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JAPAN GDP SLIPS LESS THAN EXPECTED IN Q1



Japan's gross domestic product contracted an annualized 1.0 percent in the first quarter of 2022, the Cabinet Office said in Wednesday's preliminary reading.

That exceeded expectations for a decline of 1.8 percent following the downwardly revised 3.8 percent increase in the previous three months (originally 5.4 percent).

On a seasonally adjusted quarterly basis, GDP slipped 0.2 percent - but that also beat forecasts for a fall of 0.4 percent following the downwardly revised 0.9 percent gain in the three months prior.

Capital expenditure rose 0.5 percent on quarter, missing forecasts for an increase of 0.7 percent but still up from 0.4 percent in the previous quarter. External demand was down 0.4 percent on quarter.

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JAPAN CORE MACHINE ORDERS JUMP 7.6% ON YEAR IN MARCH



The value of core machine orders in Japan was up 7.6 percent on year in March, the Cabinet Office said on Thursday - coming in at 869.5 billion yen.

That beat forecasts for an increase of 3.7 percent and was up from 4.3 percent in February.

On a seasonally adjusted monthly basis, core machine orders climbed 7.1 percent - also exceeding expectations for 3.7 percent following the 9.8 percent contraction in the previous month.

For the first quarter of 2022, core machine orders fell 3.6 percent on quarter and gained 6.1 percent on year after advancing 5.1 percent on quarter and 6.4 percent on year in the three months prior.

For the second quarter of 2022, core machine orders are seen lower by 8.1 percent on quarter and 5.6 percent on year.

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JAPAN CONSUMER PRICES RISE 2.5% ON YEAR IN APRIL



Consumer prices in Japan were up 2.5 percent on year in April, the Ministry of Internal Affairs and Communications said on Friday.

That exceeded expectations for an increase of 2.4 percent and was up sharply from 1.2 percent in March.

Core CPI, which excludes volatile food prices, was up 2.1 percent on year - in line with expectations and up from 0.8 percent in the previous month.

On a monthly basis, overall inflation rose 0.4 percent - unchanged from the March reading.

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AUSTRALIAN DOLLAR CLIMBS AFTER LABOR VICTORY IN FEDERAL ELECTION



The Australian dollar appreciated against its most major counterparts in the Asian session on Monday, after the country's Labor Party won the federal election held over the weekend, defeating the ruling party for the first time since 2013.

Labor Party leader Anthony Albanese was sworn in as the new Prime Minister and is set to form a majority government.

"Australians have voted for change. My government intends to implement that change in an orderly way," Albanese said in his first press conference.

Outgoing PM Scott Morrison admitted the defeat on Saturday and said that he would step down as leader of his conservative Liberal Party.

Investors cheered the election result that delivered a clear winner, helping lift the Australian stock market and the domestic currency.

Asian shares were mixed as investors focused on a rise in Covid cases in China's capital Beijing and the outlook for the global economy.

The aussie showed mixed performance against its major rivals on Friday. While it rose against the euro, it held steady against the greenback and the yen. Versus the kiwi, it fell.

The aussie was up by 1.2 percent against the greenback, touching over a 2-week high of 0.7126. The pair had finished Friday's deals at 0.7041. The aussie may face resistance around the 0.73 region, if it gains again.

The aussie added 1.1 percent to touch a 5-day high of 91.04 against the yen. The pair was valued at 90.09 when it ended trading on Friday. Further rally in the currency may challenge resistance around the 93.00 level.

The aussie firmed to over a 2-week high of 1.4885 against the euro, gaining 0.6 percent from Friday's close of 1.4980. Next near term resistance for the aussie is likely seen around the 1.45 level.

The aussie registered a gain of 0.8 percent against the loonie, reaching nearly a 2-week high of 0.9109. At Friday's close, the pair was worth 0.9040. Should the aussie strengthens further, it is likely to test resistance around the 0.92 region.

The aussie, however, dropped to nearly a 3-week low of 1.0973 against the NZ currency from last week's closing value of 1.0987. The aussie is seen facing support around the 1.075 area.

Looking ahead, German Ifo business sentiment index for May will be released in the European session.

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JAPAN MANUFACTURING PMI SLIPS TO 53.2 IN MAY - JIBUN BANK



The manufacturing sector in Japan continued to expand in May, albeit at a slower pace, the latest survey from Jibun Bank showed on Tuesday with a manufacturing PMI score of 53.2.

That's down from 53.5 in April, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

Both output and new order growth slowed to a marginal pace that was the weakest for three months. Manufacturers commonly noted heightened supply chain pressures, as delivery times lengthened to the greatest extent since the earthquake and tsunami in April 2011, exacerbated by material shortages and renewed lockdown restrictions in China. This contributed to the third-strongest increase in input prices in the survey history.

