“Things got overheated, and they needed to cool down, and the market needed to find a new foundation, and now we’re waiting for the next new narrative,” he said.

Bitcoin is down 13.58% over the past month. Source: CoinMarketCap

“This is pervading all asset classes and may lead to a spike in global inflation and a contraction in international growth,” Przelozny said.

Source: Charles Edwards

Source: Cointelegraph

US growth in gross domestic product (GDP) had outpaced international peers in recent years, and since the Covid pandemic in particular – helped by the Biden administration pumping billions of dollars into the economy through the Inflation Reduction Act. The former president did not get much credit, though, as voters felt the squeeze from the period of high inflation triggered by the pandemic and Russia’s war in Ukraine.

This week, the Atlanta Federal Reserve’s GDPNow, which measures GDP economic growth in real time, suggested the US economy would contract at an annual rate of 2% in the first quarter. However, this widely followed indicator can be volatile, and it is heavily influenced by the US trade deficit, which soared in January.

The US goods trade gap surged to $153.3bn in January. This was driven by record import volumes, an increase of $36.2bn to $329.5bn in total, as US businesses rushed to bring shipments into the country to avoid potential tariffs.

A significant driver of the import rise was inbound shipments of “finished metal shapes”, which include bars of gold. The trend is also attributed to traders rushing to get ahead of potential US tariffs. A widening trade deficit would normally weigh on a country’s GDP, because imports are subtracted from the measurement. But because gold bought to sit in a vault is not consumed or used in production, it is excluded.

The Organisation for Economic Co-operation and Development (OECD) said on Monday that Trump’s trade wars risked stoking inflation. It increased its US inflation forecast for 2025 to 2.8%, up from a previous estimate of 2.1% made in December.

Wage growth has also strengthened, and has remained above inflation since early 2023, helping households to rebuild some of their purchasing power lost during the recent rise in living costs.

The Biden administration oversaw a strong stock market performance, helped by the economic recovery from the pandemic. However, Wall Street surged after Trump’s election victory in November, amid investor expectations for tax cuts that could increase company profits. Markets have been rattled in Trump’s first 100 days amid concerns over his erratic approach to the economy and the threat of tariffs hitting growth and stoking inflation.

Washington has long held a “strong dollar” policy in the view that it supports the purchasing power of US consumers, helping to keep inflation low. The dollar is also used as the currency of choice for world trade and underpins the financial system. The US Treasury secretary, Scott Bessent, has said this approach is not changing. But Trump has argued that a weaker dollar would benefit US manufacturing by making exports cheaper for overseas buyers.

Business surveys have shown a marked increase in input costs for US manufacturers, providing an early warning sign for growth and inflation. The price gauge on the Institute for Supply Management (ISM) manufacturing purchasing managers’ index (PMI) shows raw material costs rose sharply at the start of this year, in the first signs of supplier difficulties and discussions about who will pay for tariffs. The rise in input costs could dent US manufacturing output, and is likely to be passed on to consumers in the form of higher prices for finished goods.

US consumer spending unexpectedly dropped in January for the first time in almost two years, with a fall of 0.2%, the biggest decrease in nearly four years. Cold temperatures in some parts of the country, as well as wildfires in California, were likely to have hit spending. However, some analysts warn consumer sentiment has taken a knock amid mounting concern over the strength of the economy.

Source: Theguardian

The USD/JPY pair surged to 149.58 on Wednesday, marking its fourth consecutive day of gains as the Japanese yen extended its decline. The Bank of Japan’s (BoJ) latest policy decision failed to inspire confidence, leaving investors underwhelmed and further weakening the yen.

Key factors driving USD/JPY movement

As expected, the Bank of Japan maintained its benchmark interest rate at 0.5% while reiterating its forecast that the Japanese economy will grow above its potential level. However, the central bank also acknowledged emerging signs of economic fragility, adopting a cautious tone in its outlook. Policymakers emphasised the need to gather and analyse more data before making significant moves, particularly in light of global economic risks.

A key concern is the potential impact of US tariff hikes, which could weigh heavily on Japan’s export-driven economy. Investors are now closely monitoring comments from BoJ Governor Kazuo Ueda for further insights into the central bank’s strategy and future policy direction.

Recent data has painted a mixed picture of Japan’s economic health. The monthly Reuters Tankan survey revealed growing pessimism among Japanese manufacturers in March, citing concerns over US trade policies and China’s slowing economy. On a brighter note, Japan’s trade balance shifted to a surplus in February, driven by robust export growth. However, this improvement has done little to strengthen the yen amid broader market concerns.

Technical analysis of USD/JPY

On the H4 chart, USD/JPY is forming a bullish wave structure, targeting 150.20. Upon reaching this level, a corrective pullback to 149.20 is possible, likely establishing a consolidation range near the current highs. A breakout above this range could signal further upward momentum, with the next target at 151.80. This scenario is supported by the MACD indicator, with its signal line remaining above zero and trending upwards.

The H1 chart shows USD/JPY developing a growth wave toward 150.20, representing the midpoint of the third wave in the current structure. A consolidation range is expected to form around 149.62, with an upward breakout potentially opening the path to 151.80. The Stochastic oscillator corroborates this outlook, with its signal line above 50 pointing upward.

Conclusion

The Japanese yen’s decline reflects market disappointment with the Bank of Japan’s cautious stance and lack of decisive action. While Japan’s trade balance has shown improvement, concerns over global economic risks and domestic manufacturing sentiment continue to weigh on the currency. From a technical perspective, USD/JPY remains in a bullish trend, with key resistance levels at 150.20 and 151.80. Traders should monitor BoJ Governor Ueda’s statements and upcoming economic data for further clues on the yen’s trajectory.

Source: ACTIONFOREX

(Bloomberg) -- Euro-area inflation slowed more than initially reported in February, strengthening arguments for the European Central Bank to keep cutting interest rates.

Consumer prices rose an annual 2.3% — less than the 2.4% Eurostat first flagged. Wednesday’s revision follows an unexpected drop in Germany’s inflation rate.

With the outlook for economic expansion and inflation in Europe clouded by uncertainty, ECB officials debating whether to pause or lower borrowing costs again next month may be tempted to focus on the clear progress in reaching their 2% target.

There have been other encouraging signs: Wage growth has moderated, inflation expectations remain anchored and gains in services prices have begun to ease.

What Bloomberg Economics Says...

“The broad inflation outlook remains relatively benign. The ECB has already cut its deposit rate by 150 basis points since the cyclical peak and, at 2.5%, borrowing costs are in the vicinity of what we think is neutral. Absent a big surprise, we therefore expect the Governing Council to adopt a more cautious approach to further easing, with the next rate cut coming in June.”

—Jamie Rush, chief European economist. 

But there are also risks that inflation will rebound. Trade tensions with the US, and a jump in defense and infrastructure spending could yet drive prices higher more quickly.

The ECB already pushed back the timeline for reaching its target to early next year, with President Christine Lagarde arguing that policymakers must be “extremely vigilant” and agile in responding to data as they arrive.

Economists surveyed by Bloomberg still predict two more rate cuts — in April and June — before the deposit rate settles at 2%. Markets are torn on what will happen next month, though they’re leaning toward two moves in total before year-end.

Source: Yahoo Finance

Above: EUR/GBP has risen as the difference between UK and Germany bond yields (lower panel) shrinks.

Source: Poundsterlinglive

Source: Reuters