A recession in the U.S. is likely to hurt base metals demand, and could raise surpluses of goods like copper, according to Morgan Stanley. The U.S. bank has already cut its metals demand growth this year to 0% from 2.5% amid a sharp deceleration of growth in Europe and America, but a recession in the U.S. could add further pressure, Morgan Stanley says. Currently, the U.S. accounts for just 7% of copper demand, compared with 30% in the 1960s. But even so, if demand in the country were to fall by 5% this year, this would mean a copper surplus rise of 140,000 tons to 230,000 tons, analysts notes. However, stronger Asian demand should mitigate losses, keeping overall demand positive on a global scale.
The Russian Central Bank announced last week that it has topped up its Gold reserves by 1 million ounces since the Ukraine war began 13 months ago. This is equivalent to 31 tons. Originally, the CBR was not planning to buy any further Gold. However, it has clearly seen itself forced to do so in order to support the domestic Gold industry, as Russian Gold producers are having problems selling their Gold. Russian banks, which previously were the most important buyers, have been hit by the West’s sanctions.
Economists widely expect the Bank of Canada on Wednesday to keep its main interest rate unchanged for a second straight decision, as inflation continues to cool, and surveys of businesses and households suggest a slowdown is in the cards. Canada’s central bank in March left its benchmark rate unchanged, after lifting rates by 4.25 percentage points in the span of 10 months to wrestle down historically high inflation. The central bank said it would take time out on further rate increases to assess the impact of sharply higher borrowing costs. The central bank has also said it stands to raise rates further should the economy outperform its forecast. Inflation in Canada peaked in the middle of 2022 at 8.1%. It has since slowed, with data for February indicating prices rose 5.2% from a year earlier, which marks the lowest level since January, 2022 and is at the low end of the spectrum among major advanced economies. The Bank of Canada sets interest rates to reach and maintain 2% inflation. The central bank’s outlook for inflation received a boost last week when its closely watched business-outlook survey for the first quarter indicated inflation expectations have eased from a peak, and nearly half of Canadian companies expect sales to slow over the next 12 months as consumers pare back spending.
Sterling could depreciate as the Bank of England's expectations for inflation to ease significantly over the course of the year might be too optimistic. The BOE's inflation outlook suggests its interest rate rise cycle could soon end, Inflation could prove more stubborn than the BOE expects as the central bank admits the economy and labor market will be more robust than previously anticipated, she says. "As we see the risk that inflation might not ease as quickly and that the BOE might drop behind the curve with its monetary policy, we remain sceptical regarding sterling and expect weaker GBP levels over the coming months."
The Bank of Japan's monetary easing was "appropriate" and effective in jolting Japan out of deflation, and its retention under new leadership is of utmost importance as inflation expectations are heightening, outgoing Governor Haruhiko Kuroda said Friday. In his last press conference as governor, Kuroda again expressed his regret over the BOJ's failure to attain its 2 percent inflation target before his term ends on Saturday. Kuroda, who served for 10 years as BOJ chief from 2013, will hand the reins to academic Kazuo Ueda, a monetary policy expert who has taken the stance that monetary easing should be in place. The outgoing governor acknowledged that the past decade of unprecedented monetary easing has had side effects but denied that the policy tool had reached its limits. "What is critically important is to promote economic growth and sustain wage growth through monetary easing," Kuroda, 78, said at the press conference. "Monetary easing has shown its effects, and our guiding of policy has been appropriate," he added. Kuroda's whirlwind tenure was devoted to beating deflation and meeting what he has described as a "global standard" of 2 percent inflation. Inflation, as measured by the core consumer price index, excluding volatile fresh food items, hit 3.1 percent in February, though the BOJ expects the rise to be temporary absent robust wage growth. By comparison, when Kuroda became governor in January 2013, the rate had dropped 0.5 percent from a year earlier. Kuroda, known for taking aggressive monetary easing steps that later became known as "bazooka," made a sensational pledge to achieve 2 percent inflation in two years and double the monetary base. The BOJ began undertaking policies that often shocked financial markets, including introducing a negative interest rate in 2016, criticized for hurting banks' profitability. The BOJ has been keeping short- and long-term interest rates depressed through massive purchases of government bonds. In recent months, the central bank has had to ramp up buying to counter market pressure, allowing for more flexibility in long-term yield moves. As a result, the BOJ's bond holdings swelled to 581.72 trillion yen ($4.4 trillion) as of March, a record for any fiscal year-end, meaning that more than half of the outstanding Japanese government debt is owned by the central bank. Sharp rises in long-term yields deal a blow to the debt-ridden government as it has to shoulder higher debt-servicing costs. Japan's debt is more than twice the size of its economy.
