Elite Research | 27.04.2025
Currencies
AUD
AUD Macro Outlook 1–4 Weeks
1. Softening External Demand and Trade Risks
- The negative spillover from U.S.-China trade tensions continues to weigh on Australia's external sector.
- China’s exports are cooling sharply, impacting Australia's key commodity export channels (iron ore, coal, LNG).
- Ongoing uncertainty regarding reciprocal tariffs on critical sectors like mining equipment and auto parts creates an overhang for export volumes.
- Early indicators such as lower shipping activity and China’s PMI deterioration suggest weaker Australian trade activity in Q2.
2. Domestic Growth Headwinds
- Domestic growth momentum is losing steam. Business confidence and household consumption indicators are deteriorating.
- Australian households remain under pressure from higher interest servicing costs relative to stagnant wage growth.
- Retail sales have surprised to the downside recently, and sentiment surveys point to continued caution among consumers.
- Although the labor market remains tight, forward-looking hiring intentions are easing, which could gradually weigh on income growth.
3. Commodity Price Weakness
- Australia's terms of trade are beginning to turn lower, with natural gas and iron ore prices declining notably.
- Easing global commodity demand (especially from China and the broader Asia Pacific) combined with relatively strong AUD-denominated production costs are undermining profitability.
- Recent discussions around potential changes to EU storage targets and the U.S.'s softer energy consumption trajectory add to the pressure on energy exports.
4. Evolving RBA Expectations
- The Reserve Bank of Australia remains on hold but retains a clear easing bias given the deteriorating inflation and growth outlook.
- Markets have started to price in the possibility of rate cuts later this year, though not imminently.
- The RBA’s own communications suggest they are prepared to act if there is evidence of a material deterioration in the domestic economy or labor market.
5. Global Risk Sentiment Stabilization (Offsetting Factor)
- Although Australian fundamentals are weakening, the stabilization of global equity markets and lower volatility after "Liberation Day" (cooling U.S. tariff threats) could reduce aggressive risk aversion.
- With European and emerging market central banks preparing to ease, capital flows into higher real-yield markets like Australia could offer temporary support.
- However, given Australia’s heavy reliance on Chinese demand, global risk sentiment improvements offer only a partial cushion.
Risks to the View
- Faster-than-expected China stimulus could lift commodity demand and Australia’s exports.
- A material resolution of U.S.-China trade tensions could restore confidence in global trade, boosting AUD fundamentals.
- A rapid weakening of USD across the board could also provide external support.
Conclusion and Outlook
Australia’s economic backdrop over the next 1–4 weeks points toward a mildly negative bias for the AUD.
We expect softening domestic and external demand, a weakening terms-of-trade position, and increasing downside risks to growth to continue acting as headwinds.
The Reserve Bank of Australia's evolving dovish stance adds to the pressure.
While a stabilization in global risk sentiment and central bank easing globally could limit the pace of decline, fundamentals are still skewed to the downside.
Upside risks primarily come from potential positive surprises in China or a faster U.S. dollar weakening, but these are secondary to the prevailing soft macroeconomic environment.
CAD
CAD Macro Outlook 1–4 Weeks
1. Fiscal Expansion Pressures and Bond Supply
- Canada's upcoming fiscal plans imply higher government deficits over the coming years.
- Whether led by Liberals or Conservatives, both major political parties propose spending measures that will materially lift issuance needs.
- RBC projects record-high net bond issuance in FY25/26, approaching pandemic-era levels.
- Higher sovereign supply dynamics are expected to gradually weaken CAD's fundamental underpinnings through heavier issuance pressures on Canadian rates.
2. Bank of Canada Policy Outlook
- The Bank of Canada remains cautious but is approaching an inflection point where rate cuts become plausible.
- RBC notes the bar for a BoC easing cycle remains high but achievable: three consecutive months of weak growth and benign inflation would likely trigger cuts.
- Fiscal expansion adds complexity — looser fiscal policy combined with lingering inflation risks could delay BoC easing relative to peers like the ECB or the Fed, supporting real yield differentials near-term.
3. External Growth and Tariff Risks
- Trade uncertainty stemming from global tariff escalations, particularly U.S.-China tensions, creates external downside risks for Canada's open economy.
- While Canada's direct trade exposure to China is limited compared to Australia, second-order effects via global growth channels still matter.
- Should global trade volumes slow meaningfully, Canada's export sector — already challenged by a strong USD — could face further headwinds.
4. Energy Prices and Terms of Trade
- Oil prices have retraced lower following weaker global demand signals and easing geopolitical fears.
- Lower energy prices reduce Canada's terms-of-trade advantage, historically a key support for the CAD.
- WTI softness, combined with evidence of U.S. strategic reserve releases and slower global manufacturing, further diminishes near-term positive drivers from commodities.
5. Relative U.S. Dollar Weakness (Offsetting Factor)
- Broad USD weakness remains a partial cushion for CAD, particularly if U.S. yields continue to move lower on softer inflation and dovish Fed signals.
- Cross-border demand dynamics show some modest CAD support compared to EM currencies, given Canada’s political and financial stability.
- However, relative to peers like AUD and NZD, CAD's resilience may be more muted given the domestic fiscal expansion and softer oil price trend.
Risks to the View
- Stronger-than-expected U.S. growth could sustain commodity demand and benefit Canada's exports.
- A sudden rebound in oil prices would lift terms-of-trade and provide fresh CAD support.
- If the BoC proves significantly slower to cut than global peers, CAD could outperform expectations on a relative real yield basis.
Conclusion and Outlook
Over the next 1–4 weeks, the CAD is expected to face mild downward pressure on macroeconomic grounds.
Record-high bond issuance, fading commodity support, and potential global trade softness suggest fundamental headwinds.
The Bank of Canada’s cautious stance delays immediate downside acceleration, but the bias is gradually shifting toward easing monetary policy over the medium term.
Relative U.S. dollar weakness provides some relief, preventing a disorderly CAD decline. However, unless there is a material upside surprise in oil or external growth conditions, the balance of risks remains modestly negative for CAD fundamentals.
CHF
CHF Macro Outlook 1–4 Weeks
1. Safe Haven Demand from U.S. Policy Uncertainty
- Elevated U.S. political risks — including uncertainty around tariffs, Fed independence, and broader governance — are reviving safe haven demand globally.
- Investors have increasingly turned to the Swiss franc as an alternative to USD amid concerns over U.S. credibility.
- Even with some stabilization in recent days, the underlying geopolitical noise and Fed-related tensions continue to support CHF buying interest.
2. SNB Policy Stance and Intervention Signals
- The Swiss National Bank is actively monitoring CHF strength, particularly against the euro, but is more tolerant of CHF appreciation versus the USD.
- UBS analysis indicates that the SNB is likely to lean against sharp EURCHF moves, but will allow USDCHF to largely mirror EURUSD developments.
- No imminent aggressive SNB action is expected unless volatility spikes materially, suggesting CHF strength could persist moderately.
3. Deteriorating U.S. Growth and Yield Dynamics
- With U.S. economic momentum softening and market pricing for Fed cuts moving forward, yield differentials are narrowing in favor of the CHF.
- Forward interest rate expectations show a faster easing cycle from the Fed compared to the SNB, compressing the CHF discount against USD.
- This reduces the opportunity cost of holding CHF and enhances its attractiveness during periods of risk aversion or global slowdown.
4. European Stability and Eurozone Growth Outlook
- Eurozone data remains fragile but is not deteriorating sharply enough to induce major safe haven flows into CHF against the euro.
- As such, CHF strength is more a function of USD weakness and broader risk hedging rather than any Eurozone-specific crisis dynamics.
- The ECB’s cautious tone, combined with easing inflation pressures in Europe, keeps EURCHF relatively rangebound for now.
5. Broader Risk Sentiment Factors
- Stabilization in equity markets after the U.S. administration’s softer rhetoric on tariffs has slowed the pace of aggressive CHF inflows.
