Silver prices saw an increase, with XAG/USD rising 1.40% to $33.05 per troy ounce. The price has climbed by 14.39% since the start of the year.

The Gold/Silver ratio shifted to 98.46, a drop from 99.29. This ratio reflects how many ounces of Silver are required to match the value of one ounce of Gold.

Impact of Silver’s Dual Role

Silver serves multiple purposes and is often used as a store of value and in industry due to its high conductivity. Market conditions and geopolitical stability heavily influence its price.

A weaker US Dollar generally leads to higher Silver prices, whereas a stronger Dollar holds them back. Industrial demand, especially in electronics and solar energy, plays a role in price fluctuations.

Silver and Gold prices often move in tandem due to their shared status as safe-haven assets. A high Gold/Silver ratio might indicate Silver is undervalued, and a low ratio could suggest Gold is undervalued.

Investors should exercise caution, thoroughly researching before making financial decisions related to Silver. Various economic factors can pose risks and uncertainties, impacting the value of Silver investments.

Silver Market Opportunities

We’ve seen a firm upward move in silver, with XAG/USD rising by 1.40% to reach $33.05 per troy ounce. That brings the total gain for the year to just over 14%, suggesting strong momentum tied both to fundamentals and external macro factors. These short-term jolts often create pockets of opportunity, but only for those watching closely. Traders focusing on derivatives tied to metals should be taking note.

The drop in the Gold/Silver ratio—from 99.29 down to 98.46—hints at a relative strength in silver versus gold. This ratio isn’t just an abstract number; it often steers capital flow among hedgers and is deeply embedded in long-term metal strategies. When the ratio declines, those holding silver contracts may see relative advantages gaining ground. Our focus should now shift to how sustained these changes might be and what they imply for spreads and hedging positions going forward.

Silver continues to straddle two worlds—its allure as a monetary metal and its growing role in industrial applications, particularly in sectors like solar and electric vehicles. Long contracts are increasingly sensitive to supply-demand shifts in technology markets. A rise in manufacturing output or clean energy growth can cause disproportionate moves in silver futures compared to gold. This unique dual demand stream makes silver options and spreads especially reactive around key economic prints.

The dollar’s weakening has also played its part. As we’ve seen historically, when the greenback drops in value, dollar-denominated commodities tend to become more attractive. This slide adds to upside pressure, especially in leveraged futures markets. Open interest data has already started to reflect this shift. Whether that persists depends on how the market interprets upcoming Fed speak and inflation reports.

Price action in silver has often shadowed gold—but not always. The connection is rooted in their joint use during uncertain times. Still, divergence is common, especially when bullion flows are driven more by industrial optimism than by inflation hedges alone. Spread trades between gold and silver could see fresh setups if their correlation continues to weaken. We’re watching for sharp dislocations that might show up during lower liquidity windows.

With implied volatility elevated, there’s a chance for re-pricing across the curve. Options traders might find straddle premiums offering asymmetric payoffs if positions are timed properly around rate decisions or employment releases. There’s been steady movement across short-dated calls, signalling anticipation of either upside breakout or further dollar retracement.

Put simply, sharp price movements, coupled with meaningful shifts in macroeconomic drivers, are creating more setup possibilities. These are not merely textbook scenarios. There’s an opening for well-positioned exposure, but only with disciplined risk checks in place.

There’s no ignoring the geopolitical tension simmering in key regions tied to supply chains. That element alone can skew probabilities in metal-linked derivatives strategies over the next few sessions. We’ll be factoring that in when assessing tail risk exposures.

What matters now isn’t just where silver is, but why it’s moving the way it is. Seeing 14.39% on the year is one thing. Understanding whether it’s sustainable under current monetary policy and demand paths is where maneuvering gets precise. That, more than price alone, determines position sizing and directionality in the weeks ahead.

Create your live VT Markets account and start trading now.

As we turn our attention from the early Asia-Pacific movements, what we’ve observed so far suggests a blend of caution and deliberate signalling from central banks and policymakers. The earlier climb in the yen, followed by a retracement to 147.75, likely mirrored early market reactions to carefully worded remarks from Kato. His reference to upcoming discussions with Bessent at the G7 indicates that foreign exchange volatility is drawing coordinated interest. This isn’t jawboning without intention—it may imply that intervention isn’t off the table if disorderly moves persist.