The survey also showed that the services PMI improved to 51.7 in May from 50.7 in April, while the composite PMI rose to 51.4 from 51.1.

The easing of pandemic-related restrictions and the diminishing impact of the virus were cited as key reasons for the uplift, notably in the tourism sector. Concurrently, the level of new business received returned to expansion territory, and at the quickest rate since last December. That said, firms continued to face sharp rises in input prices, with the latest increase the steepest in the survey history.

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NEW ZEALAND RATE DECISION ON TAP FOR WEDNESDAY



The Reserve Bank of New Zealand will wrap up its monetary policy meeting on Wednesday and then announce its decision on interest rates, highlighting a modest day for Asia-Pacific economic activity.

The RBNZ is widely expected to boost its Official Cash Rate by 50 basis points, from 1.50 percent to 2.00 percent.

Singapore will release final Q1 figures for gross domestic product, with forecasts suggesting an increase of 0.8 percent on quarter and 3.7 percent on year - slowing from 2.3 percent on quarter and 6.1 percent on year in the previous three months. Singapore also will see Q1 data for current account; in the previous three months, the surplus was SGD25.72 billion.

Australia will provide Q1 numbers for construction work done, with forecasts suggesting an increase of 1.0 percent on quarter following the 0.4 percent contraction in the previous three months.

Japan will see final March figures for its leading and coincident economic indexes; in February, their scores were 100.1 and 96.8, respectively.

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US stock indexes fall on Monday



Main US stock indexes closed in negative territory on Monday, with the Dow Jones shedding 0.2%, the S&P 500 losing 0.3%, and the NASDAQ declining by 0.72%.

Equities were negatively affected by the preliminary US GDP data for January-March 2022. Economists expect the US economy to shrink by 1.5% quarter-over-quarter.

Market players also assess the state of the global economy amid soaring inflation and the resulting policy measures by central banks. Some investors are concerned an aggressive monetary tightening cycle could lead to a recession.

On the Dow Jones, the best-performing stocks were United Health Group, Inc. (2.02%), Chevron, Corp. (1.93%), and Merck & Co., Inc. (1.37%), as well as Nike, Inc., (2.13%).

The worst-performing stocks were Salesforce, Inc. (-2.48%) and Boeing, Co. (-1.99%).

On the S&P 500, the best-performing stocks were Valero Energy, Corp. (8%), Devon Energy, Corp. (7.48%), and Hess, Corp. (5.18%).

The worst performing stocks on the S&P 500 were Etsy, Inc. (-3.55%), Electronic Arts, Inc. (-3.53%), and Autodesk, Inc. (-3.43%).

On the NASDAQ, the biggest gainers were Evofem Biosciences, Inc. (187.71%), Acutus Medical, Inc., (87.59%), and Epizyme, Inc., (55.14%).

The biggest losers were Powerbridge Technologies, Co., Ltd. (-34.95%), Borqs Technologies, Inc. (-24,38%), and Enochian Biosciences, Inc. (-21,92%).

Shares of Coinbase Global dived by 9.3% after Goldman Sachs downgraded it to a sell rating.

Rising stocks outnumbered declining ones on the New York Stock Exchange by 1,756 to 1,418. On the NASDAQ Stock Exchange, 1,959 rose and 1,850 declined.

The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, decreased by 1.03% to 26.95.

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The cost of bitcoin is falling, but many experts give positive forecasts



Bitcoin started Tuesday morning with a decline. At one point, the coin traded at $21,141. According to the website for tracking the value of digital assets CoinMarketCap, over the past 24 hours, the lowest price of bitcoin reached $20,577, and the highest – $21,478.

Bitcoin has demonstrated confident positive dynamics until Tuesday, since June 18.

Altcoin Market B
itcoin's main competitor, the Ethereum altcoin, also started Tuesday's trading session with a drop and at one point it had reached the $1,182 mark.

As for cryptocurrencies from the top 10 by capitalization, over the past 24 hours, all virtual assets, with the exception of a few stablecoins, have been declining in value. At the same time, Dogecoin (-6.77%) recorded the sharpest drop. According to the results of the past week, this cryptocurrency, on the contrary, showed the best results, soaring by 15.81%.

According to the world's largest aggregator of data on virtual assets CoinGecko, over the past day in the top 100 most capitalized digital assets, the Chiliz coin topped the list of leaders (+15.2%), and the first place in the drop list went to Synthetix Network Token (-13.0%).

Assessment of the market situation

Experts believe that the main reason for such a spectacular collapse of the crypto market in June is the loss of investors' appetite for risks. The weekly trading volumes of bitcoin and Ethereum fell below the levels of 2021.