- However, lingering concerns around global trade, potential emerging market strains, and geopolitical uncertainties continue to maintain an underlying bid for CHF.
- Unless risk appetite improves meaningfully, CHF is likely to stay resilient on a relative basis.
Risks to the View
- A genuine de-escalation of U.S. political risks (e.g., concrete tariff rollbacks, confirmation of Fed independence) could reduce CHF safe haven demand.
- A sharper-than-expected Eurozone slowdown could force the SNB to intervene more aggressively to cap EURCHF downside.
- A sudden, disorderly spike in global risk aversion could trigger excessive CHF strength and provoke a more active SNB response.
Conclusion and Outlook
Over the next 1–4 weeks, the CHF is expected to remain firm driven by:
- Persistent U.S. political uncertainty,
- Narrowing U.S.-Swiss yield spreads,
- Continued global demand for safe haven assets.
While outright runaway strength is unlikely given SNB vigilance against EURCHF volatility, USDCHF should stay biased lower unless global risk sentiment improves significantly.
The balance of macroeconomic risks remains skewed positively for CHF in the near term.
EUR
EUR Macro Outlook 1–4 Weeks
1. Softening Economic Momentum
- Recent Eurozone PMI data surprised to the downside, particularly in the services sector, with German and French services PMIs showing notable weakness.
- Manufacturing sentiment remains subdued but has stabilized; the concern is the new deterioration in consumer-facing sectors.
- Softer services activity points to growing risks of broader labor market weakness and lower wage pressures over the summer.
2. Easing Inflation Pressures
- Eurozone inflation has continued its downward trajectory, helped by lower energy costs and softer goods prices.
- Crucially, services inflation — the main driver of stickier price pressures — is showing early signs of moderating as services PMIs weaken.
- The potential for wages to cool further increases the likelihood that underlying inflation will approach the ECB’s target quicker than initially anticipated.
3. Accelerating ECB Rate Cut Expectations
- Market pricing for ECB rate cuts has firmed, with participants now expecting a series of cuts to begin as early as June.
- ECB officials, including traditionally hawkish members, have acknowledged downside risks to growth and the need for vigilance on financial conditions.
- Softening hard data — if confirmed over the coming weeks — could accelerate the ECB’s easing path beyond current expectations.
4. Fiscal Policy Remains Loosely Supportive
- Fiscal consolidation across major Eurozone economies is proceeding gradually, not aggressively.
- This provides a mild offset to private sector weakness, although not enough to fully counteract slowing consumer and business spending.
- Political risks (e.g., elections in major member states) remain a background concern but are not currently disruptive to broader fiscal or financial stability.
5. External Factors and USD Weakness
- Broader U.S. dollar weakness provides some support to EUR by default, especially as global investors seek diversification.
- However, the benefits to EUR are capped because relative growth dynamics between the U.S. and Europe are also deteriorating, not just U.S.-specific.
- As a result, while EUR may hold its ground or edge slightly higher on USD softness, it lacks a strong independent bullish driver.
Risks to the View
- A sharper than expected deterioration in European services and manufacturing could trigger deeper recession fears, pressuring EUR.
- Faster ECB rate cuts relative to the Fed could reopen yield differentials in favor of USD, capping EUR upside.
- External shocks (e.g., escalation in geopolitical tensions) could trigger risk-off flows that initially favor USD and CHF over EUR.
Conclusion and Outlook
Over the next 1–4 weeks, the EUR faces a mildly negative to neutral macro bias.
The combination of:
- Slowing economic momentum,
- Easing inflation pressures,
- Firming ECB rate cut expectations,
points toward fundamental headwinds.
While USD weakness offers some cushion, the absence of strong internal growth drivers caps any material EUR upside.
The balance of risks suggests EUR will struggle to rally meaningfully unless external conditions — such as a sharp drop in U.S. yields — provide stronger tailwinds.
GBP
GBP Macro Outlook 1–4 Weeks
1. Deteriorating Services Sector Outlook
- The U.K. services PMI for April fell to a 27-month low, signaling a sharp deterioration in business and consumer sentiment.
- Services inflation — previously a sticky component of U.K. CPI — is likely to ease further if the weakening in activity persists.
- Household confidence has softened notably, reflecting rising concerns over income security and wealth effects from market volatility.
2. Inflation Dynamics Turning More Favorable
- Broader U.K. inflation pressures are declining, particularly in goods prices and increasingly in services.
- Central Bank officials have flagged softer domestic inflation momentum, noting that tariffs imposed by the U.S. are seen as disinflationary for the U.K.
- The cooling of services inflation, if sustained, would clear a major hurdle for the Bank of England (BoE) to begin its rate cutting cycle.
3. Bank of England Rate Cut Expectations Firming
- BoE policymakers have started to shift tone, acknowledging that persistent inflation fears are easing.
- Market pricing now reflects a growing expectation of a first BoE cut during the summer months, possibly even earlier if inflation and growth trends deteriorate more quickly.
- The BoE’s hesitancy relative to the ECB and Fed could evaporate if incoming hard data, particularly labor market and services inflation data, confirm a slowing trend.
4. Resilient Fiscal and Political Backdrop
- U.K. fiscal policy remains stable ahead of expected elections, with no major fiscal expansion or austerity expected in the short term.
- Political risk premium is relatively contained; upcoming general elections are anticipated but not seen as an imminent source of market instability.
- This neutral fiscal backdrop prevents additional volatility but does little to provide economic stimulus.
5. External Factors and Relative USD Weakness
- A softer U.S. dollar offers some background support for GBP.
- However, relative growth dynamics and monetary policy shifts are now more important than pure USD movements.
- Given the U.K.’s parallel slowdown with Europe, GBP gains from USD weakness are likely to be limited and sporadic.
Risks to the View
- A faster-than-expected deceleration in U.K. inflation could prompt earlier or more aggressive BoE easing, accelerating GBP weakness.
- If U.S. data surprises to the upside and delays Fed cuts, GBP could underperform sharply versus USD.
- Political risks could re-emerge if the U.K. election landscape becomes more volatile or uncertain closer to summer.
Conclusion and Outlook
Over the next 1–4 weeks, the GBP faces a mild downside bias on fundamental grounds.
The weakening services sector outlook, rapidly softening inflation dynamics, and firming BoE rate cut expectations create headwinds.
While a weaker USD environment provides a partial buffer, without a strong domestic growth story or resilient inflationary pressures, GBP is likely to struggle to sustain any rallies.
The balance of risks favors a gradual weakening bias for GBP unless there is a sharp reversal in services data or inflation trends.
JPY
JPY Macro Outlook 1–4 Weeks
1. Safe Haven Demand Driven by Global Uncertainty
- Elevated U.S. political risks, trade war uncertainties, and volatile global sentiment continue to support underlying demand for the Japanese yen.
- Although equity markets have stabilized somewhat, the broader risk backdrop remains fragile, maintaining a steady safe-haven bid for JPY.
- Headlines around U.S. policy unpredictability and central bank independence concerns enhance the attractiveness of JPY in defensive portfolios.
2. Tokyo Inflation Surprise and BoJ Policy Implications
- Tokyo CPI data showed stronger-than-expected inflation prints, with both headline and core inflation breaching 3% YoY.
- This reinforces the view that domestic inflation pressures, while still modest compared to other major economies, are sustainably above the BoJ’s 2% target.
- Despite this, the Bank of Japan is expected to remain highly cautious in its policy normalization path, focusing on gradual adjustments rather than aggressive rate hikes.
3. BoJ’s Cautious Approach Despite Inflation
- The BoJ is unlikely to aggressively tighten policy even with inflation overshooting targets, especially given fragile domestic demand and external risks.
- Officials continue to emphasize the need for sustained wage growth and stable domestic demand before considering further rate hikes.