Persistence Of Doubt

The latest summary from the Bank of Japan underscores the presence of persistent doubt, notably tied to U.S. policies. This isn’t merely academic concern—it forces policymakers into a holding pattern, one shaped by their reluctance to tighten prematurely. By highlighting global instability rather than solely domestic progress, the BoJ is essentially letting the market know that inflation and wages may stay on their radar, but external triggers will likely determine the timing of any tangible policy adjustment.

The yuan’s move upward, assisted by the central bank fixing USD/CNY lower than expected, was not incidental. It’s a common method used by Beijing to reassure markets when facing headwinds—especially when trade sentiment is tilting more positive. In doing so, the PBoC is making it clear that they are not seeking rapid devaluation or volatility, and we infer that reduced capital outflow pressure would support those objectives. This method of smoothing FX shifts without dramatic moves usually dampens speculative positioning, at least temporarily.

Uchida’s recent remarks contain an echo of conditional readiness—we take that to mean rate hikes are an option, but any such step remains some way off unless projections start to align with observed reality. There’s always a difference between intent and execution, and we’re firmly in the former zone at present.

Australia’s indicators invite closer inspection. While consumer sentiment improved slightly, it’s recovering from a depressed base. Business confidence moving up is mildly positive, but falling business conditions point to cost hardship or softer demand. That contrast is revealing—it’s the kind of split that often delays central bank decisions or leads to more dovish bias in communication. The Reserve Bank won’t find enough here to justify aggressive adjustments, at least not yet.

Stability In Currency Pairs

Elsewhere, the stability in most major currency pairs, barring the yen, implies a waiting mode. Traders are not parsing out fresh directional themes just now; instead, they appear to be layering modest positions ahead of potential policy moves. Volatility sellers have had room to act, but that may change if expectations on U.S. inflation and upcoming rate decisions feed back into broader FX pricing.

In this environment, we continue to observe implied volatility holding at relatively muted levels, especially in short-dated yen crosses. What this means in practical terms is that the premium for near-term options remains compressed. Under these conditions, strategies involving straddles or risk reversals are less costly to structure. However, timing becomes especially key—delayed information or smaller-than-expected policy updates can erode value quickly.

Create your live VT Markets account and start trading now.

The US-China trade tensions appear to be easing, with both countries agreeing to tariff reductions. The US will lower its tariffs from 145% to 30%, while China will cut its duties from 125% to 10%, starting on 14 May.

This initial agreement suspends additional 24% tariffs for 90 days, offering time for further negotiations. However, should these additional tariffs resume, China’s GDP growth could reduce by about 1.0ppt over the next year.

Fiscal Measures To Counter Tariff Impact

To counter the tariff impact, China may roll out a fiscal package approved in March, offsetting some economic effects. Without further fiscal measures, GDP growth could face moderate risks, with expectations set at 4.8% by 2025.

China’s recent monetary policy easing aligns with economic expectations, potentially leading to another policy rate cut in Q4. With global tariff wars causing deflationary pressures, China’s CPI inflation forecast for 2025 is adjusted to -0.1%, down from 0.7%.

The information contains forward-looking risks and uncertainties, and it is crucial to perform thorough research before making financial decisions. There is no guarantee of error-free data, and the risks of investing, including potential loss of principal, are the responsibility of the investor.

The recent easing of trade tensions between the United States and China, marked by a mutual agreement to drastically reduce tariffs starting 14 May, introduces some temporary relief. The US plans to reduce import taxes from a punitive 145% to a lower 30%, while China is set to bring its own duties down from 125% to a more manageable 10%. A separate batch of 24% US tariffs has been shelved for 90 days, giving negotiators a window of time. This breathing space is not permanent, of course, and a return of tariffs remains on the table if talks falter.

