Yen Weakening Into Key Bank of Japan Decision

Economic

Summary:

Market Strategy: Selling USD/JPY on Rallies

The Japanese yen has weakened ahead of a crucial Bank of Japan (BoJ) policy meeting, with the USD/JPY exchange rate climbing back to the 150.00-level.

The currency’s recent slide reflects growing market anticipation regarding BoJ’s stance on interest rates, as well as external influences such as rising U.S. Treasury yields and stronger-than-expected U.S. retail sales data.

A significant driver of the yen’s depreciation has been the steady increase in U.S. bond yields. The U.S. 2-year Treasury yield, which hit a low of 3.83% on March 11, climbed to 4.06% following robust U.S. retail sales data for February.

The report showed a 1.0% month-over-month increase in control retail sales, reversing January’s 1.0% contraction. This data has eased concerns about a sharp slowdown in the U.S. economy, prompting investors to reassess their expectations for Federal Reserve rate cuts.

"USD/JPY has been supported by the pick-up in US yields over the past week," noted Lee Hardman, Senior Currency Analyst at MUFG Bank Ltd. "The strength of U.S. retail sales has reinforced expectations that the Fed will remain cautious about cutting rates in the near term."

The strengthening U.S. dollar, closely tied to short-term yield spreads, has placed additional downward pressure on the yen. The market remains sensitive to any policy cues from both the Federal Open Market Committee (FOMC) and the BoJ, with both institutions set to announce their latest policy decisions tomorrow.

Market expectations overwhelmingly indicate that the BoJ will maintain its current policy stance. However, speculation around the central bank’s terminal rate has intensified following recent speeches by BoJ officials. A Bloomberg survey of 52 economists pegged the median expected terminal rate at 1.25%, with estimates ranging from 0.50% to 2.50%.

"While the market is fully priced for no immediate change in BoJ policy, recent discussions around the terminal rate suggest the potential for a higher level than previously anticipated," Hardman commented. "Investors will be closely watching for any signals from Governor Ueda regarding this."

Deputy Governor Shinichi Uchida recently underscored the uncertainty surrounding the terminal rate, emphasizing that the BoJ does not have a predetermined target. Meanwhile, Policy Board Member Hajime Takata suggested that conditions are evolving toward a normalization of policy. As a result, expectations for rate hikes have gradually risen, with the market now pricing in a terminal rate near 1.20%, up from around 0.90% at the end of 2024.

Wage Growth and Inflation Considerations

Japan’s wage growth data remains a critical factor in the BoJ’s decision-making process. The recent Rengo wage negotiations delivered a stronger-than-expected outcome, with an overall wage increase of 5.46% and a base pay rise of 3.84%. These figures exceeded Bloomberg’s consensus estimates of 5.1% and 3.4%, respectively, reinforcing expectations that the BoJ could pursue further rate hikes.

"The Rengo wage announcement is a very important part of the BoJ’s inflation outlook," Hardman stated. "The latest figures provide Governor Ueda with room to signal further hikes ahead. We expect the next 25bp hike in July, but there is a risk of it coming sooner, in June."

Governor Kazuo Ueda is expected to reaffirm the central bank’s progress in reaching its inflation target, potentially laying the groundwork for a 25-basis-point rate hike in July, or even earlier in June. While the BoJ is unlikely to signal an immediate policy shift, market participants will scrutinize Ueda’s remarks for any hints of a tightening bias.

Market Strategy: Selling USD/JPY on Rallies

Given the evolving outlook, analysts at MUFG maintain a strategy of selling USD/JPY on rallies. "We would expect the recent adjustment in terminal rate pricing to be maintained following the BoJ meeting," Hardman remarked. "Our bias remains selling USD/JPY on rallies, as the prospect of higher Japanese rates continues to build."

As markets await tomorrow’s dual central bank decisions from the BoJ and the Fed, traders will remain focused on any policy signals that could shape currency movements in the weeks ahead.

Source: Poundsterlinglive

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FXOpen

Economic

Forex

As shown on the NZD/USD chart today, the exchange rate is around 0.58250—the highest level for the Kiwi against the US dollar since December 2024.

NZD strength is supported by optimism about China’s economy, a key trading partner for New Zealand. The Hang Seng Index (Hong Kong 50 on FXOpen) is near three-year highs, driven by:

→ Optimism surrounding AI development in China, including models from DeepSeek and Alibaba.→ Government stimulus measures boosting the Chinese economy.