- Therefore, yield differentials between Japan and the U.S. remain an important driver, but narrowing somewhat as Fed rate cut expectations advance.
4. Currency Policy and Market Intervention Risks
- With USDJPY hovering around elevated levels, discussions around potential government intervention to stabilize the yen have resurfaced.
- Japanese officials have stated they will not seek specific exchange rate targets in U.S.-Japan trade talks, reducing the immediate risk of a coordinated intervention.
- Nonetheless, sharp and disorderly moves could still trigger verbal intervention or mild market operations to slow depreciation if necessary.
5. External Factors: U.S. Yield Trajectory and Global Growth
- As U.S. yields continue to drift lower with the Fed nearing cuts, the U.S.-Japan real yield gap narrows, easing one of the structural pressures against JPY.
- At the same time, concerns over slowing global trade volumes and emerging market vulnerabilities enhance JPY’s role as a funding and safe haven currency.
Risks to the View
- A sharp rebound in global risk appetite (e.g., clear tariff de-escalation, strong global growth prints) could reduce safe haven flows into JPY.
- A surprise move by the BoJ to tighten policy more aggressively could strengthen JPY faster than fundamentals currently justify.
- Disorderly FX moves could invite government or BoJ interventions, temporarily weakening JPY.
Conclusion and Outlook
Over the next 1–4 weeks, the JPY is expected to remain well-supported on macroeconomic grounds.
Global uncertainty, U.S. policy risks, and softer U.S. yields favor continued defensive flows into the yen.
The BoJ’s ultra-cautious stance limits explosive JPY appreciation but does not negate the underlying safe-haven demand backdrop.
Unless global risk sentiment improves dramatically, the balance of risks is skewed in favor of continued JPY resilience.
NZD
NZD Macro Outlook 1–4 Weeks
1. Weak External Demand Environment
- Global trade softness, driven by U.S.-China tensions and slowing Chinese economic momentum, weighs heavily on New Zealand’s export sector.
- Dairy and agricultural exports — key pillars for New Zealand’s economy — face reduced demand amid slowing Asian and global consumption trends.
- Early indications suggest a moderation in external demand through Q2, increasing downside risks for NZD from the trade channel.
2. Domestic Growth Losing Momentum
- New Zealand’s domestic economy continues to show signs of fatigue, with business confidence indicators deteriorating and consumer spending softening.
- Higher interest rates are weighing on mortgage servicing costs and broader household consumption.
- The economy is navigating a period of weak growth, raising concerns about the sustainability of current employment and investment levels.
3. RBNZ Policy Outlook Tilting Dovish
- The Reserve Bank of New Zealand remains relatively hawkish compared to other G10 central banks, but the tone has begun to shift.
- With domestic demand slowing and inflation pressures easing, the RBNZ could shift toward a more neutral to dovish stance sooner than previously anticipated.
- Markets have started to price in rate cuts beginning later in 2025, but soft incoming data could bring forward expectations for an earlier adjustment.
4. Commodity Prices Remain a Headwind
- Softness in global commodity prices, particularly dairy, meat, and energy, continues to drag on New Zealand’s terms of trade.
- Broader weakness in Asia, including the Chinese slowdown, exacerbates this pressure, as alternative demand sources are not yet strong enough to offset the losses.
5. External Risk Appetite and USD Weakness
- Global risk sentiment stabilization provides some support to higher-beta currencies like NZD.
- However, the net effect remains mixed: while broader USD weakness offers a partial buffer, New Zealand’s deteriorating fundamentals limit meaningful upside.
- NZD remains vulnerable if risk appetite were to deteriorate again or if U.S. yields fall much faster than global counterparts.
Risks to the View
- A rapid rebound in Chinese growth could lift commodity demand and support NZD exports.
- Stronger-than-expected global risk sentiment could boost carry trade interest in NZD.
- A surprise hawkish hold or communication from the RBNZ could provide temporary strength to the NZD.
Conclusion and Outlook
Over the next 1–4 weeks, the NZD faces a mild downside bias driven by:
- Weakening external demand,
- Softening domestic growth,
- A shifting RBNZ stance toward eventual easing.
While softer USD trends and temporary risk-on rallies could cushion some of the downside, New Zealand’s weakening fundamentals suggest limited upside and a gradual softening path for the NZD.
USD
USD Macro Outlook 1–4 Weeks
1. Political and Policy Uncertainty Weighing on Sentiment
- U.S. political risks have increased materially: ongoing tariff threats, questions around Federal Reserve independence, and broader governance uncertainty are undermining USD attractiveness.
- The market remains particularly sensitive to any developments related to Fed Chair Powell's position or further escalation in trade rhetoric.
- This uncertainty has reduced the traditional safe-haven status of the USD in favor of alternatives like CHF, gold, and JPY.
2. Erosion of Interest Rate Advantage
- With the U.S. economy showing signs of cooling, particularly in labor market and retail sectors, expectations for Fed rate cuts have advanced.
- The policy divergence that previously favored the USD is narrowing, especially as other central banks like the ECB and BoE also prepare to ease.
- The breakdown of the USD’s relationship with relative interest rate differentials, noted earlier this month, shows that policy uncertainty is now dominating traditional rate-driven flows.
3. Declining Cross-Border Demand for U.S. Assets
- iFlow data shows that foreign investors have continued to reduce exposure to U.S. assets during recent market volatility.
- Even after the recent depreciation, USD holdings remain historically high and vulnerable to further declines if outflows persist.
- Weakening foreign appetite for Treasuries and U.S. equities reduces structural support for the USD in capital flows.
4. Global Risk Sentiment and Safe Haven Rotation
- Although equity markets have stabilized somewhat, the underlying tone of risk aversion remains.
- Importantly, however, traditional risk-off flows are no longer predominantly favoring USD: JPY, CHF, and gold have absorbed a larger share of safe-haven inflows.
- As a result, the USD’s ability to rally on broader risk aversion is diminished compared to prior cycles.
5. Trade War Dynamics and Growth Outlook
- While there are some tentative signs of a de-escalation in trade tensions (e.g., talk of lower tariffs on China), the economic damage is already being priced into global and U.S. growth expectations.
- Slower global growth impacts the U.S. as well, particularly through the manufacturing and export channels.
- The University of Michigan sentiment index and soft Beige Book commentary reinforce concerns over slowing U.S. consumption and investment trends.
Risks to the View
- A meaningful de-escalation in U.S.-China trade tensions could quickly restore confidence in U.S. assets and drive a rebound in USD demand.
- Stronger-than-expected U.S. economic data could delay Fed rate cuts and reassert USD’s yield advantage.
- A sharp deterioration in global risk sentiment without corresponding political uncertainty in the U.S. could still trigger some USD strength relative to higher-beta currencies.
Conclusion and Outlook
Over the next 1–4 weeks, the USD faces a moderate downside bias on macroeconomic grounds.
Increased political and policy uncertainty, narrowing yield differentials, declining foreign demand for U.S. assets, and diminished safe-haven flows suggest that the USD is likely to remain under pressure.
While episodic rallies are possible on isolated data beats or global risk-off episodes, the underlying trend is tilted mildly negative for the USD in the current environment.
Emerging & Exotic Markets
CNH Macro Outlook 1–4 Weeks
Key Drivers
- Weak export demand as U.S.-China trade tensions persist.
- Structural capital outflows from Chinese equities and bonds accelerating.
- PBoC policy bias toward controlled depreciation, maintaining fixings around 7.20–7.30.
- Domestic easing bias with further fiscal and monetary support expected.
- Partial USD weakness offering only limited relief.
Risks to the View
- Stronger-than-expected Chinese stimulus.
- Rapid U.S.-China trade deal.
- Capital controls tightened aggressively.
Conclusion and Outlook
CNH is expected to remain under mild downward pressure. Weak external demand, outflows, and gradual depreciation management dominate unless major stimulus surprises emerge.