If additional duties re-enter the frame, the latest projections indicate a measurable drag on China’s annual GDP growth—about one percentage point, to be precise. That reduction would not be spread evenly and would mostly damage trade-heavy sectors and capital formation. The country has, however, a contingency plan in the form of a fiscal stimulus programme cleared earlier this year. This package is not expected to single-handedly buffer all downside risks, but it should alleviate some of the direct strain on domestic demand and employment.

In the meantime, Beijing has already moved on the monetary front. Policymakers carried out interest rate cuts earlier this quarter, and with inflation now forecast to cling below zero for much of 2025—down from a previous estimate of 0.7% to -0.1%—the door is wide open for another adjustment, likely in the final months of this year. Lower rates and a relatively weak consumer price outlook point to a demand-side story that is not turning around quickly. In fact, deflation risks have started to feel less like a passing concern and more like a medium-term constraint.

Policy And Derivative Strategies

From our perspective, this puts a sharper focus on implied volatility, particularly across index options and rates. The soft inflation print alone won’t dictate the next move, but when seen alongside manageable FX pressures and weakening producer prices, there’s room to expect the PBOC to lean further on policy easing tools. We’ll continue monitoring the reassessment of terminal rates across Asian fixed income futures, as well as spreads on CNH forwards, which are beginning to show renewed hedging activity.

Li in particular appears to be reacting with a measured tone—consistent with a central authority keen to keep the RMB exchange rate stable without triggering unwanted outflows. For structured product positioning, we’ve been watching changes in skew on long-dated contracts, which may surprise on the low side if sentiment firms post-negotiations. Cross-asset correlation remains high, and as such, we’ll avoid chasing directional trades until further clarity emerges by early July.

We are reducing exposure to cyclical derivatives and favouring calendar spreads that price in another rate cut later this year. Upfront vega remains relatively expensive, so we are instead opting for second-half maturities that better reflect the policy lag. While some longer-dated implied vols continue to look elevated, there’s an argument for limited upside unless broader risk-on trends emerge across global equities.

What this means practically is that traders should watch closely early signals from state-linked policy banks in China and intermediate import figures out of East Asia. These typically give us a heads-up on the trade drag and are often overlooked. Margin requirements across OTC swap positions may tighten slightly if deflation persists, so it’s worth running new funding scenarios now, rather than waiting.

Corporate hedgers, particularly those in export-heavy manufacturing, may want to revisit their delta exposure for the remainder of Q2. With lower tariffs coming into play ahead of summer shipping volumes, we should see a recalibration of trade flows—but only if negotiations continue progressing in June.

Overall derivatives pricing on Asian risk remains anchored to monetary policy expectations and not just trade outcomes. So we’ll be keeping a close watch on weekly liquidity operations from the central bank, any shift in credit impulse data, and PMI figures that have lagged in recent months.

As always, model assumptions and macro inputs will tilt the outcome in either direction. But given the clarity around near-term trade duties, it makes sense to lean into strategies that transition cleanly into the third quarter once this 90-day window closes.

Create your live VT Markets account and start trading now.

China’s State-owned Assets Supervision and Administration Commission (SASAC) has urged state-owned enterprises (SOEs) to fast-track innovation and strengthen their roles in strategic and emerging industries. This is part of efforts to achieve 2025 targets and prepare for the upcoming 15th Five-Year Plan.

At an expanded Party Committee meeting, SASAC stressed the importance of high-quality development and national strategic priorities. It called for a fact-based assessment of SOE performance under the 14th Five-Year Plan to guide future reforms.

Soe Reform And Global Industry Change

The Commission noted external uncertainties and changes in global technology and industry, emphasising the need for forward-looking strategies in SOE reform, governance, and Party building. SOEs are encouraged to contribute to new productive forces and prioritise localisation in important sectors.

Enterprises should optimise their presence in strategic emerging and future industries and make advances in critical technologies. This will enhance their role in supporting national security, industrial resilience, and technological self-sufficiency.

SASAC also emphasised the advancement of major national projects. It stressed leveraging SOEs’ capabilities in strategic, foundational, and frontier sectors to reinforce the leadership role of the state-owned economy.

