For the risk market, last week was tumultuous, primarily due to expectations of the first interest rate cut by major central banks. Eurozone PMI was much stronger than expected, raising the question of whether the European Central Bank's anticipated rate cut in June is essentially confirmed. The US first-quarter GDP fell below expectations, while Personal Consumption Expenditures (PCE) quarter-on-quarter inflation rose more than expected. As a result, the market once again postponed expectations for rate cuts, and the Fed's first rate cut is not fully reflected in prices until November.

The pricing of a "longer period of high rates" in the US and rising energy prices continued to weigh on the yen, which weakened to above 158 last week. The Bank of Japan had previously expressed a moderate stance. Brief fluctuations were likely due to Japanese authorities' intervention, but since the yen quickly reversed its gains, such intervention proved futile. The weakness of the yen is one reason why the market expects the Bank of Japan to raise rates again this year, most likely in July.

In the midst of financial market volatility, gold, as a traditional safe-haven asset, has been closely watched by investors for its price movements. Last week, the spot price of gold experienced significant fluctuations, closing at $2338 per ounce, with a weekly decline of 2.3%, the largest single-week decline since December last year. Silver prices faced significant selling pressure over the past week, plummeting by 5.1% to $27.22 at the close, briefly dropping to $26.66 during trading. However, the recent attractiveness of silver remains strong.

The oil market experienced a series of complex dynamics last week, with geopolitical tensions and the release of macroeconomic data being the main factors influencing oil prices. WTI spot crude oil rose 1.68% throughout the week, closing at $83.30 per barrel, while Brent crude oil spot rose 2.29% to $89.70 per barrel.

The US dollar index showed a softening trend followed by stability last week, especially after stronger-than-expected inflation data was released before the weekend. The US dollar hit a 34-year high against the yen on Friday, nearing 160.40, the high point in April 1990. The dollar index also briefly touched a high of 106.19. Currently, the dollar index is attempting to return above the resistance level of 105.75–106.00. If this attempt is successful, the dollar index will move towards the next resistance level, which is in the range of 107.11–107.34.

The US stock market rebounded before the weekend, with earnings from Alphabet and Microsoft reigniting hopes of a significant rebound in large-cap tech stocks among investors. The S&P and Nasdaq indices almost reached their best performance since November last year. The S&P 500 rose by 2.7%, ending three consecutive weeks of decline, while the Nasdaq index rose by 4.2%, marking its first increase in five weeks. The Dow Jones Industrial Average rose and closed at 38,239.66 points.

Recently, the Bank of Japan's bond-buying program and changes in US bond yields have once again become the focus of market attention. The Bank of Japan decided to maintain its bond-buying program unchanged at its latest policy meeting, while in the US, bond yields hit a new high since November last year. These decisions and data changes have triggered chain reactions globally. The yield on the 10-year US Treasury rose by 5 basis points to 4.704%, while the yield on the 2-year Treasury rose by 6 basis points to 4.996%. The Treasury sold a total of $183 billion in short- to medium-term bonds this week, with demand for seven-year bonds remaining decent.

The price of Bitcoin fell from $65,279 late last Friday to a low of $62,400 early Saturday, following recent announcements from the Depository Trust & Clearing Corporation (DTCC) that it will not hold Bitcoin. Bitcoin has been in a state of continuous volatility, with prices around $63,000. Although the entire cryptocurrency market has experienced a significant decline, Bitcoin has shown some short-term resistance to growth. While Bitcoin is still at its previous all-time high, it is worth noting that the closing price slightly below $70,000 has consistently triggered selling pressure, resulting in price suppression over the past two months.

Geopolitical risks remain on the agenda. While the situation in the Middle East seems to have temporarily calmed down, the war in Ukraine has once again attracted attention. The US finally approved a new $61 billion aid package for Ukraine, which will almost immediately alleviate Ukraine's frontline difficulties. Also last week, Belarusian President Lukashenko claimed to have thwarted drone attacks from Lithuania, raising concerns about action being taken by the Kremlin-Minsk axis.

Outlook for the Week:

The upcoming week will certainly be eventful for the US dollar, as aside from the Federal Open Market Committee meeting and the April employment report, a series of other data points on the US agenda will leave traders with little time to rest. The main focus in the first half of the week will be on the Fed's policy decision on Wednesday. Not long ago, the May meeting was still seen as the meeting where policymakers would determine the path to rate cuts in June. However, after a series of inflation and employment data that exceeded expectations, the timing of rate cuts has been further postponed, with no rate cuts expected before September. Investors will closely watch every word from Chairman Powell at the press conference, looking for any clues about when the Fed will begin to ease policy. Those still holding out hope for a summer rate cut may be disappointed. If the Fed doesn't send any new signals, investors will turn their attention to Friday's non-farm payroll report. The US economy not only didn't slow down in March but added an astonishing 303,000 jobs. Analysts expect the April number to be close to 210,000, with the unemployment rate expected to remain at 3.8%. The key factor here is whether wage growth will remain moderate and continue to grow slightly above 4.0%. Any acceleration in average hourly earnings could trigger panic about weakening bets on rate cuts, rather than an unexpected rise in overall employment data. Investor focus this week will also be on April ISM Manufacturing and Non-Manufacturing PMI, to be released on Wednesday and Friday, respectively. After the disappointment of the Standard & Poor's Global Services PMI falling below expectations, similarly weak ISM Non-Manufacturing PMI may offset the potential impact of strong employment data and Fed hawkishness. In other news releases, Tuesday will focus on quarterly employment costs, as well as the Chicago Purchasing Managers' Index and Consumer Confidence Index. On Wednesday, there will be more labor market indicators, including JOLTS Job Openings and ADP Employment Change. With the June rate cut approaching, the euro will focus on the latest GDP and CPI data, unless the European Central Bank awaits surprisingly strong wage data at the end of May, June rate cuts seem to be a foregone conclusion. The uncertainty lies in the interest rate path thereafter. In recent weeks, market pricing for the end of the year has fallen below 75 basis points (about 3 rate cuts). Preliminary data for Eurozone GDP in the first quarter and CPI in April, to be released on Tuesday, may further influence expectations for the remainder of 2024, although significant changes in June are unlikely unless there is a significant deviation from forecasts. Following stagnant growth in the fourth quarter, the Eurozone economy is expected to grow by 0.2% quarter-on-quarter in the first three months of this year. Improved economic prospects will alleviate the urgency of a significant rate cut by the European Central Bank, so policymakers will have to see further declines in inflation to maintain a dovish stance. Overall inflation is expected to remain unchanged at 2.4% in March. The euro is currently trying to hold above the $1.07 level; whether it succeeds will depend on the direction of incoming data. Another region experiencing a rebound in economic activity is China. The official comprehensive PMI for March climbed to its highest level since May 2023, although much of it was driven by the services sector, while the recovery in manufacturing remained lukewarm. The latest PMI data from both government and Caixin/Markit will be released on Tuesday. If the economy strengthens further in April, it will be a good sign for risk-sensitive assets such as stocks and commodities, as well as currencies linked to commodities such as the Australian dollar and New Zealand dollar. In New Zealand, the local dollar will also focus on domestic employment data scheduled for release on Wednesday. First-quarter employment growth, unemployment rate, and wage data may provide clues to how long the Reserve Bank of New Zealand might cut rates, following the bank's recent strongest indication yet that the next move will be a rate cut. If the labor market appears to be slowing down, the New Zealand dollar may come under pressure. Elsewhere, Canada will release its monthly GDP estimate on Tuesday, and Japan will release preliminary industrial production data for March on the same day. Switzerland will release Consumer Price Index (CPI) data for April on Thursday, and the Norwegian central bank will announce its rate decision on Friday.

Overview of Important Events and Economic Data for the Week (Beijing Time):

Important Events:

Wednesday (May 1): Reserve Bank of New Zealand releases Financial Stability Report; Press conference on Financial Stability Report by Reserve Bank of New Zealand

Thursday (May 2): Federal Reserve announces interest rate decision; Press conference on monetary policy by Federal Reserve Chairman Powell; Bank of Japan releases minutes of March monetary policy meeting

Economic Data Overview:

Monday (April 29): Eurozone Economic Sentiment Index for April; Eurozone Consumer Confidence Index final value for April; Germany CPI YoY preliminary (%)

Tuesday (April 30): Japan unemployment rate for March (%); Eurozone Harmonized CPI YoY - unadjusted preliminary (%) for April; Eurozone Q1 GDP QoQ preliminary (%); Canada February seasonally adjusted GDP MoM/YoY (%); US April Conference Board Consumer Confidence Index

Wednesday (May 1): New Zealand Q1 unemployment rate (%); Australia April AIG Manufacturing Performance Index; US April ADP Employment Change (thousands); US April ISM Manufacturing PMI; US March JOLTS Job Openings (thousands); US EIA Crude Oil Inventories change for the week ending April 26 (thousands of barrels)

Thursday (May 2): Australia March Goods and Services Trade Balance (AUD billion); Eurozone April SPGI Manufacturing PMI final value; US March Trade Balance (USD billion); US Initial Jobless Claims for the week ending April 27 (thousands); US March Durable Goods Orders MoM revised (%); US March Factory Orders MoM (%)

Friday (May 3): UK April SPGI Services PMI final value; Eurozone March unemployment rate (%); US April Non-Farm Payrolls seasonally adjusted (thousands); US April Unemployment Rate (%); US April Average Hourly Earnings YoY (%); US April ISM Non-Manufacturing PMI

