Powell puts pressure on the US index, and the European Bank's resolution hides "hawkish foreshadowing"?

Asian Market Review

On Wednesday, the US dollar index fell to around 99 again and finally closed down. As of now, the US dollar is quoted at 99.66.

Trump: I met with the Japanese delegation and made significant progress.

California will sue the Trump administration for tariff policies, seeking to stop tariff measures.

India is considering importing gold and silver from the United States to make up for the trade deficit.

Japanese Economic Regeneration Minister Ryomasa Akazawa: He will continue to discuss the issue of automobile tariffs with the United States, and he believes that an agreement can be reached within 90 days.

Powell reiterated that the Federal Reserve waited and watched first and then acted, warned of the challenges of inflation and economic dilemma, and denied that it wanted to save the market.

U.S. Treasury Department data: China and Japan increased their holdings of US Treasury bonds by US$23 billion and US$47 billion respectively in February.

The monthly retail sales rate in the United States recorded 1.4% in March, and was expected to be 1.3%, recording the largest increase since January 2023.

The Bank of Canada has kept interest rates unchanged, warning that a avatradescn.comprehensive trade conflict may lead to a severe economic recession.

Von der Leyen: If negotiations fail to reach a resolution, both manufactured goods and digital services in the United States may be targets of retaliation.

The Ukrainian Parliament approved the extension of the wartime status and general mobilization period by 90 days.

Zelensky said that legal matters related to the negotiation of the Ukrainian-US mineral agreement have been basically finalized. News says the United States has droppedLow Ukrainian requirements for “repayment” aid.

World Trade Organization: Lower the forecast for global avatradescn.commodity trade growth in 2025 from the original 3.0% to -0.2%.

Summary of institutional views

Bank of the Netherlands: The ECB will cut interest rates X consecutive times, and inflation is at risk of being below the target

The ECB is expected to lower the interest rate on key policy by 25 basis points on Thursday. During the next four meetings, including this Thursday, the ECB is expected to cut interest rates continuously, each cut of 25 basis points, bringing deposit rates to a low of 1.5%. Until recently, the ECB has been saying uncertain whether the tariff shock will push up or lower inflation, saying there are drivers in both directions. However, their thinking seems to have changed a bit lately, with generally more dovish attitudes and officials have shown more concerns about economic growth. This is avatradescn.completely reasonable, because tariffs are almost entirely anti-inflation.

Looking forward, fiscal stimulus in the eurozone provides impetus for the prospect of a growth recovery in 2026 (and in the avatradescn.coming years). Given that fiscal policy will play a bigger role than monetary policy, we have recently raised our expectations for terminal interest rates to 1.5% from the previous 1%.

Overall, we still stick to a long-standing view that while tariffs have inflationary effects on the United States, they have deflationary effects on the eurozone. In fact, we believe that the euro zone inflation rate will be below the ECB’s target from around the middle of the year. Given that the ECB's March forecast has been consistent with reducing deposit rates to about 2%, and the current economic outlook has changed, we believe that interest rates will not only be below 2%, but are likely to be significantly below this level.

Nomura Securities: The Bank of Japan may delay interest rate hikes, and the rate hikes will be smaller.

Two economists in the global market research of Nomura Securities said that the Bank of Japan may delay interest rate hikes and the rate hikes will be smaller. Nomura Securities has revised expectations for the Bank of Japan's monetary policy to reflect major problems facing the Japanese economy. These issues include the balance between Trump’s tariffs, monetary and fiscal policies, and the risk of slowing wage growth in 2026. Nomura delayed the Bank of Japan's next rate hike from July 2025 to January 2026, and is expected to raise interest rates only once during the forecast period to March 2027, rather than twice previously expected.

Capital Macro: New Zealand's Fed is unlikely to worry about rising inflation

Capital Macro analyst Abhijit Surya said that rising inflation in New Zealand in the first quarter is unlikely to upset the New Zealand Fed. “We speculate that the Fed will be avatradescn.comforted by the fact that the core inflation indicator continues to fall to the midpoint of the 1%-3% target,” Surya said, considering that almost all potential inflation indicators continue to decline slightly, the Fed may ignore the factors driving the rebound in trade and non-trade CPIs. Due to potentialPrice pressure may continue to cool down, and Capita Macro continues to expect the New Zealand Fed to cut further interest rates greater than most people expect, locking the final policy rate at 2.50%.

French Foreign Trade Bank: The ECB will cut interest rates for the last time in June and will continue to maintain policy determination

We expect the ECB to lower the key interest rate by 25 basis points, and this rate cut has almost been avatradescn.completely digested by the market. This decision to cut interest rates is based on the following considerations: First, the inflation slowdown process continues to improve, especially the service industry's inflation has seen a significant decline; second, Trump's tariff policy and its uncertainty pose a significant risk to the economic growth prospects. Although its impact on inflation is uncertain (mainly dependent on possible retaliatory measures and supply chain disruptions by the EU), the medium-term impact is generally biased towards deflation. In the short term, the decline in oil prices and the appreciation of the euro provide room for policy adjustment; third, the current currency policy is still in a restrictive range, although the degree of tightening has weakened "significantly" from the past.

Looking ahead after April, we expect our last 25 basis point rate cut in June. However, since the June meeting (June 5) is still two months away, there are still variables in this decision. Our benchmark forecasts are more cautious than market expectations, as our inflation forecasts show inflation expectations are higher than current market pricing levels. If inflation data declines beyond expectations in the future, we may adjust our forecasts and increase interest rate cuts by the end of 2025.

We believe that despite unprecedented uncertainty (especially from U.S. trade policy), the ECB will remain policy firm. The ECB is expected to continue to adhere to the data-dependent decision-making method and adopt a strategy of prudent decision-making at successive meetings. Governor Lagarde is likely to re-emphasize the importance of maintaining adequate policy choices and flexibility.

The ECB is closely monitoring market trends. We are convinced that in the event of systemic market disorder or unreasonable expansion of interest rate spreads in the euro zone (not yet occurred), the decision-makers are ready to respond. If market pressure continues to intensify, the ECB may consider suspending quantitative tightening policies and be ready to provide the necessary liquidity support as before.

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