The State-owned Assets Supervision and Administration Commission has made a pointed call for faster innovation and a tighter focus on advanced sectors. Essentially, it’s telling large state firms to stop standing still. They are under pressure to show measurable outcomes by 2025—this is not optional, it’s policy. These companies must push resources towards industries with potential to shape the next decade: from clean energy and semiconductors to biotech and high-end manufacturing. The goal here isn’t only growth, but long-term resilience.

High Quality Development

The emphasis on “high-quality development” isn’t just a slogan either. It refers to prioritising innovation and strategic positioning over sheer volume or scale. As it stands, this means trimming dependency on external tech sources while better managing state influence in corporate strategy. This is especially relevant with the looming 15th Five-Year Plan—it will likely demand clear progress on technological advancement and industrial upgrade. Any pause in preparation would be misplaced.

We recognise the directive to ‘localise’ in core sectors for what it is: a push to break away from key import dependencies, especially in areas where advantages lie with foreign suppliers. It isn’t about protectionism so much as building internal substitutes where gaps clearly exist. The wider implication is that capital will likely be shifted away from legacy sectors and poured into R&D-heavy industries where breakthroughs are both possible and needed.

Elsewhere, the demand for companies to support “new productive forces” likely signals larger investment into areas such as AI applications, advanced robotics, and next-generation information networks. From where we sit, this is a cue to begin adjusting exposure to firms and sectors anticipating state-backed priority. You’re not betting on volatility here—you’re aligning with a policy trend that features very clear directives and timelines.

We can also take something from the way the Commission framed the role of governance and Party oversight. It’s not just internal housekeeping; it’s positioning for reform. That includes management accountability, sharper risk controls, and tighter alignment with national strategy. For us, that reads as less room for improvisation and more for structured, policy-aware execution plans.

With this kind of tone from the top, the flow of capital—from both policy banks and institutional channels—is going to guide where productive efforts land. We’re already seeing this in energy storage initiatives and advanced industrial chains. Asset managers should be adjusting accordingly.

Taken in full, these remarks strongly suggest a shift in expectation rather than a subtle nudge. SOEs are being instructed to deliver proof of progress, grounded in hard numbers and measurable change. That shift isn’t something to trade against; it’s a map for positioning over the coming months.

Create your live VT Markets account and start trading now.

Germany’s ZEW Economic Sentiment index for the current situation fell below forecasts in May, recording a figure of -82 compared to the expected -77. This indicates a more challenging economic environment than anticipated.

The United States Consumer Price Index (CPI) inflation report for April is due to be published by the Bureau of Labor Statistics at 12:30 GMT. The forecast suggests that the inflation index will rise at an annual rate of 2.4%, consistent with March, while core CPI inflation is predicted to remain at 2.8% year-over-year.

Market Sentiment and Risk Assets

Markets experienced a revival as the US and China paused their trade war escalation, creating a notable shift in sentiment. The adjustment in market mood saw an increase in trading of risk assets, suggesting optimism that recent difficulties might be easing.

Foreign exchange trading on margin entails a high level of risk and may not suit everyone due to the potential for significant losses. The leverage involved can also magnify both gains and losses. It is essential to carefully assess investment goals, experience level, and risk tolerance before engaging in foreign exchange trading.

Given the slump in Germany’s ZEW Economic Sentiment for the current situation, there’s a clearer signal of deteriorating conditions within the region. A print of -82, noticeably under the forecasted -77, underscores a wider level of dissatisfaction among institutional investors and analysts when assessing current economic health. This type of reading often foreshadows a drag on near-term economic activity. It’s not just a one-off dip—it follows previous soft patches, suggesting sentiment hasn’t recovered from past shocks.

What that means for us more broadly is that European markets could carry more downside than upside catalysts until data starts showing consistent strength. Bonds and rate-sensitive assets may respond to these disappointments with more demand, particularly on the safer end of the curve. Equities, on the other hand, may find it harder to hold ground unless we see signs of improving industrial output or policy support.

US Inflation and Market Reactions

Now, turning across the Atlantic, all eyes sit squarely on the April inflation release in the United States. Expectations are for annual inflation to remain at 2.4%, while the core figure is projected to hold steady at 2.8%. Should either component overshoot, traders should be ready for volatility. It wouldn’t take much—particularly with rates sensitive to even slight changes in inflation sentiment—to spark new positioning among institutions.

