"Wall Street’s rally continued with pace last night and the S&P is now in positive territory year-to-date. That will be a relief to investors who feared that a lacklustre performance in the first part of 2025 marked the end of a bull run for US equities."

There are no major UK data releases due, but in the US, the Michigan consumer sentiment index for May will be eyed.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "It’s expected to rise from 52.2 last month to 53.1. Anything significantly higher could dampen the prospects for further US rate cuts this year."

In equity markets, St James’s Place jumped to the top of the FTSE 100 as JPMorgan reiterated its ‘strong conviction’ on the overweight-rated stock and lifted the price target to 1,310p from 1,205p. "St. James’s Place remains a top conviction within our coverage universe," it said.

Land Securities edged lower even as the real estate investment trust met consensus forecasts with a small increase full-year profits, and reiterated confidence in its plans to reallocate capital away from offices in the coming years.

Workspace tanked after the office space provider flagged a trading profit headwind of around £7m for the year ending 31 March 2026.

Specialist media platform Future slid as it cautioned that it expected a low single-digit decline in full-year organic revenue amid economic uncertainty.

Vesuvius tumbled as it said its end markets remain challenging and it now expects full-year results to be slightly lower than previous guidance.

Fresnillo reversed earlier gains after announcing the sale of the majority of its stake in MAG Silver following Pan American Silver’s agreement to acquire MAG.

Source: Sharecast

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Glendon

Cryptocurrency

Bitcoin Nears $100K Amidst Market Recovery

The notable rise in Bitcoin's price highlights its rebound from previous lows, drawing attention from market analysts. Its movement underscores a positive shift in market dynamics.

Bitcoin has been trading near the $100,000 level, marking a significant upsurge since the start of 2025. The cryptocurrency's renewed momentum follows a drop earlier in the year. Prices have risen over 14% in the past month.

Analysts, including Tracy Jin from MEXC, predict that current trends could propel Bitcoin toward $150,000. As Tracy Jin, COO, MEXC, mentioned,

"If current conditions hold, a summer rally toward $150,000 is plausible, with market sentiment turning increasingly bullish."

Institutional interests have waned, but improved on-chain metrics illustrate a potential bullish trend.

The market's recovery impacts investment strategies, with companies cautious yet optimistic. Institutional inflow remains subdued compared to 2024, reflecting current economic uncertainties and evolving market strategies.

Apparent demand has surged to 65,000 BTC, indicating a market rebound. Continued positive demand could stabilize prices above previous highs, with historical data suggesting potential growth.

Bitcoin's consistent gains highlight shifting dynamics and potential upward trends. Forecasts for the year-end suggest further price increases, potentially boosted by technological advancements and increased investor confidence.