Overnight Headlines

* Yen falls to key 130 level, EUR to 1.05 and GBP to 1.25

*Bank of Japan maintains stimulus, vows to continue unlimited bond buying

*Global bonds set for worst ever month before burst of rate hikes

*Facebook parent Meta surges after daily active users beat estimates

USD’s relentless rally continues. DXY reached its highest level in five years, extending its move above 103. EUR remains subdued posting a new low this morning at 1.0480. GBP similarly made a new bottom at 1.2491 but has bounced back above 1.25. USD/JPY has surged above 130 after the BoJ maintained its ultra-dovish policy and tone. AUD and NZD are under pressure again due to dollar strength. Another consecutive weaker reference rate setting by the PBoC isn’t helping either.

US equities found a small bid amid another session of high intraday volatility. The Nasdaq did close lower after stooping to its lowest level this year. A rare day saw software and services outperform while media was the laggard. This came on the back of Microsoft better than expected earnings over those of Alphabet. Asian stocks are higher across the board as Meta surged more than 18% after hours. Futures are pointing to a positive open.

Day Ahead – Mixed bag of all sorts

Meta shares are up over 18% after it posted its earnings after the bell last night. Daily active users beat analyst estimates after the first ever decline in users on record in the last quarter. A beat on earnings but a miss on revenue is being greeted with signs of relief in the beaten-up tech sector. FB shares had been down 48% on the year heading into the results.

Investors await more big tech earnings later today from Apple, Amazon, and Twitter, along with results from Robinhood. Apple’s main concern is around demand given global inflationary pressures. Supply issues are important too, though this is more short term. Analysts will focus on Amazon Web Services and the expected rise in revenues.

We also get US GDP figures for the first quarter. Consensus sees a drop to 1.1% q/q annualised from 6.9% in Q4. But private consumption is set to show solid growth. US initial jobless claims continue to point to a very hot labour market. This morning sees the release of German inflation figures. The headline CPI number is expected to be flat at 7.4%.

Chart of the Day – USD/JPY bullish breakout

When we wake up and see USD/JPY at 130, we kind of know how the BoJ meeting went. Policymakers left rates and guidance unchanged in a dovish statement. The BOJ intend to continue with the current path of buying government bonds to cap rates around 0.25%. The bank continues to stand out massively among other major central banks.

The market had definitely priced in some chance of the BoJ loosening its grip on the yield curve. Prices had been consolidating its recent gains around 128.  But the ultra-dovish stance endures, and the major took a leap from 128.60 to 130. Meanwhile, the dollar is on course for its biggest weekly gain since January 2015. This means the 2002 correction high comes closer. Support is 125.86.