If the report aligns exactly with consensus, it implies that disinflationary forces aren’t gaining traction quickly enough. For those exposed to rate speculation, especially in options and futures markets, a flat core reading keeps the Federal Reserve in a holding pattern. Any considerable undershoot, however, would be pivotal—suddenly, the discussion around rate cuts could gain tangible timing. The market would likely interpret it as a green light to accelerate bids in shorter-dated treasuries, alongside a quick repricing across interest rate derivatives.

With the temporary cool-down in tensions between the US and China, we’ve observed early signs of reinvigoration in global risk appetite. Positioning in equity-index futures and related volatility products seems to have turned a corner. It’s not just the pause in tariff threats; liquidity has responded favourably, and inflows into high-beta sectors show that traders perceive better short-term reward potential. Still, the optimism hinges heavily on the data backing it up.

Shifting toward the engine room of risk—foreign exchange—no reminder is too many when it comes to ignoring leverage dangers. We remain highly alert here. Movements in major crosses may seem subtle one day, but the use of leverage means exposures can turn rapidly and unpredictably. Losses can far exceed deposits when volatility picks up around key macro events, and we should assume more surprise prints from data releases in the near term.

Therefore, as we enter a cycle of clustered major releases—from inflation to purchasing managers’ indices—it is critical to constantly reassess directional bias. Carry trades may become more appealing in low-volatility settings, but should inflation move unexpectedly or geopolitical headlines resurface, a swift unwind would not be uncommon.

Instruments with embedded optionality or knock-out features are likely to be tested. We advise closely monitoring implied volatility pricing, especially in G10 crosses, as well as any shift in the forward curve for yield-based instruments. These can provide early insights into market recalibration when economic assumptions are challenged.

We’re watching for more than just data surprises—we’re mapping how divergences in economic momentum between major economies play out in pricing actions. Traders should prepare for well-defined ranges suddenly breaking as consensus disintegrates. Timing will matter, but so too will patience.

Create your live VT Markets account and start trading now.

China is constructing megaports in South America to address its crop demands. The country assures its citizens of a stable food supply even without relying on U.S. crops.

China’s state grain trader, Cofco, plans to establish the world’s largest export terminal in Brazil. This initiative aims to replace U.S. soybeans and other foodstuffs by tapping into South American resources.

Challenges Facing Brazil’s Export Capacity

However, Brazil’s main export port to China, Santos, faces limitations regarding capacity and infrastructure. Furthermore, Brazil grapples with fertilizer supply challenges and soil nutrient depletion, affecting crop production advancement.

In diplomatic moves, China’s foreign minister recently held discussions in Beijing with Brazil’s counterpart. Additionally, China expressed its intention to purchase approximately $900 million worth of soybeans, corn, and vegetable oil from Argentina.

What we’ve seen so far points to a clear strategic shift. By financing and building mega ports in South America, and by arranging deals in both Brazil and Argentina, China is working to reduce its reliance on U.S. agricultural imports. The announcement from Cofco to invest heavily in Brazil indicates more than just trade preferences – it shows long-term positioning.

This sheds light on China’s broader tactic: reshaping its supply chain for food security reasons. Notably, Brazil has the land and the harvest volume, but the ports, especially Santos, are already under pressure. Bottlenecks caused by limited infrastructure mean expansions can’t deliver overnight shifts in global flows. The soil health concerns, specifically regarding nutrient exhaustion and fertiliser scarcity, aren’t just minor agricultural hiccups. They alter the reliability of yields. If production fails to meet projected growth in the next few seasons, it could undermine China’s expectations.

Implications for Global Commodity Markets

The involvement of high-level officials further strengthens the trade commitment, particularly with Argentina. A $900 million offer sends a focused message – Beijing is not hesitating to secure supplies in two of South America’s key producers, even if it comes with logistical or qualitative compromises. These moves also steadily shift bargaining power in global commodity markets, and with that, new patterns in price sensitivity and volume liquity start to form.

