【XM Forex Official Website】: The return of US manufacturing industry faces many challenges. Analysis of short-term trends of spot gold, silver, crude oil and foreign exchange on April 1

Global Market Review

1. European and American market trends

Dow futures, mainly blue-chip stocks, fell 0.27%; S&P 500 futures fell 0.17%; Nasdaq 100 futures, mainly technology stocks, fell 0.07%. European stock markets rose, with the German DAX index rising by 0.87%; the French CAC40 index rising by 0.59%; and the UK FTSE 100 index rising by 0.58%.

2. Market news interpretation

The return of US manufacturing is facing many challenges

① John McNally of Scotia Bank pointed out that the US tariff policy aims to relocate manufacturing capacity back to the country, but this goal is difficult and costly. ② Analysis shows that in order to replace imported finished products, US manufacturing output needs to increase by about 36%, and the restrictions on domestic supply by patent or intellectual property rules are not taken into account. ③McNally said this would require manufacturing to hire 61% of its staff, equivalent to 5.7% of the total private labor force in the United States. ④ Even if productivity doubles, nearly 4 million additional employees will still be recruited, and this process may take years. ⑤ For an economy that performs above the potential level and is facing a population decline, this will put significant upward pressure on wages and inflation.

U.S. natural gas prices fell due to high production and sluggish demand

①U.S. natural gas futures fell about 1% on April 1 as March production hits record highs and the weather is mild next week and demand is lower than expected. ② Natural gas futures for delivery on the New York Mercantile Exchange fell 4.1 cents to $4.078 per million British thermal units. ③ The mild weather and low demand in March allowed utilities to increase gas inventories in March for the first time since 2012, the second time in history, energy traders said. ④ Nevertheless, natural gas inventory is still about 5% lower than normal, as extreme cold weather in January and February caused energy xm-links.companies to withdraw large amounts of natural gas from their inventory. ⑤ In the spot market, the Waha hub gas price in the Permian Shale in West Texas turned negative for the third time this year, as pipeline maintenance caused gas related to oil production to be trapped. ⑥ Financial xm-links.company LSEG said that average natural gas production in 48 U.S. states rose to a record 106.1 billion cubic feet per day in March, up from 105.1 billion cubic feet per day in February. ⑦ Meteorologists expect temperatures in 48 local states in the United States will mostly remain above normal levels by April 16, which will curb natural gas demand. ⑧LSEG expects that the average natural gas demand (including exports) in 48 states in the United States will rise from 102.9 billion cubic feet per day this week to 105 billion cubic feet per day next week, but is still lower than Monday's expectations. ⑨ Natural gas flow at U.S. LNG export plants hit a record 15.8 billion cubic feet per day in March, up from 15.6 billion cubic feet per day in February, as new installations at the Prakmin LNG plant in Louisiana were put into operation. ⑩The natural gas prices of the Dutch Natural Gas Trading Center (TTF) in Europe and the Japanese and Korean LNG price benchmark (JKM) in Asia are both around US$13/million BTU.

Trump tariffs bring uncertainty to the inflation outlook in the euro zone

①Dutch International Group economist Bert Colijn pointed out that trade turmoil may undermine efforts to stabilize prices, and European policymakers have low visibility into inflation. ② On Tuesday, data showed that the eurozone's inflation rate cooled in March, approaching the ECB's 2% target, which could pave the way for another rate cut at its meeting later this month. ③However, with the approaching U.S. trade tariffs and possible retaliation measures by the EU, the direction of inflation in the euro zone is unpredictable. ④Colijn said that U.S. tariffs may put deflationary pressure on the euro zone market because tariffs will curb exports and thus suppress economic growth. ⑤ But the European xm-links.commission's retaliation measures may push up inflation in the euro zone.

Germany Treasury bonds rise, yield curve flattening

① According to IFR News on April 1, German Treasury bonds (Bunds) prices rose again, mainly supported by global growth concerns (induced by tariff issues), weak housing data in the UK in March and a lower-than-expected March manufacturing PMI data. ②The German Treasury Debt on the same dayThe highest price reached 129.56, close to the previous day's high of 129.59. As Treasury bond prices climbed, the "receive" side in the swap market performed strongly. ③ Futures-driven accounts are more active among short-term Treasury bonds. The yield on the 2-year Treasury bond fell from 2.175% to 2.15%, and the 3-year Treasury bond fell from 2.235% to 2.21%. ④ In the middle part of the yield curve, the "receive" end is also slightly enhanced. The yield on the 5-year Treasury bond fell from 2.37% to 2.34%, and the 10-year bond fell from 2.62% to 2.5825%. ⑤The overall yield curve tends to flatten. The spread of 2-year and 10-year Treasury bond yields narrowed from 44.5 basis points to 43 basis points. The spread hit a low of 32.5 basis points on March 19, while the high of 47.75 basis points on March 28, and the spread currently fluctuates within this range.