Meanwhile, traders are assessing the USD’s outlook in light of the Trump administration’s trade tariff policies.

Technical Analysis of NZD/USD

The recent rally accelerated after bulls broke through the downward trendline (shown in orange). However, bears may expect a correction due to three key factors:

→ The price is near the 0.58000 level, which previously acted as support (as indicated by arrows). It may now serve as resistance, limiting further gains.

→ The RSI indicator is in overbought territory, unsurprising given the rally’s pace over the past week.

→ The price is near the upper boundary of the ascending channel (in place since early 2025), which could also act as resistance to further upside.

Source: ACTIONFOREX

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Glendon

Commodity

(Bloomberg) -- Gold rose to a record high above $3,017 an ounce as an escalation in Middle East tensions underscored its haven appeal, and investors weighed data that fueled concern the US economy is slowing down.

Bullion climbed 0.6% as Israel said it launched military strikes on Hamas targets in Gaza, a move that threatens to undermine a shaky truce. Palestinian residents reported multiple airstrikes in several parts of the Gaza Strip.

Traders were also digesting US retail sales data released Monday, which rose less than forecast in February. While the figures pointed to weak spending on goods, there was no sign of a severe pullback and the data did little to alter traders’ bets on expectations for Federal Reserve rate cuts.

Still, companies, investors and economists remain cautious as consumer sentiment sours and signs of financial stress mount, amid risks of escalating trade wars sparked by US President Donald Trump.

The gloomier outlook for both the US and global economy has underscored bullion’s role as a store of value in uncertain times. The metal is up more than 14% so far this year, extending its strong annual advance in 2024. Several major banks have hoisted their price targets for this year higher in recent weeks.

While gold has further room to run, “$3,000 was a strong resistance” in the short term, said Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp. “Even though it’s broken marginally above this, it may not signal a decisive break,” said Menon, who sees bullion rising to $3,100 an ounce within twelve months.

Source: Yahoo Finance

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Warren Takunda

Stocks

London stocks rose in early trade on Tuesday, taking their cue from positive sessions in the US and Asia, as investors eyed the start of the Federal Reserve’s two-day policy meeting and this week’s Bank of England announcement.

At 0835 GMT, the FTSE 100 was up 0.4% at 8,712.22.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "UK markets have continued on the front foot, with yesterday’s close marking four consecutive days of gains for the FTSE 100, with another jump higher this morning.

"Positive earnings reports and growing optimism about China’s economic recovery helped lead insurers and miners to the forefront in yesterday's session. This week, all eyes are on the Bank of England's upcoming interest rate decision on Thursday, with markets pricing in a 90% chance of no change as policymakers navigate the challenging task of balancing slowing growth with sticky inflation."

Before that, the Fed’s two-day policy meeting kicks off on Tuesday.

Kathleen Brooks, research director at XTB, said: "We don’t expect the Fed to change policy on Wednesday; but the updated economic forecasts and dot plot will be crucial for the direction of asset prices later this week."

In equity markets, Anglo American rallied after an upgrade to ‘sector perform’ from ‘underperform’ at RBC Capital Markets. Miners more generally were doing well, with Glencore and Antofagasta also among the top gainers on the FTSE 100.

Bytes Technology surged as it reported double-digit growth across all key financial metrics over the year to 28 February, with gross invoiced income topping the £2bn mark for the first time.

IT firm Computacenter made solid gains as it posted lower annual profit in line with expectations amid an uncertain macroeconomic environment and softer market conditions in the UK, offset by stronger performances in the US and Germany, particularly in the second half.

Trustpilot jumped as it lifted its full-year outlook for 2025 following a "strong" performance in 2024.

STEM-focused recruiter SThree advanced as it held on to its full-year guidance despite a weak first quarter with double-digit declines in fees for both contract and permanent positions.

On the downside, Close Brothers tanked after the merchant banking group said it swung to a hefty loss in the first half on the back of a £165m provision for motor finance commissions.

Close Brothers reported a pre-tax loss of £103m for the six months to 31 January, compared with a £88.1m profit a year earlier. The £165m motor finance provision had already been well flagged.