For us, this instability in the traditional supply chain doesn’t signal immediate price disruptions, but it does reframe where risks will surface. If these port investments in Brazil proceed as planned, and volumes rise as intended, basis prices across regions may separate more than usual. Meanwhile, uncertainty around Brazilian production capacity – from weather to soil inputs – leaves any smooth transition less than assured.

Given these developments, attention must be given to freight capacity from South America, reliance on river transport, and any farmer response to fertiliser pricing. With attention tilted toward Argentina as well, we anticipate two harvest windows – Brazilian and Argentinian – to carry more weight in market pricing than before. Differentials between U.S. and South American futures may widen on timing alone, let alone on quality or availability.

An increase in long hedges from Chinese buyers across South American origin will likely affect open interest positioning too. Dislocations could arise if investors underprice Brazil’s potential shipping delays or if Argentina faces political changes that block exports. Early indicators of port congestion or fertiliser shortage should be monitored closely and used to reassess spreads, particularly into Q4.

We are entering a cycle where conventional models based on U.S. exports may underperform. Assumptions on average port throughput, barge movements, or input costs in South America may no longer apply with the same confidence. It’s now less a question of transition, and more of competition.

Create your live VT Markets account and start trading now.

The Euro (EUR) may weaken further against the US Dollar (USD), but it is unlikely to breach the major support level at 1.1055. In the long run, while EUR is under pressure, whether the current pullback reaches 1.0945 remains uncertain.

On a 24-hour view, EUR dropped to a 1-1/2-month low at 1.1087, down by 1.42%. Despite oversold conditions, further USD weakening is possible, but breaking the major support at 1.1055 is unlikely. Resistance levels are identified at 1.1120 and 1.1150, which would indicate stabilisation.

One To Three Week Perspective

In a one-to-three-week perspective, last Friday’s shift from neutral to negative outlook anticipated EUR falling towards 1.1145. The decline exceeded expectations, reaching a low of 1.1064. Although downward momentum has grown, the current weakness is seen as part of a pullback, and reaching support at 1.0945 is uncertain. Only a break of 1.1225 suggests easing pressure.

This analysis involves risks and uncertainties, with no guarantees of flawlessness or timeliness. Market investments carry risks, including potential total loss and emotional distress, and all associated responsibilities lie with the individual. Users should carry out thorough research before making decisions.

What the current analysis demonstrates is a downward pull in the Euro’s value against the Dollar, though we’re seeing a fairly strong cluster of support forming around the 1.1055 level. Even with a sudden slump touching 1.1087, the structure beneath that point is robust enough that further rapid declines aren’t projected to slice through it without compelling catalysts. It isn’t about whether the Euro is weakening—it certainly is—but rather how far existing momentum can carry that weakness before counter-forces temper it.

We saw the Euro fall 1.42%, settling near the lowest level in around six weeks. That drop is stark, even if some technical conditions now suggest oversold territory. When viewed through a broader lens though, the probability of continued Dollar strength may reinforce local EUR softness. Yet, resistance at 1.1120 and 1.1150 appears very near the surface. Those zones are important—should price action rebound and climb there, it could indicate a brief footing is being found.

Directional Shift

Now looking ahead one to three weeks, we noticed a directional shift recently. The stance moved from neutral to bearish just before the weekend, and since then the pace of decline has been sharper than initial forecasts. Last week’s expectation was a moderate dip toward 1.1145, but 1.1064 came swiftly, suggesting bearish pressure intensified more than anticipated. Even with this momentum, this move still qualifies more as a short-term retracement than a true reversal of longer-term structure. The idea that the Euro might reach the next lower support around 1.0945 hasn’t yet formed into a high-conviction outcome.

That support below is worth keeping an eye on, but we’d hesitate before planning strategy around its inevitability. Too many assumptions, without fresh catalysts or shifts in macro data, would simply inject excessive exposure to sudden turns. Similarly, if prices manage to press above 1.1225 again, it would be the first solid sign that this current phase of weakness has passed.

From where we sit, the signals are mixed: firm downside action, yes, but not without areas where rebounding price could be met with stiff resistance. This subtle balance leaves very little room to operate overnight with high certainty. Rather, it encourages a trim, reactive posture that adjusts to each incremental change in price behaviour rather than predicting wholesale shifts.