Trump will not announce any specific details about pharmaceutical tariffs

① According to four people familiar with the matter, Trump will not announce any specific details about pharmaceutical tariffs on Wednesday. Previously, drugmakers have been lobbying Trump to gradually impose tariffs on imported drugs, hoping to reduce the impact of tariffs and buy time for production transfers. ②Trump has said that after imposing tariffs on other industries, taxes on the pharmaceutical industry will be announced soon, which has been exempted previously. ③ Although Trump will not announce details yet, large multinational pharmaceutical xm-links.companies have predicted that the U.S. tariffs on medical products are inevitable, and they hope that tariffs can be gradually raised to 25%, rather than reaching this level from the outset.

Eurozone factories show signs of recovery, Asia is set by US tariffs

① According to Reuters on April 1, euro zone factories showed signs of meaningful recovery in March, but most of Asia are set by US tariff rhetoric and slowing global demand, and factory activity mostly weakened. ② Trump in the United States plans to announce a xm-links.comprehensive tariff proposal on April 2, and has previously imposed tariffs on aluminum, steel, automobiles and all goods. ③ Nevertheless, the eurozone manufacturing industry showed signs of recovery for the first time in March, with PMI showing manufacturing output rising for the first time in two years, but trade tariffs could weaken this upward momentum. ④ The euro zone's manufacturing purchasing managers' index (PMI) rose to 48.6 in March, close to the 50 boom-bust line, and the output index rose from 48.9 to 50.5. ⑤ The German economy showed signs of recovery and the French economy slowed down, but British manufacturers' new orders decreased significantly due to tariff threats and upcoming tax revenues, and optimism weakened. ⑥In Asia, the decline in factory activity in Japan in March was the fastest in a year, with PMI falling for the ninth consecutive month. ⑦ South Korea's factory activity accelerated in March, and Vietnam's manufacturing PMI rose from 49.2 in February to 50.5 due to weak domestic demand. ⑧ Other indicators show that South Korea's export growth is lower than expected, and a quarterly survey by the Bank of Japan shows that business sentiment by large manufacturers has fallen to its lowest level in a year.

Polish opposition presidential candidate calls for interest rate cuts

①Poland's largest opposition party Law and justiceCarol Navrodsky, a presidential candidate supported by the Party (PiS), called on the central bank to cut interest rates to reduce consumer borrowing costs. ②Navrotsky said in a video on Tuesday that Poles needed lower loan installments, calling on the Monetary Policy xm-links.committee to cut interest rates to relieve millions of borrowers. ③ Since October 2023, the credit costs in Poland have remained unchanged and have become a hot topic in the presidential campaign. The first round of elections is scheduled to be held on May 18, and the second round of voting is expected to be held on June 1. ④ Rafar Tratskovsky, the current leading candidate and representative of the Citizen Union (KO) of Prime Minister Tusk, has repeatedly stated that the cost of borrowing should drop. ⑤Simone Holonia, the Speaker of the Lower House of Parliament and the candidate for the third road to the right in the middle, also called for a rate cut. ⑥ Polish Central Bank Governor Adam Grapinsky (appointed by PiS when he was in power) reiterated last week that Poland's higher inflation rate has left no room for policy easing. ⑦ Polish central bank deputy governor Marta Kitley said last week that when inflation rises, politicians call for interest rate cuts will put Poland at long-term risk of high inflation, and she also emphasized the independence of the central bank. ⑧The annual inflation rate in March was 4.9%, the same as in February, and far higher than the central bank's inflation target cap of 1.5% to 3.5%. ⑨ Despite this, some members of the Monetary Policy xm-links.committee said that policy relaxation may begin in the second half of the year after the central bank issued its inflation forecast in July. ⑩ The xm-links.committee will announce its decision on Wednesday, but analysts surveyed by Reuters do not expect a rate cut in April, and the Polish central bank has maintained the main interest rate at 5.75% since October 2023.

