Yen Rally Ends, Markets Eyes Fed Rate Decision And BoJ Minutes

Economic

Forex

Summary:

The Japanese yen is in negative territory on Wednesday, after a three-day rally which saw it gain 2% against the US dollar. In the European session, USD/JPY is trading at 143.29, up 0.61% on the day.

The Bank of Japan releases the minutes of its March meeting on Thursday. At the meeting, the BoJ held the key policy rate at 0.5% in a unanimous vote. Members cautioned that there was uncertainty over tariffs, which the US was expected to announce in April.

Since then, the financial markets have see-sawed in response to President Trump’s erratic tariff policy. Japan’s export-reliant economy could be hit hard, but Tokyo is already negotiating with the US and hopes to carve out an agreement to cancel or at least mitigate the impact of the tariffs.

The Bank of Japan is walking a tightrope, as it wants to continue to normalize policy and raise rates, but is worried about the uncertainty over the tariffs and the real possibility of a global trade war. Bank policymakers are taking a wait-and-see stance, hoping that US trade policy will become more clear.

Fed likely to hold rates at today’s meeting

The Federal Reserve is virtually certain to maintain rates at today’s FOMC meeting. There’s little doubt about the decision but investors will be all ears as to the amount of pushback from Fed Chair Jerome Powell, after President Trump has repeatedly pushed him to lower rates.

The markets have priced in a 30% chance of a cut in June, compared to a 63% likelihood just one week ago, according to CME’s Fedwatch Tool. We can expect the pricing of a June cut to continue to swing, as the tariff saga continues.

USD/JPY Technical

There is resistance at 143.67 and 144.92
143.01 and 141.76 are the next support levels

USDJPY 1-Day Chart, May 7, 2025

Source: ACTIONFOREX

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Warren Takunda

Stocks

Wall Street is poised to open with gains as the Federal Reserve wraps up a two-day policy meeting where it will almost certainly leave interest rates unchanged despite pleas from President Donald Trump for a rate cut as he pursues a worldwide trade war.

Futures for the S&P 500 and the Nasdaq composite rose 0.6% before the bell Wednesday. Futures for the Dow Jones Industrial Average rose 0.7%.

Walt Disney Co. jumped more than 6% in premarket after the entertainment behemoth easily beat Wall Street’s profit targets for the second quarter. Disney’s revenue rose 7% from the same quarter a year ago as it added another 2.5 million Disney+ and Hulu subscribers.

Disney’s results come just days after Trump accused other countries of “stealing the movie-making capabilities” of the U.S. and said that he had authorized government agencies to immediately begin the process of implementing this new import tax on all foreign-made films.

Video game company Electronic Arts climbed more than 5% after it announced preliminary results for its most recent quarter, which also easily beat analysts’ sales and profit targets.

Some companies say they’re already seeing impacts to their business from the uncertainty created by tariffs, causing them to revise or pull their guidance. Some have even offered two sets of forecasts — one contingent on tariffs and one without the additional costs factored in.

Chair Jerome Powell and other Fed officials have signaled that they want to see how the duties — including 145% on all imports from China — impact consumer prices and the economy.

Uncertainty around tariffs has also made U.S. households more pessimistic about the economy and could affect their long-term plans for purchases. That anxiety has helped fuel a surge in imports ahead of potentially more severe tariffs ahead.

The U.S. trade deficit soared to a record $140.5 billion in March as consumers and businesses alike tried to get ahead of tariffs that went into effect in April and others that have been postponed until July. Last week, the government reported the U.S. economy shrank at a 0.3% annual pace during the first quarter of the year because of a surge in imports.

At midday in Europe, Germany’s DAX was virtually unchanged, while the CAC 40 in Paris slipped 0.6% and Britain’s FTSE 100 shed 0.4%.

In Asia, shares advanced after the U.S. and China said they plan to hold trade talks in Switzerland later this week.

Hong Kong’s benchmark briefly jumped more than 2% after officials in Beijing rolled out interest rate cuts and other moves to help support the Chinese economy and markets as higher tariffs ordered by Trump hit the country’s exports.

But the markets’ reaction to both developments was relatively restrained.

Tokyo’s Nikkei 225 edged 0.1% lower to 36,779.66.

The Hang Seng in Hong Kong gained only 0.1% by the end of trading, closing at 22,691.88. The Shanghai Composite index rose 0.8% to 3,342.67.