For positioning, one must be very deliberate here. Overleveraging based on presumed directional continuation risks poor entry and frustrated exits when structures such as 1.1055 either hold tight or trap into limited range. These situations usually require trade entry based more on exhaustion cues than momentum chases. For example, until 1.1225 is reclaimed, any upside attempt is likely confined to the zones already mentioned—no further until those resolve.

We continue to monitor short flows into the lower 1.10s and note whether positioning gets uncomfortably crowded. That often hints at pent-up reversal potential that can catch short-duration trades flat-footed. At the same time, assumptions of a bottom forming too early can derail any attempts to carry trades across brief countertrends. One keeps watch of both ends.

As prices walk this narrow line between continued weakening and holding steady, there’s no benefit in over-committing before technical signals align with fundamentals. It’s the type of sequence where technical levels—like 1.1055 and 1.0945—matter more than sentiment or thematic views. It becomes a case of tactical engagements, waiting for pressure build-up or release, rather than chasing fading moves.

Create your live VT Markets account and start trading now.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

The Bank of Japan’s deputy governor stated that US tariffs exert pressure on Japan’s economy. Despite this, there are potential risks to Japan’s prices due to these tariffs, which could lead to both positive and negative outcomes.

Economic growth in Japan is predicted to slow to around its potential. After this period of slowdown, growth may accelerate if overseas economies resume a moderate growth path.

Output Gap Expectations

The output gap is expected to remain stable. An improvement is anticipated by the end of the Bank of Japan’s three-year forecast period through fiscal 2027.

Interest rate hikes could continue if both the economy and prices improve as projected. Though inflation expectations may stagnate temporarily, a tight job market could drive wages up.

Japan’s economy is likely to recover if the global economy grows, boosting inflation and expectations. High uncertainty surrounds these forecasts, so decisions will be made as conditions evolve.

A strong yen could negatively impact exports and major manufacturing profits. However, it could enhance household real income and improve retailer profits through reduced import costs.

Exchange Rate Volatility

Rapid fluctuations in foreign exchange can complicate business planning. Japan’s finance minister is keen to discuss foreign exchange rates with counterparts.

The article outlines remarks and projections from policy authorities concerning Japan’s current and future economic situation, especially under the pressure of US-imposed trade tariffs. Though these external shocks may weigh down production and sentiment, they also set off a chain of reactions in domestic inflation and industrial pricing. Short-term disruptions seem tolerable for now, but we should be wary — economic data from the next two quarters will matter much more than usual. The suggestion here is that currency movements and global demand might create a whiplash effect through different revenue channels and cost structures.

From a trading perspective, this opens a narrow but measurable window for directional bets. Wage growth, while still fairly weak, could stir inflation in the medium term, especially if hiring trends hit record lows again. Price momentum might sag in the near run, but we should expect stronger signals as wage bargaining trickles into consumer pricing later this year. Futures tied to Japanese government bonds and inflation-protected instruments could reflect this tightening path well in advance. Careful staggering of duration risk may be necessary.

The forecast period running to fiscal 2027, while far out, tells us that incremental steps are more likely than sharp pivots. If the output gap does start to close more steadily toward the second half of this cycle, upward pressure on short- and medium-term rates could arrive faster than many have priced in. That means even slight upward revisions in quarterly GDP or wage data will matter outsize in positioning.

On top of all this, the yen’s volatility stands out as a wild card. A stronger currency may dent overseas earnings, but there’s another layer here: lower input costs for domestic sellers could, in time, rebuild margins. We might see retail names reflecting that story before it appears in broader indices. But the window is short. Wide swings in exchange rates aren’t just annoying; they sideline investment decisions, which leads to deferred spending and changes in hedging behaviour.

Given all this, sharp moves in swaps, especially where they diverge from real economy data, may present opportunities. We should dial in closely to wage negotiations, foreign currency reserves data, and input prices, especially in manufacturing and retail. If policymakers comment more on currency intervention or trade policy alignment, that reinforces that FX intervention risk is on the table. Waiting on confirmation indicators won’t work in the short term; better to recalibrate before it becomes reactive.