At the same time, since the beginning of this year, the trading activity of the main altcoin has decreased significantly more than the indicators of the BTC. So, since January 2022, amid extreme market conditions, the outflow of users from the Ethereum network has increased by 28%.

Many analysts believe that it is not worth waiting for the recovery of the activity indicators of the leading cryptocurrencies in the near future, because the current bear market has become the most painful and protracted for the digital asset market in the entire history of their trading. At the same time, the key factors that led to such a deplorable state of cryptocurrencies, experts call a record increase in inflation and the tight monetary policy of the world's central banks.

For comparison, back in November 2021, the total capitalization of the virtual coin market exceeded the $3 trillion mark. Now this indicator balances at the level of $1 trillion.

An equally important proof of the seriousness of current market conditions was the decrease in the spot value of bitcoin below the selling price by 11.3%. Now traders are forced to sell their cryptocurrency at a significant loss. This situation in the virtual asset market is observed only for the fifth time since the launch of bitcoin in 2009.

What awaits bitcoin in the future?

The prolonged agony of the virtual asset market forces experts to make the most unexpected predictions about its future. Recently, analysts from Arcane Research suggested that the potential for reducing the value of bitcoin remains at $10,350.

Earlier, Jeffrey Gundlach, CEO of DoubleLine investment company, said that bitcoin could soon collapse to the $10,000 mark after a series of recent falls that made investors seriously doubt the stability of the cryptocurrency markets.

At the same time, some crypto experts continue to believe in the bright future of the first cryptocurrency. So, recently, a popular analyst and microblog presenter under the nickname Crypto Rover suggested that bitcoin has not yet completed growth and ahead of it is the fifth, final wave of positive movement.

A similar opinion is shared by the CEO of the software company XOR Strategy. So, recently, Aurelien Ohayon said that the BTC has reached a cyclical bottom and will soon make a rebound from the lows, starting a new growth cycle. If his assumption becomes a reality, Ohayon believes, by the end of June, the MTC can easily reach the level of $30,000.

Previously, well-known trader Peter Brandt predicted the return of bitcoin to a bullish trend when the BTC market dominance index will surely recover above 50%. At the moment, this indicator is balancing at 43.4%. It fell below the 40% level back in January 2022 and has not crossed the 50% mark since then.

Mike Novogratz, CEO of virtual asset management company Galaxy Digital, is also confident that the worst time for bitcoin is over. The analyst suggested that the main reason for the current sales in the crypto market was the liquidation, and not the deliberate refusal of traders from digital assets. According to Novogratz, the record volatility of cryptocurrencies eliminated too many orders, which triggered the recent collapse of the BTC below $18,000.

Despite all his optimism about the future of digital coins, Novogratz admits that a large-scale recession is coming to the crypto market, which will significantly hit the global economy.

Novogratz believes that bitcoin will be able to confidently turn to a bullish trend when the US Federal Reserve stops its tight monetary policy and a permanent increase in the key interest rate. According to the expert's calculations, the virtual asset market will remain in a state of recession for about 18 months.

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The euro is looking for a bottom



Inflation statistics for Germany misled the markets at the moment. Judging by the slowdown in the indicator in the locomotive of the European economy, some players began to anticipate a possible peak in inflation. A similar report from Spain somewhat grounded the markets, as inflation in this country was higher than expected.

Inflation Rate in Germany (M/M)
Market players will now look for clues on how the European Central Bank will behave at the upcoming meeting in July. Will the central bank take into account the fact that the worst of the current spikes in inflation may have passed and it will be possible to apply a less aggressive approach to raising rates.

At the moment, the ECB is ready to raise rates in July and then in September. The size and number of upcoming increases matter for the euro. If the meeting talks about 50 bp, it will be seen as a strong commitment to normalizing policy and potentially support the single currency.

The softening of inflation indicators may be a good reason for a symbolic rate hike– by only 25 bps. This will disappoint the players, as they are already set up for a more aggressive approach by the ECB. Lower inflation data may also mean a reduction in the frequency of rate hikes. In other words, the tightening will not happen monthly, as investors think.

Prior to the release of inflation data, the markets predicted a rate hike of at least 30 bps. The main scenario, after all, was an increase of 50 bp, besides, this figure increasingly surfaced in analytical and financial reviews.

It is worth noting that on June 13, the market expected the ECB deposit rate to peak at 2.48%, but since then it has fallen and as of June 27 was at 2.04%. There is reason to believe that this value will become even lower further.

Holding back expectations of a rate hike will trigger a mechanical reaction of the euro's decline, as was seen at midweek trading. Consequently, the summer consolidation of the EUR/USD pair may be limited to 1.0350-1.0642, and not 1.0350-1.0800.