MXN Macro Outlook 1–4 Weeks
Key Drivers
- Softening domestic growth and downside inflation surprises open door for Banxico cuts.
- Tariff risks impacting export expectations and business confidence.
- Still favorable real yields supporting carry attractiveness for now.
- Global risk sentiment moderately stabilizing, cushioning extreme weakness.
Risks to the View
- Sharp rebound in U.S. growth lifting Mexican exports.
- Further global risk-on moves sustaining MXN carry demand.
- Delayed Banxico easing relative to market expectations.
Conclusion and Outlook
MXN maintains a neutral to mildly negative bias. Fundamentals are weakening, but high real yields and stabilizing risk appetite prevent disorderly moves for now.
BRL Macro Outlook 1–4 Weeks
Key Drivers
- Fiscal concerns easing temporarily but still structural overhang medium term.
- Domestic inflation declining, enabling BCB to stay cautious.
- Soft commodity prices hurting export terms of trade.
- Global sentiment stabilization offering some support short-term.
Risks to the View
- Political surprises ahead of fiscal measures.
- Stronger China demand boosting commodity exports.
- Delayed BCB easing or tightening if inflation rebounds.
Conclusion and Outlook
BRL has a neutral to slightly positive short-term bias, helped by temporary fiscal relief and benign domestic inflation, but vulnerabilities remain in the background.
ZAR Macro Outlook 1–4 Weeks
Key Drivers
- Downside inflation surprises reducing immediate SARB tightening pressure.
- Political noise around fiscal reforms and upcoming elections remains a headwind.
- Global commodity softness weighing on trade surplus.
- Still fragile risk sentiment limiting upside.
Risks to the View
- Higher commodity prices lifting current account.
- Risk-on flows reviving EM interest.
- Political breakthroughs improving sentiment.
Conclusion and Outlook
ZAR faces a mildly negative bias, with fiscal and political risks dominating, though soft inflation may cushion volatility near-term.
TRY Macro Outlook 1–4 Weeks
Key Drivers
- Severe lira depreciation pressure persists due to weak macro fundamentals.
- Continued FX intervention by state banks slowing the pace of weakening.
- Domestic dollarization trends remain entrenched.
- Earthquake-related outflows adding pressure to the external balance.
Risks to the View
- Surprise CBRT rate hikes.
- IMF support discussions (unlikely near-term).
- Emergency measures to stabilize capital outflows.
Conclusion and Outlook
TRY maintains a highly negative bias. Deteriorating macro conditions, weak confidence, and political intervention risks dominate the near-term picture.
PLN Macro Outlook 1–4 Weeks
Key Drivers
- Softening inflation and growth opening space for NBP rate cuts.
- Political stability broadly intact post-election.
- External demand risks tied to Germany and Eurozone outlook.
- Still favorable carry vs peers if global risk stabilizes.
Risks to the View
- Rapid ECB cuts leading to yield compression.
- Domestic inflation re-accelerating unexpectedly.
- Faster German slowdown hurting exports.
Conclusion and Outlook
PLN carries a neutral to mildly negative bias. Solid domestic footing is offset by a soft external backdrop and the approaching start of an easing cycle.
HUF Macro Outlook 1–4 Weeks
Key Drivers
- NBH holding a cautious easing stance, but pressure mounting.
- Inflation progress encouraging, but not fully secure.
- Political risks remain background noise but not front-and-center.
- Limited global demand for CE3 risk amid broader global slowdown.
Risks to the View
- Inflation falling faster than expected.
- Regional fiscal policy surprises.
- ECB cuts restoring EUR demand and dragging HUF.
Conclusion and Outlook
HUF holds a mildly negative bias. Domestic stabilization is not enough to offset CE3 regional headwinds and weaker European activity trends.
IDR Macro Outlook 1–4 Weeks
Key Drivers
- BI remains cautious, focusing on FX stability amid global volatility.
- Export slowdown due to softer Chinese demand and commodity prices.
- Soft domestic inflation offering room for gradual rate cuts later this year.
- Higher sensitivity to global risk appetite compared to other EM Asia currencies.
Risks to the View
- Sharp rebound in commodity prices.
- Successful bilateral agreements boosting trade.
- Greater EM inflows on global rate cuts.
Conclusion and Outlook
IDR faces a mild downside bias, with softer exports and global volatility dominating, although domestic fundamentals remain relatively stable compared to peers.
Commodities
Oil
Oil Macro Outlook 1–4 Weeks
1. Weakening Global Demand Outlook
- Global macroeconomic momentum continues to slow, particularly across key demand centers like China, Europe, and parts of Asia.
- The latest purchasing manager indices (PMIs) show a synchronized deceleration in manufacturing and services, suggesting weaker industrial and transport demand for oil.
- Trade tensions and tariff risks are creating additional headwinds for global trade flows, further dampening energy demand expectations.
2. Strategic Reserves and Supply Management
- The U.S. has signaled plans to release additional barrels from the Strategic Petroleum Reserve (SPR) to stabilize domestic energy prices.
- This policy overhang acts as a supply buffer, limiting upside price momentum even during short-term disruptions.
- Meanwhile, OPEC+ compliance remains relatively high, but spare capacity and willingness to adjust production quickly continue to restrain bullish impulses.
3. Geopolitical Risks Easing Marginally
- While geopolitical tensions persist (Middle East, Russia sanctions), markets have priced out extreme disruption scenarios for now.
- The absence of major new supply shocks or conflict escalation has allowed oil prices to drift lower, reflecting more fundamental rather than fear-driven trading.
4. Financial Flows and Positioning
- Investor positioning has turned more defensive, with reduced long speculative exposure in oil futures.
- Broader weakness across commodities, including metals and agricultural goods, reflects general concern about slowing global demand rather than isolated sector-specific dynamics.
- Lower financial demand for commodities as an inflation hedge further weighs on prices.
5. Seasonal Factors
- The typical spring maintenance season in refineries curbs crude oil demand temporarily.
- While summer driving season demand could pick up in the U.S., the near-term dynamic remains soft until clearer signs of improved consumption emerge.
Risks to the View
- Unexpected supply disruptions (e.g., escalation of Middle East tensions, unplanned outages) could trigger sharp short-term spikes.
- A major stimulus announcement from China could revive demand expectations and lift oil prices.
- Rapid decline in U.S. inventories beyond expectations could re-tighten market balances.
Conclusion and Outlook
Over the next 1–4 weeks, Oil is expected to maintain a mild downward bias.
Weaker global demand signals, U.S. SPR releases, easing geopolitical risk premiums, and cautious investor positioning point toward a continuation of a softer price trend.
Unless a major supply shock or a large Chinese stimulus package materializes, the balance of risks favors continued moderate pressure on oil prices during this period.
Gas
Natural Gas Macro Outlook 1–4 Weeks
1. Weaker Demand Expectations
- European and Asian industrial demand for natural gas remains weak, with consumption trends notably below seasonal averages.
- Softer manufacturing activity and concerns over global trade volumes continue to weigh on forward demand expectations.
- Warmer-than-normal spring temperatures in Europe and North America reduce residential and commercial heating needs, adding to near-term oversupply pressures.
2. High Storage Levels and Relaxed Policy Targets
- EU natural gas storage levels remain robust despite winter drawdowns, currently well above historical averages for this time of year.
- European policymakers are considering loosening mandatory storage targets for the coming winter to avoid artificially spiking prices, reducing urgency in summer storage demand.
- This relaxation of storage requirements is a direct negative for natural gas pricing into mid-year.
3. Structural Supply Pressures
- New liquefied natural gas (LNG) supply capacity from the U.S. and Qatar is scheduled to come online between late 2025 and early 2026, but forward hedging activity is already impacting near-term sentiment.
- Current LNG export flows remain strong, particularly from the U.S., keeping global supply well distributed across major markets.