The trade talks may account for the decision to announce the economic rescue package, Lynne Song of ING Economics said in a report.

“This way, the easing won’t be seen as a knee-jerk reaction to tariffs. Policymakers are likely now privy to some of the early data on how the economy is being impacted by the tariff shock,” Song said.

But analysts said the muted response to the policies announced Wednesday also may reflect disappointment over the lack of major government spending increases that many economists say may be needed to wrest the Chinese economy out of its doldrums.

“These will help to shore up growth at the margin. But any boost to credit demand will be modest and today’s moves are no substitute for an expansion in fiscal support,” Julian Evans-Pritchard of Capital Economics said in a report.

Australia’s S&P/ASX 200 picked up 0.3% to 8,178.30, while the Kospi in South Korea gained 0.6% to 2,573,80.

U.S. benchmark crude oil gained 48 cents to $59.57 per barrel. Brent crude, the international standard, gained 40 cents to $62.55 per barrel.

The dollar rose to 143.34 Japanese yen from 142.41 yen. The euro ticked down to $1.1365 from $1.1369.

Source: AP

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Michelle

Economic

Forex

China and the US will hold their first trade talks since President Donald Trump took office and more than a month after the two sides imposed tariffs of more than 100% on each other.

US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will travel later this week to Switzerland for talks with Chinese Vice Premier He Lifeng, seeking to dial down a tariff standoff that has threatened to hammer both economies and other nations. The announcements early on Wednesday Beijing time boosted hopes that the two largest economies in the world might pull back from their actions which had threatened to effectively eliminate bilateral trade.

China said that it had to talk after approaches from US officials, but the Ministry of Commerce emphasized that “any dialogue and negotiation must be carried out under the premise of mutual respect, equal consultation, and mutual benefit,” adding that the US needed to “show sincerity in talks, correct wrong practices, meet China halfway, and resolve the concerns of both sides through equal consultation.”

The US is looking to “de-escalate” tensions, Bessent said on Fox News, calling the current level of tariffs “unsustainable” and saying the US doesn’t want to break completely with China. However, the US does “want to decouple over strategic industries,” he said, mention steel, semiconductors and pharmaceuticals as examples of sectors where the US wants to reshore manufacturing from China and elsewhere.

How damaging the tariffs have already to bilateral trade will become clearer this Friday when China released April trade figures, but high-frequency data is already showing that overall the effect has been muted so far, with Chinese ports processing more cargo in the final week of April than in any other week since the start of 2023. Shanghai port, one of the largest in the world, processed 4.5 million containers last month, according to data released on Wednesday, the most since August 2024.

—James Mayger in Beijing

Weekend meetings to de-escalate the punitive tariff war between the US and China can’t come soon enough for global trade. The latest sign of stress can be seen in freight rates as container liners begin to sever shipping routes that link the US and China across the Pacific. German container shipping group Hapag-Lloyd has canceled 30% of China-to-US bound shipments, according to a spokesperson. Swiss liner Kuehne + Nagel said some trades had stopped completely, while it expected a 25% to 30% drop in bookings from China to the US, CEO Stefan Paul said.

Source: Bloomberg Europe

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Adam

Economic

China’s central bank and financial regulators announced sweeping policy steps Wednesday, including interest rate cuts, as Beijing ramps up efforts to bolster growth amid mounting trade worries.

China will cut the seven-day reverse repurchase rates by 10 basis points to 1.4% from 1.5%, the People’s Bank of China Governor Pan Gongsheng said at a press briefing. That will bring down the loan prime rate, the main policy rate, by around 10 basis points, the governor said.

The central bank will also lower the reserve requirement ratio, which determines the amount of cash banks must hold in reserves, by 50 basis points, unleashing additional liquidity of 1 trillion yuan ($138.5 billion) to the market.

The lower policy rates will come into effects Thursday, while the RRR relaxation will be effective May 15, according to state media Xinhua.

The officials also announced measures to support financing for several key sectors, including technology and real estate, along with establishing of a 500-billion-yuan relending tool for consumption and elderly care.

The PBOC will reduce the mortgage rates under the nation’s housing provident fund, a government-backed housing lender, by 25 basis points. Rates on five-year loans for first-time homebuyers will be trimmed to 2.6% from 2.85%, the governor said.