Lastly, it’s worth watching how other central banks treat inflation surprises. Any shift in the yield differentials could influence carry trades around the yen, moving risk sentiment quickly. The dominoes can fall fast, and even small changes across the yield curve might present asymmetric return setups. Avoid anchoring to earlier expectations – price in flexibility, not forecasts.

Create your live VT Markets account and start trading now.

EUR/GBP maintains stability following the release of UK employment data. The UK ILO Unemployment Rate rose to 4.5% for the three months ending in March, compared to 4.4% previously.

After a six-day decline, EUR/GBP trades around 0.8420 during early European trading on Tuesday. Markets anticipate the ZEW Economic Sentiment surveys from Germany and the Eurozone for insights into institutional investor confidence.

UK Employment Data

The Office for National Statistics reported a Claimant Count Change increase of 5,200 in April, contrasting with a revised decrease of 16,900 in March. Employment Change figures show a rise of 112,000 in March, down from February’s 206,000.

Mixed wage growth data shows Average Earnings, excluding bonuses, increased by 5.6% year-over-year, below both the previous 5.9% and the expected 5.7%. Including bonuses, wages increased by 5.5%, exceeding forecasts of 5.2%.

According to reports, European Central Bank officials suggest the policy review will likely confirm existing strategies such as QE. The ECB’s commitment to “forceful action” during periods of low rates and inflation remains emphasised.

From what we’ve seen this week, the EUR/GBP has been relatively muted, brushing off the fresh labour market figures out of the UK. Stability around the 0.8420 mark, despite a modest uptick in the unemployment rate to 4.5%, suggests traders aren’t yet shifting their broader bias. That figure, while incremental, points to a slightly cooling market—nothing alarming, but worth acknowledging when shaping exposure in rates or FX-linked derivatives.

Market Reactions and Analysis

The Claimant Count ticked higher by 5,200 in April—small, yes, but in sharp contrast to the revised 16,900 drop in March. A reversed dynamic like that can jar sentiment at the margin, particularly when the Bank of England has already been leaning toward a cautious tone. Interestingly though, job creation remained positive, if decelerating. The increase of 112,000 in employment isn’t negligible, yet when compared to February’s 206,000, there’s a clear moderation in pace. We interpret this as a gentle softening, which could dampen the need for further near-term tightening while reinforcing medium-term dovish recalibration.

Wage growth metrics offer a more nuanced picture. Excluding bonuses, earnings rose 5.6% annually—under both forecast and the prior print. Including bonuses, however, we note an upside surprise: an annual increase of 5.5% versus the 5.2% consensus. That uneven pressure in pay signals a possible stickiness in services inflation, despite fading recruitment momentum. It opens the door for diverging scenarios in policy responses and urges caution when defining volatility ranges or strike selection, particularly for front-month options plays.

On the continent, the focus turns to sentiment from institutional participants via the ZEW surveys. These forward-looking gauges, covering both Germany and the broader bloc, are often picked apart for early signs of business cycle shifts. They can inform momentum trades, not merely directional plays but spread-based strategies as well. Especially with the ECB leaning on consistent messaging—continuing QE where appropriate, favouring forceful intervention if inflationary tailwinds fade—we see scope for broader consistency in their communications, effectively anchoring long-end expectations.

Lagarde and her counterparts have made it clear: they won’t flinch if easing is required. Unlike more erratic central banks, their direction points more towards controlled adjustments, not volatility reaction. That lends itself well to calendar spreads across eurozone yields and relative value setups across front-end swaps, particularly as implied vols remain well-anchored across maturities.

We believe this steadiness across both currency and policy expectations allows for short-term short gamma positioning, assuming range-bound trading holds. However, as labour signals in the UK begin to diverge from wage trends, there’s scope for sharp re-pricing if wage inflation remains embedded. That would ripple into BoE rate expectations, injecting sudden two-way risk.

Reaction among institutional players to this week’s ZEW data and any ECB commentary could provide the next catalyst. For now, two economies show signs of divergence—one softening in employment while the other relies on guidance for bond market anchoring. Trade construction should adjust in kind.

Create your live VT Markets account and start trading now.