4. Geopolitical Factors Fading
- While risks surrounding Russian pipeline gas disruptions linger in background scenarios, markets are now largely adapted to reduced Russian gas flows.
- Speculation about a possible ceasefire in Ukraine and improved relations between the U.S. and certain Eurasian countries have slightly eased geopolitical risk premiums in gas markets.
5. U.S. Domestic Dynamics (Henry Hub)
- Rising U.S. production, especially from the Permian and Appalachian basins, has kept Henry Hub prices under downward pressure.
- Although rig counts have begun to moderate, inventory builds remain strong, leaving little fear of near-term supply shortages.
Risks to the View
- A sudden heatwave in Europe or North America could trigger stronger-than-expected power sector demand.
- Unexpected disruptions in LNG supply chains (e.g., maintenance issues, geopolitical tensions) could tighten the global market temporarily.
- A sharp escalation in geopolitical tensions affecting key supply routes could reintroduce risk premiums.
Conclusion and Outlook
Over the next 1–4 weeks, Natural Gas prices are expected to remain under downward pressure.
High storage levels, weak industrial demand, policy-driven reductions in storage targets, and abundant global supply suggest a bearish near-term setup.
Unless significant unexpected weather or geopolitical shocks occur, the balance of risks remains firmly tilted toward further moderate downside in natural gas pricing.
Gold
Gold Macro Outlook 1–4 Weeks
1. Safe Haven Demand Amid Policy Uncertainty
- Elevated U.S. political risks — including uncertainty around tariffs, Fed independence, and fiscal trajectory — are supporting strong demand for traditional safe havens like gold.
- Recent record highs in gold prices reflect increased market hedging against macro and geopolitical instability, particularly from institutional buyers.
2. Declining U.S. Real Yields
- Expectations for Federal Reserve rate cuts have increased as U.S. economic data softens.
- As nominal yields decline and inflation expectations remain relatively anchored, U.S. real yields are falling, providing strong fundamental support for non-yielding assets like gold.
- Narrowing yield differentials globally further enhance the relative attractiveness of gold against bonds and cash alternatives.
3. Broad-Based USD Weakness
- A weakening U.S. dollar environment, driven by declining rate differentials and softer growth expectations, enhances gold's appeal to international investors.
- Historical correlations between USD and gold suggest that persistent dollar softness tends to be a major tailwind for precious metals.
4. Central Bank Purchases Remain Strong
- Global central banks, particularly in emerging markets, continue to accumulate gold reserves as part of a broader diversification away from USD holdings.
- Central bank buying provides a steady underlying demand base, independent of speculative investor flows.
5. Financial Market Volatility and Risk Hedging
- Ongoing financial market volatility, even if not extreme, maintains a steady bid for gold as a portfolio diversifier and hedge against equity and credit market shocks.
- Investors are increasingly allocating toward gold as a strategic risk management tool amid an environment of elevated policy and geopolitical uncertainty.
Risks to the View
- A sudden improvement in U.S. political stability or an unexpected delay in Fed rate cuts could cap gold upside.
- A sharp, disorderly surge in USD strength driven by external shocks could temporarily weigh on gold prices.
- Rapid global economic acceleration reducing safe-haven demand.
Conclusion and Outlook
Over the next 1–4 weeks, Gold is expected to remain well-supported, with a continued positive bias.
Falling real yields, USD weakness, strong central bank demand, and elevated global uncertainty form a powerful bullish fundamental backdrop.
Unless a sharp reversal in U.S. political or monetary dynamics occurs, the balance of risks remains skewed toward further gains or at least stabilization at elevated levels for gold.
Silver
Silver Macro Outlook 1–4 Weeks
1. Benefiting from Gold’s Strength
- Silver tends to track gold closely, particularly during periods of heightened safe haven demand.
- As gold prices remain elevated due to falling real yields and U.S. political uncertainty, silver is enjoying positive spillover effects.
- The gold-silver ratio has stabilized recently, suggesting silver is participating proportionately in the broader precious metals rally.
2. Industrial Demand Headwinds
- Unlike gold, silver has a strong industrial demand component, particularly in electronics, photovoltaics (solar panels), and green technologies.
- Slowing global manufacturing activity and weaker forward-looking industrial surveys (especially in Europe and China) create mild headwinds for silver’s industrial demand.
- The market is balancing silver’s safe haven appeal against concerns over softer cyclical industrial usage.
3. Broad-Based USD Weakness
- As with gold, a weakening U.S. dollar improves silver’s appeal to non-dollar investors.
- With global expectations shifting toward synchronized central bank easing, USD weakness is likely to remain a supportive factor over the coming weeks.
4. Financial Investment Flows
- ETF flows into silver products have picked up alongside gold as investors seek diversified hedges against market volatility.
- Silver’s higher volatility profile compared to gold makes it an attractive leveraged proxy when precious metals are in demand.
5. Supply Dynamics Remain Balanced
- No major new supply shocks are evident in the silver mining sector.
- Production remains steady, and inventories are relatively healthy, meaning price moves are likely to be more demand-driven rather than supply-constrained in the near term.
Risks to the View
- A sharp global slowdown impacting industrial metals could disproportionately hurt silver versus gold.
- A sudden rebound in global manufacturing activity could boost industrial silver demand more than expected.
- Significant USD strengthening could cap or reverse recent gains.
Conclusion and Outlook
Over the next 1–4 weeks, Silver is expected to maintain a positive bias, tracking gold higher.
Safe haven flows, falling real yields, and weaker USD fundamentals all support silver.
However, lingering softness in global industrial demand could slightly moderate the pace of gains compared to gold.
The balance of risks favors further upside for silver, but with higher volatility than gold in response to shifts in macro and industrial sentiment.
Platinum
Platinum Macro Outlook 1–4 Weeks
1. Industrial Demand Softness
- Platinum’s major use cases — including catalytic converters in automobiles and certain industrial applications — remain under pressure.
- Global auto production growth is moderating, particularly in Europe and China, limiting upside for platinum's industrial demand in the very near term.
- Broader global manufacturing softness, as reflected in recent PMI data, suggests continued subdued platinum consumption over the next month.
2. Precious Metal Tailwinds
- Despite industrial softness, platinum benefits indirectly from strength in the broader precious metals complex (gold, silver).
- Falling U.S. real yields and a weakening USD enhance the relative attractiveness of hard assets like platinum, even though it is more cyclical than gold.
3. Substitution Trends in Catalytic Converters
- Automakers have increasingly substituted platinum back into catalytic converters as palladium prices remain elevated relative to platinum.
- This ongoing slow substitution trend provides a structural demand tailwind but moves at a gradual pace and is unlikely to significantly alter short-term dynamics.
4. Supply Conditions in South Africa
- Platinum supply risks remain a key focus, with South African production vulnerable to labor unrest, electricity shortages (load shedding), and logistical bottlenecks.
- No major supply shocks are priced in currently, but any unexpected disruption could tighten the market rapidly given the concentration of platinum mining in South Africa.
5. Investment and ETF Flows
- Investment demand for platinum has been relatively muted compared to gold and silver.
- ETF inflows into platinum have remained stable, reflecting cautious investor sentiment focused more heavily on traditional safe havens.
- Platinum's dual nature (precious + industrial) makes it more sensitive to economic sentiment than gold.
Risks to the View
- A sharper slowdown in global auto production could weigh more heavily on platinum than currently anticipated.
- Escalating supply disruptions in South Africa could tighten markets and drive prices higher quickly.
- A major rebound in global manufacturing could reignite industrial demand faster than expected.
Conclusion and Outlook
Over the next 1–4 weeks, Platinum is expected to trade with a neutral to mildly positive bias.
Precious metals strength (gold-led) provides a floor, but soft global industrial demand caps immediate upside.
Supply-side risks in South Africa remain a wildcard that could turn platinum bullish quickly if they materialize.
