Headlines

* BoJ sticks with stimulus, revises forward guidance, to review past easing

* Yen slumps after BoJ decision, dollar headed for monthly loss

* Amazon Q1 beats but raises fears of continued slowing cloud growth

* Asian stocks gain on earnings after Wall Street’s best day since January

FX: USD was mixed again with the DXY closing very marginally higher. US GDP missed on the headline, but internals were strong. There was also a surprise fall in jobless claims. The DXY will finish in the red for a second straight month. The 2-year yield picked up back above 4%. The 200-day SMA is at 4.11%. It has kept trading below and above this indicator since the banking stress. The 10-year yield ticked up to the psychological level of 3.50%.

EUR printed a doji closing at 1.1028. It will probably trade in a tight range ahead of the FOMC meeting next week if there are no fireworks from today’s inflation data. GBP settled at 1.2495. Cable is on track for seven consecutive weeks of gains. USD/JPY has surged higher after the BoJ left all policies unchanged. It tweaked its forward guidance which remained dovish. The major is nearing the April high at 135.13. A strong close could bring into view the 200-day SMA at 136.96. AUD is consolidating near its recent lows around 0.66. USD/CAD is also tracking sideways above 1.36 and the 50-day SMA at 1.3585.

Stocks: US equities rallied sharply boosted by strong earnings and mixed, but solid data. The benchmark S&P 500 finished up 1.96%. That was its biggest gain since early January. The blue-chip index is roughly flat on the month even as three midsized banks have failed. The tech-heavy Nasdaq 100 climbed 2.76% higher. Meta was the best performer, surging 14%. It posted stronger than expected Q1 results while touting its investments in AI. After hours, Amazon beat expectations across the board. But after rising 9%, the e-commerce giant has fallen into the red amid the company signalling lower AWS (cloud) growth. The Dow finished in the green, up 1.57%. This month has been about the outperformance of defensive stocks, but decent earnings and macro could see a shift in that.

Asian stocks were positive after liking Wall Street’s rally. The region was also digesting the unchanged BoJ and month-end data releases. The Hang Seng was firmer amid tech strength. The Nikkei 225 was lifted after better economic data and a dovish BoJ.

US equity futures are rangebound with the Amazon price reversal after the bell lingering. European equity futures are indicating a stronger open (+0.4%). The cash markets closed higher by 0.2%.

Gold ongoing battle with $2000 continues. The $1969 to $2015 range remains.

Day Ahead – Core PCE data to inform Fed decision

Today sees the release of US core PCE inflation data which is the Fed’s favoured price measure. This includes a wider section of both businesses and consumers and is expected to rise 0.3% m/m and 4.5% y/y. The monthly number would be in line with February while the annual figure would be one-tenth lower than the prior month. As rent-related components have a smaller weight in the core PCE measures than in the core CPI calculation, the core PCE may not benefit as much as the CPI counterpart from the recent weaknesses in rents.

Markets will monitor closely the core service excluding housing sub-index in the PCE report to gauge the underlying consumer inflation trend in the US. Essentially, the report is expected to confirm the ongoing process of gradual disinflation in March. But the core run rate is still set to remain more than double the Fed’s 2% target. Yesterday’s GDP data also saw a pick up in the price release which warns of a possible upside surprise. Markets are pricing in one more rate hike next week, then 65bps of cuts by the end of the year. We also get eurozone country data which could possibly sway the ECB into a bigger 50bp hike next week.

Chart of the Day – Gold waiting to break out

All eyes are on today’s data ahead of the FOMC next Wednesday. If Chair Powell doesn’t hint we are at or very close to the peak in rates, gold will slide. This is because the terminal rate would move higher supporting the dollar and hurting the non-yielding asset.

The precious metal has been trapped in a narrow range recently. The longer that goes on, the bigger the range expansion and move out of the range should be. The current sideways trading is between $1969 and $2015. The hugely psychological level of $2,000 is the first initial resistance above. A move beyond $2015 would target the April high at $2047 ahead of the top from March 2022 at $2070. Key support after the range low at $1969 is the February top at $1959.