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On April 27th, data from the State Taxation Administration showed that in the year since the implementation of the "instant tax refund upon purchase" policy for departing tourists, the number of people applying nationwide has increased by 12.96 times year-on-year, while the sales volume and amount of tax refunds have increased by 9.35 times year-on-year, demonstrating rapid growth in business scale. It is understood that "instant tax refund upon purchase" means that in regions where the departing tourists have implemented the tax refund policy, when purchasing tax-refundable goods at "instant refund" stores, they can sign an agreement and pre-authorize their credit cards to receive a refund in RMB equivalent to the tax amount on-site at the store. The government actively encourages eligible tax refund stores to provide "instant refund upon purchase" services. Currently, there are over 8,000 tax refund stores nationwide offering this service, an increase of over 100% compared to when the policy was first rolled out nationwide a year ago.On April 27th, Kei Fujimoto, an economist at Sumitomo Mitsui Trust Asset Management, stated that the Bank of Japan is expected to maintain its policy rate at 0.75% on Tuesday. However, even if it pauses its actions, it doesnt necessarily mean a further postponement of interest rate hikes. He said, "The Bank of Japan has repeatedly emphasized that financial conditions remain accommodative, and its policy stance still leans towards tightening." The economist added, "If tensions in the Middle East ease and uncertainty decreases even slightly, the likelihood of a rate hike in June or July will increase."April 27th - The Bank of Japan will announce its interest rate decision on Tuesday. Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, stated that the market is currently paying close attention to the extent to which Bank of Japan Governor Kazuo Ueda will hint at a possible rate hike in June. Such comments will alter market expectations regarding the policy rate path and could potentially impact the Japanese government bond yield curve.On April 27th, Kei Fujimoto, an economist at Sumitomo Mitsui Trust Asset Management, stated that the yen is likely to remain weak regardless of how the situation in the Middle East develops. He said, "Even if the conflict with Iran eases, oil prices are likely to remain high given the continued supply constraints. Concerns about deteriorating fiscal conditions and a weakening trade balance are expected to persist, making it difficult for the yen to appreciate in the short term." He also pointed out that given the current yen weakness is driven more by economic fundamentals than speculative factors, the effectiveness of foreign exchange market intervention may be limited.The Federation of Thai Industries reported that Thailands automobile production rose 2.69% year-on-year in March (compared to 3.43% in February).

Dow Jones, EUR/USD, USD/JPY, AUD/USD, GBP/USD, EU CPI, BOJ, and US GDP for the Week Ahead

Drake Hampton

Apr 25, 2022 10:49

For the fourth consecutive week, the Dow Jones Industrial Average (DJIA) fell nearly 2% as risk sentiment deteriorated rapidly into the weekend. The catalyst appeared to be a discernible increase in the Fed's rhetoric about significantly tightening policy in response to soaring inflation that threatens to undermine the economic recovery. Rate traders responded by increasing their bets on 50 basis point rate hikes via overnight index swaps, which currently price in complete 50 basis point raises for the next three FOMC meetings. The preliminary gross domestic product (GDP) growth rate for the United States is scheduled to be released on Tuesday, which will indicate how much the economy increased in March.

 

This resulted in a rebound rout in Treasuries, which spread to the rest of the world's financial markets. Government bond yields increased across the board, from UK Gilts to German Bunds. The French election this weekend may result in some European bond repricing, but the impact is likely to be minor in the event of a Macron victory. A Le Pen triumph, on the other hand, would almost certainly have a rattling effect, although polls indicate that is an improbable prospect. Eurozone inflation data for the first quarter may spark some volatility trading in EUR/USD. According to a Bloomberg survey, economists anticipate Q1 core inflation to be 3.1 percent year on year.

 

The risk-sensitive Australian and New Zealand Dollars fell against the Greenback in the Asia-Pacific region. Australia is expected to release its first-quarter inflation figures, with analysts anticipating an increase to 4.6 percent from 3.6 percent year over year. A stronger-than-expected reading could spark a recovery in the battered AUD/USD pair. A broad decline in metal prices weighed on sentiment around the Australian Dollar, which remains under pressure due to continued Chinese lockdowns.

 

USD/JPY could witness a turnaround following Thursday's Bank of Japan policy meeting outcome. The central bank has been assertive in recent months in attempting to contain bond yields, and no adjustment in the benchmark rate is expected this week. However, a change to the central bank's inflation targets may result in some currency repricing. Last week, options traders began to unwind bearish bets on the Yen, as demonstrated by a decline in one-week risk reversals. Another significant focus is the Bank of England's rate hike bets, following a bad batch of statistics that put doubt on the United Kingdom's economic recovery, with retail sales and PMIs falling short of expectations.

Weekly Performance of the US Dollar Against Currencies and Gold

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