Source: Sharecast

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FastBull Featured

Daily News

[Quick Facts]

1. Canadian Prime Minister Carney seeks to align with UK and France to counter U.S. pressure

2. Lebanon and Syria agree to border ceasefire

3. The U.S. military launched a new wave of airstrikes against Yemen's Houthi rebels

4. February retail sales data fuels concerns over consumer spending

5. EU is fortifying trade protection measures, contemplating restrictions on aluminum imports and scrap metal exports

[News Details]

Canadian Prime Minister Carney seeks to align with UK and France to counter U.S. pressure

During his inaugural international visit following his appointment as Canadian Prime Minister, Mark Carney advocated for a stronger alliance with European partners. This initiative reflects Canada's strategic objective to mitigate its reliance on the U.S., particularly amidst escalating tensions with its southern neighbor. In discussions with French President Macron in Paris, Carney emphasized the necessity for Canada to fortify its trade and security partnerships with European democracies. "I aim to ensure robust collaboration between France, and indeed the entirety of Europe, with Canada, a nation that, while not geographically European, embodies European values," he stated. Carney, who assumed office on Friday, further affirmed Canada's continued commitment to North America while simultaneously pursuing "the most constructive possible relationship with the U.S."

Lebanon and Syria agree to border ceasefire

Following discussions between the Lebanese Minister of National Defense and the head of the Syrian Ministry of Defense, addressing the evolving situation along the Lebanon-Syria border, a ceasefire agreement was reached. Intelligence agencies from both nations will maintain communication to prevent further escalation and protect civilian lives. Concurrently, a meeting between the Lebanese Minister of Foreign Affairs and the Syrian Minister of Foreign Affairs addressed the recent developments on the border, with both parties agreeing to ongoing dialogue to safeguard national sovereignty and avert a deterioration of the security situation.

The U.S. military launched a new wave of airstrikes against Yemen's Houthi rebels

According to sources from Yemen's Houthi rebels, U.S. forces conducted airstrikes on the evening of the 17th, local time, targeting the Salif and Bajil districts within the Houthi-controlled Hodeidah province. The U.S. Department of Defense confirmed that the initial U.S. strikes in Yemen involved over 30 targets, including Houthi training facilities. A U.S. Department of Defense spokesperson stated that this was "not an open-ended offensive" and was unrelated to any regime change in the Middle East. The spokesperson clarified that the operation has a clearly defined endpoint, contingent upon the Houthis' commitment to cease attacks on U.S. vessels and to stop endangering American lives.

February retail sales data fuels concerns over consumer spending

Data released by the U.S. Department of Commerce on Monday indicated a 0.2% MoM increase in retail sales for February, following a downwardly revised 1.2% decrease in January, marking the largest decline since July 2021. This figure fell short of expectations, compounded by the downward revision of the previous month's data, intensifying concerns regarding a contraction in consumer spending.

Of the 13 categories covered in the report, 7 experienced declines, notably motor vehicles, which were anticipated to rebound after a weak January performance. Sales of gasoline, electronics, and apparel also decreased. Restaurant and bar spending, the sole service sector category in the retail report, saw its largest drop in a year.

While retail sales data is not adjusted for inflation and primarily reflects goods purchases, which constitute a relatively smaller portion of overall consumer spending, its current performance is particularly significant. This is due to the potential for tariffs imposed by the U.S. on substantial imports from major trading partners to elevate prices. The data further suggests a downturn in consumer spending, potentially exacerbated by tariffs that could reignite inflation and impede economic growth. With declining consumer confidence and notable signs of financial strain, businesses, investors, and economists are adopting a cautious outlook.

EU is fortifying trade protection measures, contemplating restrictions on aluminum imports and scrap metal exports

A draft plan from the EU indicates that the European Commission is considering import restrictions, driven by concerns that the Trump administration's metal tariffs could trigger an influx of aluminum into Europe. The plan also contemplates tariffs on domestic scrap metal exports to bolster the industry. Furthermore, the European Commission intends to introduce a new proposal by Q3 of this year, aiming to replace the existing measures, which expire on July 1, 2026, with a "tariff rate quota"-based steel trade mechanism.