XAGUSD

Last week, silver prices plummeted by over 5.20% to around $27.20. Following a sharp decline from the beginning of the week, where silver dropped 5.20% to $26.66, it remained within a narrow range of $27.70 to $26.70 for the entire week. This was due to traders reassessing the Federal Reserve's interest rate cut expectations, as the core Personal Consumption Expenditures Price Index (PCE) for March in the United States remained higher than expected. The annual basic inflation data rose from an anticipated 2.6% to 2.7%, although it slowed compared to the previous value of 2.8%. On a monthly basis, the growth in price pressure was as expected, with the previous value at 0.3%. The persistent rise in price pressure has bolstered expectations for the Federal Reserve to maintain a hawkish monetary policy framework. This situation favors the US dollar and bond yields but puts pressure on non-yield assets such as silver. The Federal Reserve believes that interest rate cuts are appropriate only when there is evidence that the inflation rate will return to the ideal level of 2%. The yield on 10-year US Treasury bonds fell by 1.15% to 4.65%. The speed of silver's rise exceeded the expectations of many bulls. In the absence of an interest rate cut by the Federal Reserve, silver prices soared to a three-year high. Importantly, from a long-term perspective, the silver market is far from overbought. From the daily chart, although silver experienced a retracement last week, the uptrend remains intact, and the decline is seen as an opportunity for buyers to maintain silver buying pressure. Over the past four trading days, silver has remained in a narrow range near $27.70 to $26.70. Silver bears have still failed to push prices below $26.95 (the midline of the downward channel) and $26.92 (38.2% Fibonacci retracement level from $22.27 to $29.79). However, the 14-day Relative Strength Index (RSI) has moved from the bullish zone of 60.00-80.00 to the range of 40.00-60.00, indicating a temporary weakening of the bullish momentum. Therefore, silver prices have temporarily continued to adjust downward, with the next target being $26.43 (34-day moving average), moving towards the psychological barrier of $26.00. For bullish recovery, once traders break through the level of $27.73 (9-day moving average), this will pave the way for further upside. The first resistance level is $27.90 (upper boundary of the downward channel), followed by $28.68 (high point from last week). Conclusion for the Week: The more credibility the Federal Reserve loses on inflation issues, the more it will attract investors to buy precious metals to protect their wealth. Despite recent setbacks in the gold and silver markets, they are still in an impressive upward trend this year. Range for the Week: $26.00—$28.68. Summary for the Week: It is advisable to buy silver on dips this week.

USDCHN

With China tightening leverage and offshore liquidity, the successful downward pressure on the depreciation of the Renminbi (RMB) is evident. The People's Bank of China (PBOC) announced at the beginning of last week that it would maintain the loan prime rates (LPR) across various tenors unchanged. The one-year and five-year LPRs were held steady at 3.45% and 3.95%, respectively. The five-year LPR was last lowered by 25 basis points in February, from 4.20% to 3.95%. As the Federal Reserve toggles between "cutting rates, keeping rates unchanged, and raising rates," the strengthening US dollar has prompted Asian countries to take counter measures, initiating a currency defense battle. Last week, the USD/CNH tested breaking above 7.28, approaching the critical psychological level of 7.30, which triggered market reactions. However, with China's tightening of leverage and offshore liquidity, the RMB depreciation was successfully mitigated, demonstrating the PBOC's control over the exchange rate market. The PBOC's attempt to stabilize the midpoint exchange rate last week may also coincide with the timing of the release of first-quarter data. Stronger-than-expected economic data for the first quarter in China has alleviated market pessimism, which is beneficial for preventing excessive sentiment adjustments. The RMB strengthened last week to around 7.2535, recovering some of the losses from the beginning of the week. Offshore RMB liquidity continues to improve, with interbank borrowing rates continuously falling, indirectly reducing the cost of shorting the RMB and increasing the selling pressure on offshore RMB.

From the daily chart, looking at the offshore RMB against the US dollar, over a longer period of time, the RMB has depreciated from its low point of 7.0870 at the beginning of the year to a low of 7.2830 on April 16, with a cumulative depreciation of 1960 basis points (approximately 2.8%). It has since gradually rebounded to 7.2350. Currently, the currency pair is in a sustained sideways trend. Throughout April, the USD/CNH has been oscillating within the "sideways channel" formed between 7.2830 and 7.2350. The 14-day Relative Strength Index (RSI) is at the 50 midpoint, indicating a lack of clear direction as bulls and bears are at a stalemate, lacking a clear sense of direction. Recently, there has been a crisis of depreciation in Asian currency exchange rates against the US dollar, but the RMB has notably stabilized around the 7.25 level. If Asian currency crises turn around in the future, the RMB exchange rate still has room for recovery by the end of the year. Short-term targets are estimated at the 200-day moving average of 7.2330, and 7.2350 (lower boundary of the sideways channel), as well as 7.20 (psychological barrier). As for the upside, attention can be paid to 7.2740 (last week's high) with the next level towards 7.2830 (upper boundary of the sideways channel).

Conclusion for the Week: Observing the correlation between the USD/JPY and USD/CNH trends over the past year. In the short term, the market continues to focus on changes in the RMB midpoint rate, offshore RMB liquidity, and the trend of the US dollar. The currency range to watch temporarily is 7.2200-7.2820.

Range for the Week: 7.2350—7.2830

Strategy for the Week: Suggest shorting the US dollar on rallies this week.

Disclaimer: The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.