It will also gradually lower the amount of cash that auto financing firms must hold in reserves to zero from the current 5%.

These measures, however, may have limited impact on boosting domestic credit demand, said Tianchen Xu, senior economist at Economist Intelligence Unit, as “borrowing has been somewhat insensitive to interest rates.”

China is also preparing more measures to support small and medium enterprises and the private sector, which will be announced soon, Li Yunze, the head of the financial regulatory administration, said at the briefing. The government has ramped up efforts in recent weeks to help businesses impacted by the tariffs and boost employment.

The broad stimulus announcements Wednesday showed the officials were acting with greater urgency to bolster the economy and the easing depreciation pressure on Chinese yuan has created more desirable condition, analysts said.

Chinese offshore yuan has regained some ground to hover near the key 7.20 threshold, after weakening to a record low of 7.4287 per U.S. dollar earlier this month. It depreciated modestly to trade at 7.2227 per U.S. dollar following the Wednesday briefing.

“There is no longer pressure on the RMB to depreciate against the dollar. In this context, PBOC doesn’t need to worry about the risk of rate cut and RRR leading to capital outflows and RMB depreciation,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.

New fiscal policy measures are, however, missing and may only be unleashed when policymakers see concrete signs of economic deterioration, Zhang said.

Despite hinting repeatedly that it had sufficient policy firepower to deploy “when appropriate,” Beijing had largely opted for piecemeal stimulus measures this year. In a high-level economy policy setting meeting in April, Chinese top policymakers urged the country to prepare for “worst-case scenarios” with sufficient planning.

“Policymakers are likely now privy to some of the early data on how the economy is being impacted by the tariff shock,” said Lynn Song, chief economist for Greater China at ING, flagging that “there is [still] room for further policy easing,” citing deflationary pressure and moderating growth.

He expects further 20 basis points of cuts in the interest rates and 50-basis-point reduction in the RRR this year, while noting “the next move may not come until after the Fed resumes its rate cuts.”

The yields on China’s benchmark 10-year government bond were little changed at 1.636% on Wednesday, according to LSEG data.

The press conference took place hours after Beijing’s affirmation that Chinese Vice Premier He Lifeng will hold talks with U.S. Treasury Secretary Scott Bessent in Switzerland later this week to discuss tariff and trade matters, in the latest sign that negotiations could begin between the two sides.

Those would be the first confirmed trade talks between the two countries since U.S. President Donald Trump ratcheted up tariffs on Chinese goods to an eye-watering 145%, prompting Beijing to retaliate with additional levies of 125% on imports from the U.S.

The planned talks could mark a turning point in ongoing trade war that has rattled markets and crippled trade between the world’s two largest economies.

source :cnbc

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Warren Takunda

Stocks

The FTSE 100 was on track to snap a 16-day winning streak on Wednesday as investors showed caution ahead of a central bank meeting in the US, with heavy losses in the telecoms and pharma sectors weighing on the index.

The Footsie, which has finished every trading session since 9 April in positive territory, was trading around 0.3% lower at 8,572 by the midday mark in London. Investors were likely taking profits following the longest win streak on record, which has seen the benchmark index surge nearly 12% over the past four weeks.

A rise in geopolitical tensions was also likely hitting risk appetite after India launched missile strikes on Pakistan and Pakistan-administered Kashmir. Meanwhile, US and Chinese officials are reportedly set to meet at the weekend to begin trade negotiations, though Beijing warned against what it said might be an "attempt to continue to coerce and blackmail under the guise of talks".

However, the Federal Open Market Committee meeting, set to finish at 1930 GMT, "undoubtedly provides the main event of note", according to Joshua Mahony, chief market analyst at Scope Markets, "with traders watching out for commentary from Powell over the direction of travel for rates in the face of economic uncertainty".

He said: "The sheer number of unknowns mean that we are highly unlikely to see the Fed cut rates this time around. However, the events of the past week have also seen markets lose confidence over the potential for a June cut, with a pause going from a 33% outside chance to the 70% base case."

In UK economic news, the S&P Global UK construction PMI was 46.6 last month, down on March’s 46.4 but ahead of analyst expectations for a further fall, to 45.7. Respondents said rising business uncertainty meant decisions on new projects were being delayed, leading to further declines in total order books and increased job losses.