[Today's Focus]

UTC+8 17:00 ECB Governing Council member Rehn speaks

UTC+8 17:00 ECB Governing Council member Escrivá speaks

UTC+8 20:30 Canada February CPI YoY

UTC+8 20:30 U.S. February Housing Starts YoY

UTC+8 20:30 U.S. February Building Permits

UTC+8 21:15 U.S. February Industrial Production MoM

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Owen Li

Economic

Stocks

Another Wall Street strategist is lowering her year-end target on the S&P 500 (^GSPC), citing economic growth concerns.

Following the S&P 500's recent 10% drawdown, RBC Capital Markets head of US equity strategy Lori Calvasina lowered her year-end target to the S&P 500 to 6,200 from 6,600. Calvsina's revised outlook on the S&P 500 comes after both Goldman Sachs and Yardeni Research lowered their targets last week.

"While we don’t believe that a pullback beyond the 10% drawdown that has already been sustained is inevitable, we do believe that the path for stocks between now and December has gotten rockier with stronger headwinds," Calvasina wrote in a note to clients on Sunday night.

A gloomier outlook on US economic growth from the RBC Capital Markets economics team contributed to the more subdued S&P 500 projection. RBC's economic forecasters now project the economy to grow 1.6% this year, down from a prior estimate of 2%. Calvsina noted that the stock market has often fallen in years when GDP is in a "sluggish" range of 1.1%-2%.

"Some economic forecasters around the Street have started to dial down their 2025 GDP forecasts, but are not calling for a recession," Calvasina wrote. "Historically, the dialing down of economic growth on its own presents a significant headwind for the stock market to overcome."

Goldman Sachs chief US equity strategist David Kostin also highlighted a cut to GDP forecast from Goldman's economics team when moving his target to 6,200 from 6,500.

"Our revised estimates reflect the recently reduced GDP growth forecast of our US Economics team, a higher assumed tariff rate, and higher level of uncertainty that is typically associated with a greater equity risk premium," Kostin wrote.

With slower economic growth expected and several companies already trimming their first quarter forecasts, Calvasina now sees earnings per share for the S&P 500 ending 2025 at $264, lower than her team's prior projection of $271. Calvsina also projects a lower possible bear case, now seeing a potential scenario where the S&P ends 2025 at 5,550, down from a prior forecast of 5,775. The bear case would represent another 2% fall for the benchmark index from current levels.

For now, the new base case of 6,200 bakes in the idea that the S&P 500 has likely seen — or closed near —its lows for the year. But Calvasina's conviction on that call "isn't incredibly high."

Recent survey data, from both consumers and businesses, have deteriorated over the past several months as concerns over the impact of President Donald Trump's tariff policies have weighed on the market mood. For now, there hasn't been much feed-through from those so-called soft data points to hard data like the monthly jobs report.

Source: Yahoo Finance

To stay updated on all economic events of today, please check out our Economic calendar

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Devin

Economic

Commodity

Oil’s recent descent has prompted Goldman Sachs analysts to lower their price target for the year, in part due to expectations of softer economic growth amid President Donald Trump's tariff policies.

The firm reduced its December 2025 forecast for Brent by $5 (BZ=F) to $71 per barrel.

Brent prices have fallen more than 3% year-to-date. Initiatives by the Trump administration to broker a peace deal between Russia and Ukraine, and efforts for a potential nuclear agreement with Iran have eased supply worries. Meanwhile, some economists have cut their growth forecasts amid a string of disappointing data and uncertainty over Trump's tariff policies.

“The selloff mostly reflects a shift in market focus from downside risk to Russia and Iran supply to softer US GDP growth,” Goldman Sach’s Daan Struyven wrote.

Struyven and his team expect oil demand will grow less than expected “incorporating slower US GDP growth on higher tariffs.”

Last week, Trump imposed 25% tariffs on aluminum and steel imports from all countries. The European Union responded with retaliatory levies against the US.

More US tariff plans are expected to be announce in early April.

Goldman Sachs analysts also anticipate higher OPEC+ supply next quarter.

Earlier this month futures fell after the Organization of Petroleum Exporting Countries and its allies (OPEC+) surprised Wall Street by announcing it would bump up production in April as a first step toward unwinding its production cuts.

On Monday, West Texas Intermediate crude futures (CL=F) jumped around 1% to trade above $67 per barrel while Brent also gained roughly 1% to trade above $70.

The gain came after the US indicated it would continue to launch an offensive against Iranian backed Houthi rebels until their shipping attacks in the Red Sea stopped.