The balance of risks suggests stabilization with mild upside bias, unless macro or supply shocks sharply alter the picture.
Agriculture
Agriculture Commodities Macro Outlook 1–4 Weeks
1. Weak Global Demand Signals
- Slower global economic growth, particularly in China and Europe, is weighing on agricultural demand forecasts.
- Lower feed demand (for livestock) and softer biofuel production expectations (corn-based ethanol, soy-based biodiesel) are capping upside pressure across major crop markets.
- Consumer demand in key emerging markets is moderating alongside income pressures, leading to slightly weaker consumption expectations.
2. Favorable Weather Conditions
- Recent weather patterns across key growing regions, including the U.S. Midwest, South America, and parts of Europe, have been relatively favorable for planting and early crop development.
- Barring localized disruptions, overall crop yield expectations are trending toward normal-to-above-normal conditions for wheat, corn, and soybeans.
- Seasonal planting progress in the U.S. is running close to average, reducing concerns of planting delays or major early-season stresses.
3. Large Existing Inventories
- Global stockpiles of wheat, corn, and soybeans remain relatively high, especially following strong harvests in Brazil and the U.S. last year.
- High inventories act as a supply buffer, preventing major price spikes unless a significant weather shock emerges.
- In wheat, strong Russian production continues to pressure global export prices downward.
4. Geopolitical Risk Moderation
- Supply chains for grains through the Black Sea corridor (Ukraine and Russia) have normalized compared to the chaos of 2022–2023.
- Barring new major disruptions, shipping flows from these critical exporters are keeping the global grain supply relatively stable.
5. Speculative Positioning and Financial Flows
- Speculative investor positioning in agriculture futures is relatively light, reflecting cautious sentiment and limited conviction about near-term supply shocks.
- With broader commodities markets under pressure from softer global growth expectations, financial flows into agricultural commodities have remained subdued.
Risks to the View
- An unexpected weather event (e.g., droughts, floods, heatwaves) during key U.S. planting and growing months could sharply tighten supply forecasts.
- Renewed geopolitical tensions in Eastern Europe disrupting grain exports could spike wheat and corn prices.
- A sudden surge in Chinese demand for feedstocks could tighten soybean and corn markets quickly.
Conclusion and Outlook
Over the next 1–4 weeks, Agricultural commodities are expected to maintain a mild downward to neutral bias.
Favorable growing conditions, high inventories, weak speculative interest, and subdued global demand suggest limited upside for most major crops.
However, the sector remains highly sensitive to weather volatility during the critical Northern Hemisphere planting season, meaning the main upside risks are event-driven rather than trend-driven.
Equities
S&P500
S&P 500 Macro Outlook 1–4 Weeks
1. Softening U.S. Growth Momentum
- Recent U.S. data (PMIs, durable goods, retail sales) point to a gradual cooling in economic momentum.
- Slower growth reduces corporate earnings visibility and could pressure equity valuations, particularly in cyclical sectors.
- However, recession risks are still not imminent over a 1–4 week horizon, supporting selective resilience across sectors like tech and healthcare.
2. Fed Policy Pivot Expectations
- Markets are increasingly pricing in Fed rate cuts starting in the second half of 2025, with rate-sensitive sectors like tech and real estate benefiting.
- Falling U.S. Treasury yields provide support for equity valuations via lower discount rates, particularly for long-duration assets.
- However, if growth slows faster than expected, fears of an earnings recession could outweigh the positive effect of lower yields.
3. Elevated Political and Trade Policy Risks
- U.S. political risks around tariffs, trade disputes, and Fed independence are raising uncertainty premiums.
- Equity volatility has picked up slightly, although still contained relative to historical stress periods.
- Companies with higher international exposure could underperform if trade tensions escalate, while domestically focused sectors might outperform.
4. Corporate Earnings Season Dynamics
- The current earnings season has delivered mixed results: some major technology names have beat expectations, while industrials and consumer discretionary sectors have underwhelmed.
- Earnings revisions have tilted slightly negative, suggesting rising caution among analysts and investors heading into the summer.
- Markets will be sensitive to forward guidance rather than backward-looking results.
5. Financial Conditions and Liquidity
- Financial conditions remain relatively easy despite Fed tightening over the past year.
- Liquidity injections via the Fed’s slower balance sheet runoff ("slower QT") and ongoing global monetary easing expectations continue to provide a supportive backdrop for equities.
Risks to the View
- A sharper-than-expected economic slowdown leading to an earnings recession could trigger significant equity repricing.
- Renewed inflationary pressures delaying Fed rate cuts could reverse recent yield-driven support for equities.
- Geopolitical or domestic political shocks raising volatility and risk-off behavior.
Conclusion and Outlook
Over the next 1–4 weeks, the S&P 500 is expected to trade with a neutral to mildly positive bias, primarily supported by:
- Expectations of Fed easing,
- Easier financial conditions,
- Still-resilient corporate liquidity and consumer balance sheets.
However, upside is likely capped by rising earnings uncertainty, softening economic momentum, and elevated policy risk premiums.
The balance of risks favors cautious upside, with sector rotation likely continuing toward defensive and high-quality large-cap names.
NASDAQ
NASDAQ-100 Macro Outlook 1–4 Weeks
1. Fed Rate Cut Expectations and Lower Yields
- NASDAQ-listed companies, particularly in technology and growth sectors, are highly sensitive to real interest rates.
- With markets increasingly pricing Fed rate cuts into late 2025, falling U.S. Treasury yields have become a strong tailwind for NASDAQ valuations.
- Lower discount rates disproportionately benefit long-duration growth stocks, keeping the tech-heavy index relatively supported despite softening macro data.
2. Solid Big Tech Earnings Resilience
- Despite broader economic slowing, large-cap tech companies have largely delivered resilient earnings, driven by strong cash flow generation and structural demand trends (AI, cloud computing, digital infrastructure).
- Earnings beats from major NASDAQ components have reinforced investor confidence in the relative defensiveness of Big Tech earnings compared to cyclicals.
3. Global Demand for High-Quality U.S. Equities
- As global growth slows and political uncertainty rises, institutional investors continue favoring high-liquidity, high-quality assets — of which NASDAQ mega-cap stocks are prime examples.
- This "quality premium" supports ongoing inflows into NASDAQ even during periods of broader market risk aversion.
4. Valuation Stretch and Rotation Risks
- The NASDAQ trades at elevated valuation multiples relative to historical norms.
- Any disappointment in earnings momentum, unexpected inflation resurgence, or deterioration in liquidity conditions could trigger a swift de-rating.
- Rotation risk is also present: investors could increasingly shift toward more defensive sectors (e.g., healthcare, staples) if economic data deteriorates sharply.
5. Financial Conditions and Market Liquidity
- Overall financial conditions remain accommodative, with slower Fed quantitative tightening and improving liquidity across global central banks.
- Liquidity support helps sustain investor risk appetite for high-growth equities, cushioning against sharp drawdowns.
Risks to the View
- A sudden hawkish shift from the Fed if inflation data reaccelerates could sharply hurt high-duration tech valuations.
- Material earnings disappointments from key mega-cap companies could drag down the broader NASDAQ index.
- An unexpected sharp slowdown in U.S. or global growth could prompt aggressive risk-off positioning, impacting tech more heavily than defensives.
Conclusion and Outlook
Over the next 1–4 weeks, the NASDAQ-100 is expected to maintain a mildly positive bias, supported by:
- Lower yields,
- Strong Big Tech earnings resilience,
- Global demand for quality growth assets.
However, elevated valuations and growing macroeconomic uncertainty imply that upside is becoming increasingly fragile.
The balance of risks favors cautious upside, with selective rotation into more defensive large-cap technology likely if growth concerns intensify.