Pharma and telecom stocks fall

Shares in GSK and AstraZeneca came under pressure on Wednesday, after vaccine-sceptic Vinay Prasad was appointed to a key role at the US Food and Drug Administration. Prasad, an oncologist who has been vocal in his criticism of the FDA’s leadership as well as Covid-19 mandates, will oversee the regulation of costly biologic drugs, including vaccines, gene therapies and blood supply, and is widely expected to tighten up vaccine approvals, likely leading to much longer approval timelines for new drugs.

Vodafone was trading lower after revealing that its finance chief announced his decision to step down to join another company. Luke Mucic was to leave the telecoms operator no later than "early 2026" to join German real estate firm Vonovia.

Sector peer BT was also among the worst performers, while Spirent Communications underwhelmed with an in-line trading update for the first quarter.

Defence blue chip BAE Systems was in the red despite reaffirming its full-year 2025 guidance following a steady first quarter as it highlighted strong operational performance and a robust order backlog.

Shares in Trainline fell sharply after the online rail ticketing platform said net ticket sales growth would be lower this financial year as it faced potential headwinds from global macroeconomic uncertainty and the expansion of Transport for London's contactless travel zone.

Source: Sharecast

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Glendon

Economic

Forex

The European Union will propose tariffs on Boeing Co aircraft if talks with the US meant to de-escalate the trade conflict fail, according to a person familiar with the plan, who spoke on the condition of anonymity.

The duties would be part of an EU plan to hit about €100 billion (US$114 billion or RM483.4 billion) in US goods with additional tariffs, Bloomberg reported Tuesday. That list of products will be shared with member states this week and could change over the next month during consultations.

The European Commission, the bloc’s executive arm that handles trade matters, has been meeting with US officials ever since President Donald Trump announced last month a 20% universal tariff — reduced to 10% until July — on nearly all EU exports. He also imposed a 25% levy on cars and metals.

A commission spokesperson declined to comment on the plans.

Negotiations between the EU and US have made scant progress and the expectation is that the bulk of the American tariffs will remain in place. The EU said on Tuesday that Trump’s ongoing trade investigations will boost the amount of the bloc’s goods facing tariffs to €549 billion, or 97% of the total.

The commission is expected to share a paper with the US this week to try to kick-start negotiations with Washington, Bloomberg reported earlier. Proposals from the EU are expected to include lowering trade and non-tariff barriers and boosting investments in the US.

The Financial Times reported the commission plan earlier.

Airbus SE chief executive officer Guillaume Faury earlier this week advocated that the EU impose tariffs on Boeing if negotiations fail to remove duties hurting the aerospace industry. The US manufacturer is a major exporter to Europe, and would stand to feel the bulk of any tariffs imposed on American-made planes.

“Europe is in negotiations, and if these negotiations do not lead to a positive outcome, I imagine that — and this is what we hope for — reciprocal tariffs on aircrafts will be imposed,” he told reporters at an event in Paris.

Source: Theedgemarkets

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Adam

Economic

China–U.S. Trade War

Central Bank

U.S. stock futures tick up, bolstered by news of an impending meeting between U.S. and Chinese representatives that could mark the first step in cooling ongoing trade tensions between the world’s two largest economies. The focus is also on an upcoming Federal Reserve interest rate decision and any clues the central bank may give about its future policy plans. AMD’s current-quarter revenue guidance tops estimates, but the semiconductor group flags a steep hit from new U.S. chip export rules.

Futures rise

U.S. stock futures pointed higher on Wednesday, as investors assessed an upcoming meeting on trade between U.S. and Chinese officials.

Markets were also looking ahead to the latest monetary policy decision from the Fed, with the central bank’s potential signals for its interest rate path in focus.

By 03:38 ET (07:38 GMT), the Dow futures contract had gained 218 points, or 0.5%, S&P 500 futures had increased by 32 points, or 0.6%, and Nasdaq 100 futures had advanced by 132 points, or 0.7%.

On Tuesday, the main averages on Wall Street fell, dragged down in part by U.S. President Donald Trump’s comments on recent trade negotiations. Speaking during a meeting with Canadian Prime Minister Mark Carney, Trump suggested that the U.S. doesn’t have to sign deals, other countries "have to sign deals with us".

