Financial markets entered Tuesday on a subdued note, with the Asian session notably quiet. While US stocks managed a rebound overnight on speculation that the April 2 “Liberation Day” tariff rollout might be narrower in scope than initially feared, sentiment failed to fully carry into Asia. Equity indices across the region were mixed, reflecting ongoing investor caution. In the currency markets, major pairs remained trapped within yesterday’s ranges, signaling a broader wait-and-see mode among traders.
Yen is seeing some mild recovery after Monday’s selloff, partially supported by signals from BoJ’s latest January meeting minutes. The central bank reaffirmed its readiness to tighten policy further. Still, external developments—particularly the uncertainty over global trade and US tariffs—are making the policy path less clear, forcing BoJ to move with greater caution in coming months.
Looking ahead to the European session, Germany’s Ifo Business Climate data will be watched. Still, most of the optimism linked to Germany’s fiscal expansion appears to be already priced in. Unless there’s a sharp upside surprise, the report may not trigger much market movement.
Later in the day, US Consumer Confidence figures are in focus. Expectations are for a continued decline, reflecting growing concerns over the economic fallout from reciprocal tariffs. Yet, this deterioration in sentiment has become a familiar theme, and its market impact may also be muted unless the drop is significantly worse than expected.
What investors truly crave are concrete details surrounding Trump’s tariff due next week. Until then, markets are likely to remain rangebound and headline-driven. With such a pivotal policy move on the horizon, traders are understandably reluctant to take strong directional bets. That has kept volatility suppressed for now, even as the risk environment remains fragile underneath the surface.
Technically, a major focus now is USD/JPY, which has extended the rebound from 146.52 short term bottom this week. Strong resistance is expected from 150.92 support turned resistance, and 55 D EMA (now at 151.08) to limit upside. However, firm break of this zone will argue the fall from 158.86 has completed, and turn near term outlook bullish for stronger rebound. The next move in USD/JPY would determine the overall tone of Yen in the markets.
In Asia, at the time of writing, Nikkei is up 0.56%. Hong Kong HSI is down -1.99%. China Shanghai SSE is down -0.05%. Singapore Strait Times is up 1.11%. Japan 10-year JGB yield is up 0.028 at 1.574. Overnight, DOW rose 1.42%. S&P 500 rose 1.76%. NASDAQ rose 2.27%. 10-year yield rose 0.079 to 4.331.
BoJ minutes signal readiness to tighten further if outlook holds
Minutes from BoJ’s January 23–24 meeting revealed a growing consensus among policymakers that further tightening would be appropriate, provided the current economic and price outlooks hold.
While the central bank raised policy rate to 0.5%, members acknowledged that real interest rates remained “significantly negative”, ensuring “accommodative financial conditions would be maintained.”
However, the path ahead is clouded by global uncertainty. While BoJ held rates steady at its latest meeting last week, it flagged increasing risks from escalating US tariffs.
Nevertheless, Governor Kazuo Ueda emphasized that stronger-than-expected wage growth and persistent food price inflation could keep upward pressure on underlying prices, indicating that the case for another rate hike remains very much alive.
Fed’s Bostic sees just one rate cut in 2025, warns tariffs may reinforce inflation
Atlanta Fed President Raphael Bostic said in a Bloomberg interview that he’s now projecting just one cut by year-end, down from his earlier expectation of two.
Bostic explained the shift was due to his view that inflation will be “very bumpy and not move dramatically and in a clear way to the 2% target”. With inflation unlikely to return to target until 2027, he believes the path to neutral must also be delayed.
Bostic also expressed concern about the inflationary impact of rising tariffs. While such measures are often assumed to cause a one-off increase in prices, Bostic suggested the current environment could be different.
In his view, businesses and consumers may have grown more tolerant of elevated inflation following the pandemic, making price hikes more likely to stick. He noted that many business leaders now feel confident about “a complete pass-through” of higher costs on to customers without fear of losing market share.
BoE’s Bailey calls for trade cooperation and embraces AI as growth catalyst
BoE Governor Andrew Bailey urged greater international cooperation to resolve growing strains in the global trading system. In a speech overnight, he pointed to the disruptions caused by US President Donald Trump’s trade policies, emphasizing that resolving these challenges requires “multilateral setting rather than set tariffs bilaterally”.
In a more optimistic tone, Bailey also pointed to artificial intelligence as a transformative force for the UK and global economy. Comparing AI to electricity in the early 20th century, he said the technology could meaningfully raise growth and per capita income over time. He called for policy support to facilitate AI’s development as the “most likely general purpose technology,” capable of driving broad-based economic gains in the years ahead.
ECB’s Escriva warns of extreme uncertainty and skewed growth risks
In remarks delivered overnight, Spanish ECB Governing Council member Jose Luis Escriva highlighted that “growth risks are more downside than upside.” While he acknowledged that supportive fiscal policy could offer some near-term uplift, he stressed that the broader risks — particularly to the downside — are dominating the economic outlook.
Escriva painted a grim picture of the current global backdrop, describing it as “extremely uncertain.” He noted that today’s uncertainty global index levels are at their highest since records began — exceeding those during the Covid-19 pandemic, the war in Ukraine, the 9/11 attacks, and even the peak of the Great Financial Crisis.
Despite the fact that worst-case, disruptive scenarios have yet to materialize, Escriva emphasized that ECB must be “readier than ever” to revise its forecasts and relevant action should conditions change”.
Looking ahead
German Ifo business climate ins the main focus in European session. Later in the day, US will release consumer confidence, house prices and new home sales.
USD/CAD Daily Outlook
Daily Pivots: (S1) 1.4287; (P) 1.4322; (R1) 1.4354; More…
Range trading continues in USD/CAD and intraday bias remains neutral for now. Overall, price actions from 1.4791 are seen as a corrective pattern. On the upside, break of 1.4541 will extend the second leg from 1.4150 to retest 1.4791 high. On the downside, break of 1.4238 will argue that the third leg has already started through 1.4150 support.
In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.
