Kazuo Ueda, Japan's nominee for the new central bank governor, spoke at a confirmation hearing on Friday. He believes monetary policy should focus on closely watching economic and price outlooks, with Japan's current economy recovering but uncertainty high. While consumer inflation is above the Bank of Japan's target, Ueda says it is driven by rising import prices, not strong demand, and will likely fall below 2% next year. He believes it will take some time to sustainably achieve the BOJ's 2% target. Ueda emphasised the importance of maintaining monetary easing to achieve the target in a sustainable and stable fashion, along with wage hikes.
EQUITY
On Thursday, the US stock market rebounded after a four-day slump. Investor uncertainty about Federal Reserve interest rate policy continued, while economic data showed unexpected improvement with lower jobless claims and a 2.7% increase in Q4 GDP. Positive earnings reports from tech companies Nvidia, Broadcom, Intel, and Qualcomm ease the worries of a continuous downturn. What's worrying is that the 1-year Treasury has reached a 5% yield, a 1.2% yield inversion compared to the 10-year Treasury.
GOLD
Gold prices closed slightly lower on Thursday. Uncertainty over interest rates and the possibility of a U.S. recession have spooked the markets, causing gold to be uncertain of its direction. Bloomberg Intelligence predicts higher gold prices this year due to a potential U.S. recession, but the labour market is persistent. Technically, it's at a critical break or reverse point that will be determined on Friday.
OIL
Oil prices rose on Friday, but fears of a slowdown in crude demand persist due to rising U.S. crude inventories and concerns over tightening global monetary conditions due to high inflation readings in several countries. The market is also monitoring the recovery in Chinese demand following COVID measures, although early indicators suggest parts of the economy are still struggling.
CURRENCY
The US dollar held steady with a 0.03% increase, supported by economic strength and persistent inflation. The Fed's meeting minutes gave no hints of a pause, and traders expect three more rate hikes by June. The US economy shows resilience, and strong economic data could extend the Fed's monetary policy tightening. However, a stronger dollar could lead to a harder landing if the economy keeps accelerating.