The Swiss banking system's rapid stabilization following measures to stem the fallout from troubles at Credit Suisse reinforces the franc's safe-haven status, Societe Generale says. "What it means is that whereas in the past, EUR/CHF would fall when EUR/USD did (the Swiss franc falling by less than the euro against the dollar) and rise when EUR/USD did, EUR/CHF has decoupled from EUR/USD, allowing the Swiss franc to rise as fast against a falling dollar, as the euro does," SocGen forex strategist Kit Juckes says in a note. The Swiss National Bank appears more tolerant of a stronger franc while being less tolerant of a weaker currency amid high inflation, he says
Reserve Bank of Australia Gov. Philip Lowe said Wednesday that the central bank’s decision to announce a pause in raising interest rates doesn’t rule out further increases over time. “The decision to hold rates steady this month does not imply that interest rate increases are over. Indeed, the board expects that some further tightening of monetary policy may well be needed to return inflation to target within a reasonable timeframe,” Mr. Lowe said in a speech to the National Press Club in Canberra. The central bank held its official cash rate steady at 3.60% after a policy meeting on Tuesday, snapping a run of 10 consecutive increases since May last year. “It was prudent to hold rates steady this month to allow more time to assess the impact of the increases in interest rates to date and the economic outlook,” Mr. Lowe said. The RBA board is conscious that monetary policy operates with a lag and that “the full effect of the increases to date is yet to be felt,” he added. “It is also conscious that there are significant economic uncertainties at the moment.”
In a monthly economic report for March, the government cut its assessment on production for the first time since December amid slowing overseas demand for semiconductors and other items. Its view on corporate earnings was also downgraded for the first time in nearly three years. Full attention should be given to price increases, supply-side constraints and fluctuations in the financial and capital markets," the Cabinet Office said in the report, which described the Japanese economy as "picking up moderately" despite some weakness. It expected that the recovery will continue. Among key components of the economy, industrial production "has been in a weak tone recently," a downgrade from the previous month's view that its pick-up was pausing, the report said. apan's economy narrowly avoided a recession in the October-December quarter and many economists expect it to grow in the current quarter, as private consumption, which makes up over half of gross domestic product, has been supported by pent-up demand for services despite accelerating inflation.
While banking concerns have roiled markets recently, evoking memories of the financial crisis but with historically higher global inflation, the effect on the G10 FX outlook has been muddled, Bank of America strategists say in a note. The dollar has softened with the Fed less likely to hike aggressively. But they maintain their EUR/USD outlook at 1.05 at 2Q end and 1.10 by the end of the year, guiding near-term USD strength and end-year softening reflective of longer-term continued dollar overvaluation. Euro positives include a hawkish ECB, a resilient economy and improved terms of trade on lower energy prices.
Metals prices are moving higher amid a week of financial turmoil, with Wall Street's largest banks looking to deposit $30 billion into First Republic in order to save it from collapse. Three-month copper is up 1.9% to $8,692 a metric ton while aluminum is 1.3% higher at $2,308.50 a ton. Gold meanwhile is 0.6% higher at $1,934.40--putting this week's rise to 3.6%. Investor sentiment feels better heading into the weekend. As well as the moves from Wall Street, the European Central Bank dropping its commitment to keep raising interest rates at a steady pace was welcomed by the market, helping investors to move "risk-on".

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