Early last month, Trump rolled out punishing new tariffs on a host of countries, but later delayed most of these levies for 90 days in the wake of deep ructions in stock and bond markets. White House officials have since been tasked with securing a bevy of individual trade deals before the elevated tariffs take effect in July.

Trump officials to meet with Chinese counterparts

U.S. Treasury Secretary Scott Bessent is reportedly due to meet with Chinese Vice Premier He Lifeng -- considered to be Beijing’s main representative for economic and trade matters -- this week for talks.

In a statement, Bessent said he looked forward to "productive talks as we work towards rebalancing the international economic system towards better serving the interest of the United States".

Citing a Chinese statement, Reuters reported that China has agreed to meet with Bessent and chief U.S. trade negotiator Jamieson Greer in Switzerland this weekend. While Beijing said it plans to "re-engage" with the U.S., it warned that it will "never agree" to a deal if Trump officials attempt "to use talks as a cover to continue coercion and blackmail".

The world’s second-largest economy was left out of Trump’s tariff postponement and currently faces sweeping U.S. levies of at least 145%.

China, who has imposed its own retaliatory tariffs of 125% on U.S. imports, has become a central target of Trump’s tariff agenda, with the president arguing that the country is a "candidate for the ’chief-ripper-offer’ on trade". China has responded with its own heated rhetoric, ratcheting up tensions with Washington.

Fed decision ahead

The Federal Reserve is broadly expected to leave interest rates unchanged after its latest two-day gathering on Wednesday, placing the spotlight on any indications it may give about policy decisions later this year.

Despite ongoing pressure from Trump to lower interest rates, the central bank has previously signaled that it will take a "wait-and-see" approach to any future changes to borrowing costs. Officials have been wary about uncertainty around the impact of Trump’s tariffs on the economy, especially on inflation and employment.

Policymakers will be grappling with relatively muddled economic data. While figures showed that U.S. gross domestic product contracted in the first quarter, consumer spending remains solid and the labor market has proved to be resilient.

But with the next batch of rate forecasts from officials not due out until June, the attention will likely be squarely on Fed Chair Jerome Powell’s post-decision press conference for any clues.

Extra focus may also be placed on potential commentary from Powell around the independence of the Fed. Trump has indicated his displeasure with Powell for not pushing harder to bring down interest rates, although he has said he has no plans to oust the Fed leader.

AMD’s second-quarter sales guidance beat

Shares in Advanced Micro Devices (NASDAQ:AMD) edged higher in extended hours trading on Wednesday after the chipmaker unveiled a second-quarter revenue guidance that beat Wall Street estimates.

Analysts suggested that the upbeat current-quarter outlook was likely driven by many clients racing to lock in purchases prior to the implementation of U.S. tariffs.

AMD has been wrestling with new U.S. restrictions on the export of high-end artificial intelligence-processors to China, threatening a crucial region for the company.

The firm said it expects to incur a hit of $1.5 billion to sales this year because of the export curbs, with CEO Lisa Su flagging that the impact will be most felt in the second and third quarters. Still, Su sees annual AI chip revenue from its data center unit climbing in the "double digits".

Elsewhere on Wednesday, several groups are anticipated to report their latest results, including ride-hailing firm Uber Technologies (NYSE:UBER), entertainment behemoth Walt Disney (NYSE:DIS), and chip designer Arm Holdings (NASDAQ:ARM).

Gold slips

Gold prices fell as the announcement of trade talks between officials from U.S. and China boosted risk appetite and sapped haven flows, while the dollar also firmed before the Fed decision.

The yellow metal had gained some ground this week, coming back in sight of record highs as a lack of clarity on U.S.-China trade tension drove up haven demand. But this trend appeared to have reversed somewhat on Wednesday.

Spot gold slid 1.3% to $3,386.97 an ounce, while gold futures for June fell 0.8% to $3,395.86/oz by 03:35 ET.

Meanwhile, oil prices rose, pushing away from four-year lows on trade hopes and signs of healthy demand in the world’s largest consuming nation.

U.S. crude stocks fell by 4.5 million barrels in the week ended May 2, according to data from the American Petroleum Institute on Tuesday, indicating demand remains strong. Official U.S. government data from the Energy Information Administration are due later in the session.

At 03:37 ET, Brent futures climbed 1.5% to $63.05 a barrel, and U.S. West Texas Intermediate crude futures rose 1.8% to $60.14 per barrel.