Be that as it may, the euro does not look completely hopeless. Annual CPI in Spain for May was 10.2%, which is higher than expected 9% and 8.7% for the previous period. It is too early to talk about the stabilization of the inflationary situation in the euro area as a whole, so the ECB is likely to maintain its current rate.

Bank of America Forecast
The euro's weakness is due to the softness of the ECB and the periphery.

When it comes to a raise, it will be difficult for the central bank to keep up with other major central banks tightening policy. The policy divergence between the major central banks will be a key driver of the exchange rate in the coming months, according to Bank of America.

The ECB was left with the lowest interest rate in the G-10. While the majority is starting a quantitative tightening (reversal of easing) program, the ECB is only now about to complete its quantitative easing.

Analysts are convinced that Europe will not begin quantitative tightening until at least the end of 2024. The rate is likely to be increased by 25 bp in July.

The ECB will remain dovish compared to other members of the Big 10 until it eliminates the risks of fragmentation. In this regard, market players will pay more attention to how the ECB solves the issue of curbing the yield of Italian and Greek bonds.

Failure to solve this problem is highly likely to destabilize the eurozone and, therefore, is a key risk for the prospects of the euro.

However, ECB representatives have recently started talking about tools to ensure that the difference in bond yields between different countries remains stable, thereby containing risks. The information was once again reiterated by ECB President Christine Lagarde during her speech at the annual ECB forum.

In the near future, there will be a plan according to which the central bank will continue to buy bonds of vulnerable countries, which will limit the yield that these bonds pay, and therefore limit the cost of borrowing.

To compensate for the stimulus, the bank will pump out liquidity from other parts of the system, potentially offering banks attractive interest rates to hold cash with the ECB, Reuters reports. This is known as the "sterilization" program.

Bank of America has little faith in promises. If we are talking about the development of an instrument, this means that it is not in the ECB.

Bank of America's medium-term forecasts for the euro remain pessimistic until the end of this year. In the long term, a gradual return to equilibrium is expected.

"We maintain our forecast for EUR/USD for this year at 1.0500, which is still below the consensus forecast of 1.1000," analysts write.

In 2023, the quote is expected to be at the level of 1.1500, increasing to 1.2000 in 2024. Nevertheless, uncertainty remains high for these years as well.

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Dollar moving away from the decline, and the sliding euro is far from slowing down



The US currency is firmly in the leading positions, once again confirming its strength. At the same time, experts fear that the fall of the euro in the EUR/USD pair, which began last week, will continue.

At the end of the past week, the greenback demonstrated a reduction in price in relation to the euro, which continued to weaken. Disappointing reports on the US industrial sector turned out to be the driver of the USD decline. According to current data, the index of business activity in the American industry (ISM Manufacturing) fell to 53% in June from 56.1% in May.

Against this background, the European currency sank significantly against the American one. The catalyst for the fall of the EUR was a large-scale acceleration of annual inflation in 19 eurozone countries. According to reports, inflation made a dizzying turn in June, rising to 8.6% from the previous 8.1%. According to experts, this is another record rise, which increases the likelihood of a tightening of the monetary policy by the European Central Bank.

Many market participants are confident that the ECB may raise the rate again at the July meeting. The reason is the prolonged acceleration of inflation and the risk of its increase. In the current situation, the ECB is ready to revise its forecast of economic growth downward. Against this background, fears about stagflation in the eurozone are growing.

Earlier, ECB President Christine Lagarde expressed concerns about the recession, but hoped for a favorable outcome for the eurozone economy.

However, a number of negative factors, such as galloping inflation, low economic growth and a prolonged energy crisis, increase the central bank's concern about a significant downturn in the European economy.

Against this background, the greenback has noticeably strengthened, once again "stepping on the heels" of the euro. On the morning of Monday, July 4, the EUR/USD pair was trading at 1.0433, approaching 1.0349 – a five-year low reached in May. According to analysts, such actions mean a flight to the dollar on the part of investors.

Some market participants prefer to invest in USD amid unfavorable prospects for the global economy. At the same time, experts record a number of alarming signs indicating a weakening of the US economy. It should be noted that personal spending in the United States decreased to 0.3% in June from the previous 0.6%. At the same time, the inflation rate is gradually decreasing, and the labor market in the United States is showing steady growth. And so the markets expect the Federal Reserve to continue fighting high inflation and tightening monetary policy.

At the beginning of this week, risky currencies were trading near multi-year lows against the greenback, while the euro remained under pressure. Investors prefer safe haven assets, primarily the dollar. Powerful financial injections supported the latter, allowing it to strengthen against the currencies of exporting countries. Additional support for the USD was provided by the deterioration of the prospects for the global economy. Currently, the greenback is held at high levels, and the dollar index has consolidated near 105,100, approaching the high in the last 20 years. The growth of the US currency was not prevented by the doubts of market participants about the next rise in interest rates in the United States.



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