 Risk appetite in Asian markets has been solid this week, support by optimism surrounding China's latest measures to boost domestic consumption. Hong Kong stocks continue to lead gains in the region. Meanwhile, in the forex markets, both New Zealand and Australian Dollars are holding firm, though the Aussie is slightly lagging due to rising trade tensions with the US. As tariff threats continue to evolve, the Australian economy is relatively more vulnerable to disruptions in trade, keeping a cap on the currency’s momentum. Meanwhile, Japanese Yen has weakened notably, weighed down by the prevailing risk-on sentiment in the region. Additionally, traders are solidifying expectations that BoJ will keep rates unchanged in this week’s policy decision, leaving any rate hike for future meetings. Though, any hints from Governor Kazuo Ueda about the timing of future hikes could rejuvenate Yen's rebound. . In Europe, attention turns to Germany, where ZEW economic sentiment index is expected to show early signs of optimism surrounding the incoming government’s EUR 500B infrastructure and defense spending plan. Also, Chancellor-in-waiting Friedrich Merz faces a crucial parliamentary vote on this plan today, and while it is broadly expected to pass, there remains an outside risk of legal intervention. The far-right Alternative für Deutschland party has challenged the speed of the legislation’s introduction. Merz might get the court's verdict soon. Meanwhile, Canada’s inflation data will be in focus, as markets assess BoC’s next policy steps, which are heavily complicated by trade war. OECD has significantly downgraded Canada’s growth forecast, citing trade war risks and economic fallout from US tariffs. However, OECD also warned of inflationary pressures, suggesting that if Canada faces 25% retaliatory tariffs from the US, borrowing costs could stay higher for longer. This places the BoC in a difficult position, as it must balance slowing growth with the risk of persistent price pressures.... |