Dow Jones
Dow Jones Macro Outlook 1–4 Weeks
1. Softening U.S. Economic Growth
- U.S. growth indicators (PMIs, retail sales, industrial production) have moderated, particularly in sectors like manufacturing and construction, which directly impact Dow components.
- The Dow’s heavy exposure to cyclicals (industrials, financials, energy) makes it more sensitive to fluctuations in underlying U.S. economic momentum compared to the tech-heavy NASDAQ.
2. Fed Policy Expectations
- Easing expectations for Federal Reserve policy provide some support, particularly to Dow sectors like financials and industrials that benefit from lower funding costs.
- However, the Dow is less directly sensitive to falling rates than NASDAQ, given its lower duration profile and focus on traditional sectors.
3. Rotation Toward Defensive Sectors
- As growth risks mount, there is a natural investor rotation toward defensive, dividend-paying stocks, many of which are prominent Dow components (e.g., healthcare, consumer staples).
- This sector rotation supports the Dow in relative terms during periods of macroeconomic uncertainty, even if absolute upside is limited.
4. Stronger USD and Global Trade Risks
- The Dow's multinational companies (such as Boeing, Caterpillar, and McDonald's) are sensitive to U.S. dollar fluctuations and global trade volumes.
- A stronger USD earlier in the year and ongoing trade tensions create headwinds for Dow earnings through lower foreign revenues and margins, although recent USD softness partially offsets this.
5. Earnings Season and Profitability Trends
- Early results from Dow companies have been mixed: healthcare and consumer sectors have shown resilience, while industrials and discretionary sectors have struggled.
- Forward guidance is cautious, with companies emphasizing margin pressure and softer global demand trends.
Risks to the View
- A sharper-than-expected slowdown in U.S. or global growth could disproportionately hurt Dow cyclicals and exporters.
- Renewed trade tensions or a sudden USD surge could erode multinational profitability.
- Delayed Fed cuts or sticky inflation could keep financial conditions tighter for longer, hurting Dow earnings.
Conclusion and Outlook
Over the next 1–4 weeks, the Dow Jones is expected to maintain a neutral to mildly positive bias, with resilience from:
- Defensive sector rotation,
- Easier monetary policy expectations,
- Global liquidity support.
However, rising economic slowdown risks and sensitivity to trade and manufacturing trends limit major upside potential.
The balance of risks suggests rangebound performance with a slight tilt toward defensives among Dow components.
DAX40
DAX 40 Macro Outlook 1–4 Weeks
1. Softening German and Eurozone Growth
- German and broader Eurozone PMIs have disappointed recently, with services and manufacturing showing signs of renewed weakness.
- The DAX, heavily exposed to global industrial and export sectors (automotive, machinery, chemicals), is particularly sensitive to slowing growth momentum in Europe and abroad.
- Domestic demand in Germany remains fragile, weighed down by soft consumer confidence and cautious corporate investment.
2. Accelerating ECB Rate Cut Expectations
- Markets are increasingly pricing in ECB rate cuts starting mid-2025, following softer inflation prints and weaker growth data.
- Lower yields across Europe provide support for equity valuations generally, but for the DAX, easing financial conditions may not fully offset deteriorating earnings expectations tied to slower external and domestic demand.
3. External Headwinds: Trade and China Exposure
- The DAX is highly exposed to global trade flows, and any drag on Chinese demand or escalation in U.S.-EU trade tensions impacts major German exporters.
- Weakening Chinese growth continues to pressure key DAX sectors like autos (Volkswagen, BMW), industrials (Siemens), and materials.
4. Euro Weakness Providing Partial Cushion
- Recent softness in the euro provides a modest benefit to German exporters by making their goods more competitive internationally.
- However, with global demand weak, the positive impact of a lower EUR may be limited compared to periods of strong global trade expansion.
5. Investor Positioning and Sector Rotation
- Investors are beginning to favor defensive over cyclical sectors across Europe, a trend that could weigh on DAX heavyweights concentrated in cyclical industries.
- Financial conditions remain relatively easy, but risk appetite toward European equities is cautious given persistent macro headwinds.
Risks to the View
- Stronger-than-expected Chinese stimulus could boost German exports and industrial demand.
- A sudden rebound in global trade and manufacturing could reflate DAX earnings expectations.
- ECB moving too slowly or a faster-than-expected Fed easing cycle could compress EURUSD further, benefiting DAX exporters.
Conclusion and Outlook
Over the next 1–4 weeks, the DAX 40 is expected to trade with a mildly negative to neutral bias.
Softening domestic and external growth, cautious earnings sentiment, and continued dependence on weak global trade conditions weigh on the outlook.
While lower ECB rate expectations and a weaker euro cushion downside risks, they are unlikely to spark significant upside unless global growth rebounds meaningfully.
The balance of risks favors cautious positioning, with a preference for more defensive DAX constituents.
FTSE100
FTSE 100 Macro Outlook 1–4 Weeks
1. Defensive Sector Bias Supporting Stability
- The FTSE 100 has a heavy weighting toward defensive sectors such as energy, consumer staples, healthcare, and utilities.
- In an environment of slowing global growth and rising economic uncertainty, this defensive tilt offers a degree of resilience relative to more cyclical indices like the DAX or NASDAQ.
2. Global Earnings Exposure and USD Linkage
- A significant portion of FTSE 100 revenues come from overseas (approximately 70%), particularly from emerging markets and the U.S.
- A softer GBP (relative to USD) provides a natural earnings boost for FTSE multinationals, helping to cushion against weaker domestic economic trends.
3. Commodity Price Sensitivity
- With substantial weight in mining and energy (e.g., Shell, BP, Glencore, Rio Tinto), the FTSE is highly sensitive to commodity prices.
- Recent softness in oil and base metals moderates earnings momentum slightly, but high dividend yields from these sectors continue to attract investors looking for income.
4. Bank of England Policy Path
- Markets are pricing in BoE rate cuts beginning in the second half of 2025, as U.K. growth momentum weakens and services inflation cools.
- Lower domestic rates reduce discount rates for equities but could also signal more significant underlying economic fragility.
- Financial sector performance (banks) within the FTSE could be mixed: benefiting from easing, but hurt if growth concerns dominate.
5. Political and Fiscal Stability
- U.K. political risks remain contained ahead of expected general elections.
- No major fiscal expansion or austerity is expected near-term, maintaining a relatively neutral fiscal backdrop for markets.
Risks to the View
- A sharp rebound in commodity prices could lift energy and mining earnings, supporting the FTSE more strongly.
- Stronger-than-expected U.K. domestic data could delay BoE easing, supporting banks but capping broader defensive rotations.
- A surprise surge in GBP could reduce the earnings benefit from overseas revenues.
Conclusion and Outlook
Over the next 1–4 weeks, the FTSE 100 is expected to maintain a neutral to mildly positive bias.
Defensive sector composition, overseas revenue exposure, and ongoing BoE easing expectations provide relative support compared to more growth-sensitive indices.
However, softer commodity prices and fragile global macro conditions cap significant upside potential.
The balance of risks suggests the FTSE will likely remain rangebound with a slight tilt toward stability and defensiveness.
JPN225
Nikkei 225 Macro Outlook 1–4 Weeks
1. Yen Strength Risk Emerging
- Recent strengthening pressure on the Japanese yen (JPY) creates headwinds for Nikkei 225 companies, many of which are major exporters (e.g., Toyota, Sony, Honda).
- As USDJPY drifts lower on falling U.S. yields and softening U.S. growth expectations, currency-adjusted earnings outlooks for large-cap Japanese exporters are under pressure.
- A stronger JPY reduces the overseas earnings value when repatriated, impacting profit margins.
2. BoJ Cautious Normalization Stance
- Despite rising inflationary pressures (Tokyo CPI breaching 3%), the Bank of Japan is expected to remain highly cautious in its policy tightening approach.
- Ultra-loose domestic monetary policy supports local liquidity and equity valuations, mitigating some of the negative effects from JPY strength.
