The Eurozone’s Q1 GDP growth was revised down to 0.3%, missing forecasts, yet marked five quarters of expansion, bolstered by robust March industrial production (2.6% MoM, 3.6% YoY) and steady employment gains (0.3% QoQ, 0.8% YoY), signaling cautious optimism that may lead ECB hawks to tread carefully on rate changes amid geopolitical trade risks. Meanwhile, the ECB targets early 2026 to finalize plans for a digital euro, aiming for a launch within two to three years to reduce reliance on U.S. digital payment systems, seen as a vulnerability after Trump’s Transatlantic alliance exit, while Russia-Ukraine ceasefire hopes dim as Putin ignores demands and Trump shows no sign of backing heavier sanctions.

USDJPY is tracking the narrowing US-Japan 10-year yield gap, with Japan’s yields nearing two-week highs and US yields easing after data signaled slowing US growth. Japan’s Q1 GDP contracted more than expected at -0.7% annualized, raising concerns about a technical recession and likely delaying BOJ rate hikes until at least January, as trade talks with the US remain unresolved. Japan’s Finance Minister Kato aims to discuss currency volatility with US Treasury Secretary Bessent at the G7 meeting in Canada, while PM Ishiba targets a July trade deal but resists agreements retaining high US auto tariffs. A successful deal could revive BOJ hike expectations, while the yen may benefit if Asian currency appreciation talks reignite, amid a global slowdown boosting haven demand.

The PBOC has kept the yuan fixing near 7.2, signaling reluctance to allow rapid appreciation that could hurt Chinese export competitiveness, with yesterday’s weaker fix marking the first in four sessions, tempering bullish bets on yuan proxies like antipodean currencies. However, a temporary US-China trade truce and talks of currency appreciation among Asian exporters like South Korea and Japan could ease China’s concerns, potentially allowing faster yuan gains and boosting the yen, won, and antipodeans. This truce also supports Australia’s export sector, while former RBA board member Warwick McKibbin urged the RBA to hold rates steady next week, citing Australia’s fiscal stimulus, strong employment, and inflation near target amid global uncertainty.