The advancement of the IMF agreement in Argentina is still difficult to resolve the currency fog

① Argentina and the IMF have entered the final stage of negotiations on a new US$20 billion plan, but have not eliminated traders' anxiety and uncertainty about the peso prospects. Since the implementation of strict capital controls in 2019, Argentina's negotiations aim to rebuild investor confidence and enrich foreign exchange reserves, but uncertainty in foreign exchange policy has led to further loss of reserves. ②Since mid-March, the market's bet on peso depreciation has caused the central bank to spend $1.6 billion to stabilize its currency, and peso futures soar, despite the government's denial of rumors of depreciation. Analysts and investors remain cautious due to lack of IMF program details and uncertainty about future situations in exchange rates and capital controls. ③On March 31, the Argentina national risk index 11EMJ soared 62 points to 863 basis points, close to the November high, reflecting the decline in investor confidence in the country's sovereign debt, and local bonds, parallel peso markets and stocks also fell. ④ After President Mile took office in December 2023, he implemented a zero-deficiency spending reduction plan. Net foreign exchange reserves improved from negative US$11 billion to negative US$4 billion, but then reversed. The market needs more details about the IMF agreement, otherwise it will be difficult to alleviate "pure suspicion" of the exchange rate. ⑤ Since mid-March, the central bank's sale of USD to support peso, causing total reserves to drop from US$33 billion in January to US$26 billion. Analysts have differences on the peso policy and what may happen under the IMF agreement and the timelines,The downward trend may continue until the outlook for foreign exchange rates is clear.

3. Trends of major currency pairs in the New York Stock Exchange before the market

Euro/USD: As of 20:20 Beijing time, the euro/USD fell and is now at 1.0787, a drop of 0.27%. Before the New York Stock Exchange, the euro-dollar price rose slightly in recent intraday trading driven by positive signals from stochastic indicators as prices managed to vent oversold saturation there, but prices remained below the key resistance of $1.0830, with negative pressure as trading below the 50-candle SMA.

GBP/USD: As of 20:20 Beijing time, GBP/USD fell and is now at 1.2895, a drop of 0.18%. Before New York, the GBP/USD price rose slightly in recent intraday trading while trying to vent oversold saturation in the stochastic indicators and send positive signals from it, but despite the recent rise, prices remain below the main uptrend line in the short term, increasing the likelihood of default, especially as trading below the 50-day SMA leads to persistent negative pressure.

Spot gold: As of 20:20 Beijing time, spot gold rose, now at 3132.07, an increase of 0.26%. Before New York, gold prices fell slightly in recent intraday trading as it gathered positive rebound momentum while trying to vent overbought saturation in the stochastic indicators from which negative signals flowed out, with the dominant uptrend as prices traded along secondary trend lines in the short term.

Spot silver: As of 20:20 Beijing time, spot silver fell, now at 33.833, a drop of 0.67%. Before New York, silver prices traded sideways at the intraday level while trying to gather positive momentum to return to highs as it also maintained an upward short-term trend line, gaining additional positive support as the trade was above the 50 candle SMA.

Crude oil market: As of 20:20 Beijing time, U.S. oil fell, now at 71.320, a drop of 0.22%. U.S. crude oil prices expand in the latest intraday trading before New YorkWith the increase, the upward correction trend dominated in the short term, as the trading was above the 50-candle SMA, the stochastic indicators showed positive signals despite reaching the overbought level.

4. Institutional View

Bank of the Netherlands: The ECB must protect economic recovery from hawks

Bank of the Netherlands analyst Christophe Boucher said that the ECB should not allow hawks to take advantage of the just-appearing economic rebound. The euro zone's annual inflation rate slowed again in March to 2.2%, close to the ECB's 2% target. Trade tariffs may lead to a surge in inflation, but the impact is only temporary. While there are positive signs of economic growth and labor markets, the ECB may need to continue to cut interest rates to ease the policy burden on the eurozone economy. The ECB should not view this as a reason to stop the rate cut cycle, as some hawkish officials have suggested. Boucher warned that tightening of the ECB tone could affect confidence and ultimately demand.

Dutch International: Tariffs cast a shadow on the cooling of inflation in the euro zone

Dutch International Group economist Bert Colijn said European policymakers have difficulty assessing inflation prospects as trade turmoil may undermine efforts to stabilize prices. Data released on Tuesday showed that euro zone inflation cooled last month, close to the 2% target of the European Central Bank. This could lead to another rate cut at the central bank meeting later this month. But with the EU likely to take the same retaliation measures, the direction of eurozone inflation is difficult to predict as Trump's tariffs are about to be announced. U.S. tariffs could put deflationary pressure on eurozone markets as they would curb exports and thus growth. However, the European xm-links.commission's retaliatory measures could push up inflation in the euro zone.

Deutsche Bank: As core inflation cools down, the ECB may cut interest rates again

xm-links.commerzbank analyst Vincent Stamer said that with more and more signs of cooling down price pressure, the possibility of interest rate cuts in the euro zone seems to be increasing. Data released on Tuesday showed that the annual inflation rate in March fell to 2.2% from 2.3% in February, closer to the 2% target set by the European Central Bank, and the closely watched core inflation is also cooling down. This will help ECB policymakers, making them more willing to cut interest rates amid slow economic growth. This makes it much more likely to cut key interest rates in April than to suspend rate cuts. According to LSEG data, the euro zone currency market is expected to cut interest rates by more than 80%.

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