- The supportive BoJ backdrop remains a key buffer for the Nikkei.
3. Global Risk Sentiment and Equity Flows
- Stabilizing global risk sentiment and expectations for synchronized central bank easing worldwide continue to support global equity allocations.
- Japan remains a major beneficiary of foreign portfolio inflows, particularly as investors diversify away from expensive U.S. equities.
- However, the pace of inflows may moderate if JPY strengthens too quickly or global growth concerns escalate.
4. Corporate Governance and Structural Reforms
- Ongoing corporate governance reforms in Japan (improved shareholder returns, cross-shareholding unwinds) continue to attract long-term foreign investors.
- Structural improvements in corporate profitability and transparency are long-term supportive for the Nikkei’s relative valuation multiples.
5. External Growth and Trade Exposure
- Japan’s heavy exposure to global trade flows, particularly with China, Europe, and the U.S., means the Nikkei remains vulnerable to a synchronized global slowdown.
- Export sectors like autos, electronics, and machinery would be first affected by weaker global industrial and consumer demand trends.
Risks to the View
- A sharper, disorderly surge in JPY could create abrupt downside pressure on Nikkei earnings.
- A sudden global risk-off shock (e.g., major geopolitical event) could reverse recent foreign inflows into Japanese equities.
- Faster BoJ tightening (beyond current expectations) could reduce liquidity support for the domestic equity market.
Conclusion and Outlook
Over the next 1–4 weeks, the Nikkei 225 is expected to maintain a neutral to mildly positive bias, supported by:
- Cautious BoJ policy,
- Continued global portfolio diversification flows,
- Structural improvements in corporate governance.
However, rising yen strength risks and softening global demand conditions moderate upside potential.
The balance of risks suggests stability or modest gains, but growing sensitivity to FX moves warrants caution.
Global News
Global News and Events Outlook 1–4 Weeks
1. U.S. Political and Policy Uncertainty
- Elevated U.S. political risks continue to dominate headlines:
- Ongoing tariff threats against China and other trading partners,
- Tensions around Federal Reserve independence,
- Fiscal concerns ahead of the 2025 budget cycle.
- These dynamics are creating uncertainty across global risk assets and currencies, reducing investor confidence and elevating volatility premiums.
2. Trade War and Tariff Escalations
- While rhetoric has softened slightly ("Liberation Day"), there is still a risk of renewed tariff actions if negotiations fail to progress meaningfully.
- The impact on global trade volumes, manufacturing, and commodity flows is a key macro headwind.
- Emerging markets and export-driven economies (e.g., Germany, Japan, China) are particularly sensitive to these developments.
3. Central Bank Policy Shifts
- A broad global pivot toward easing is underway:
- Fed rate cut expectations have firmed,
- ECB is signaling cuts by mid-year,
- BoE is preparing for easing as inflation cools.
- Rate cut cycles are likely to unfold asynchronously, but overall looser financial conditions are supportive of risk sentiment — unless growth deteriorates too sharply.
4. Inflation Trajectory and Data Surprises
- Inflation surprises (especially services inflation) remain a key short-term risk.
- Disinflation trends are largely intact in the U.S., Eurozone, and U.K., but sticky components (e.g., shelter, wages) could delay full normalization.
- Key inflation prints (U.S. Core PCE, Eurozone CPI, U.K. services inflation) in the next few weeks could materially impact yield curves and risk appetite.
5. China’s Growth and Stimulus Trajectory
- Chinese export data continues to weaken, weighing on Asia-Pacific sentiment.
- Hopes for additional Chinese stimulus packages (fiscal and credit easing) remain alive, but the size and effectiveness are uncertain.
- Global commodities (especially industrial metals and oil) and EM FX remain sensitive to any policy signals from Beijing.
6. Geopolitical Flashpoints
- Middle East tensions have receded modestly but remain an ongoing tail risk.
- Russia-Ukraine ceasefire discussions are being monitored; any progress could significantly impact European energy markets and safe-haven flows.
- Broader geopolitical risks (South China Sea, U.S. election dynamics) remain latent but could spike suddenly.
Risks to the View
- A faster-than-expected global growth slowdown could overwhelm central bank easing efforts and trigger broader risk aversion.
- A sharp reacceleration in U.S. or global inflation could delay or derail central banks’ easing plans, hurting equities and boosting yields.
- New geopolitical shocks could abruptly shift market dynamics toward safe havens.
Conclusion and Outlook
Over the next 1–4 weeks, global news flow is expected to maintain a high level of uncertainty, with key drivers including:
- U.S. policy unpredictability,
- Trade war dynamics,
- Central bank easing signals,
- Inflation data surprises,
- Chinese stimulus prospects.
The balance of risks leans toward elevated headline-driven volatility, with markets attempting to balance optimism around easing against caution over growth and political risks.
Expect continued tactical positioning rather than aggressive directional risk-taking until greater clarity emerges on these fronts.
Disclaimer: Trade ideas provided on this page are for informational and educational purposes only and should not be considered financial advice or trading signals. These trade ideas are based on our global macro analysis and are intended to provide insight into market trends and potential opportunities.EliteTraders does not guarantee any specific outcome or profit. Trading involves significant risk, and you should always conduct your own analysis and risk assessment before making any trading decisions. By using this research, you acknowledge that EliteTraders is not responsible for any financial losses incurred based on the information provided.
Trade Ideas
Trade Ideas Found in Reports
- Sell CNH/IDR (12M) — from Crédit Agricole.
Fundamentals remain weak for CNY while IDR is supported by attractive carry and BI interventions.
- Buy USD/HKD (12M) — from Crédit Agricole.
Following post-NFP volatility and approaching Fed cuts, USD/HKD is expected to rise modestly.
- Sell USD/IDR (1M) — from Crédit Agricole.
USD/IDR appears more than 1.5 standard deviations overvalued based on their fair value model.
- Buy USD/KRW (1M) — from Crédit Agricole.
USD/KRW is undervalued relative to model fair value, and macro drivers (energy prices, U.S.-Korea spreads) support upside.
- Long USD/CNH vs Short USD/CNY (6M) — from Crédit Agricole.
U.S.-China tensions expected to widen the CNY-CNH basis; offshore CNH weaker.
- Short GBP/USD — from BNY Mellon.
Weak U.K. services PMI, softening wage inflation, and BoE dovishness build a negative fundamental bias on GBP.
- Sell AUD/NZD on rallies — from Crédit Agricole.
AUD faces heavier downside pressures from China-linked weakness and softer commodity prices relative to NZD.
- Buy NZD/USD — from Crédit Agricole.
New Zealand economy emerging from recession while global USD weakness adds support.
Custom Trade Ideas Based on Full Macro Analysis
- Short AUD/USD:
Weak Australian macro backdrop (domestic demand, China exposure, commodities), RBA easing bias.
- Short EUR/USD:
Eurozone slowing, ECB cutting, services inflation rolling over — bearish for EUR.
- Short GBP/JPY:
BoE pivoting dovish, U.K. growth slowing, JPY supported by risk aversion and narrowing U.S.-Japan spreads.
- Long CHF/JPY:
CHF benefiting from risk-off flows; SNB less aggressive against strength; BoJ still slow to normalize.
- Short USD/CAD:
USD softening; CAD partially protected by fiscal stability, oil stabilization, and delayed BoC cuts.
- Long Gold (XAU/USD):
Real yields falling, Fed easing, USD weakening, strong central bank buying — bullish for gold.
- Short Natural Gas (Henry Hub):
High U.S. storage levels, weak industrial demand, no supply-side shock risks — downside persists.
- Short Oil (WTI):
Slowing global demand (China, Europe), SPR releases buffering supply — bearish near-term.
- Short S&P 500 vs Long NASDAQ-100:
Slowing growth favors tech defensives over cyclicals; Fed easing narrative supports NASDAQ.