Recent preliminary data from Rengo, Japan's largest trade union confederation, showed that its member organizations secured an average wage increase of 5.26% this year, slightly above last year's 5.25%. Major corporations such as Toyota, Honda, and Hitachi fully met union demands. This outcome has heightened market expectations for an interest rate hike by the Bank of Japan. Overnight index swaps indicate a roughly 60% probability of a rate hike as early as April, while an economist from S&P Global Market Intelligence forecasts the central bank will raise rates to 1% in July. However, surging energy prices driven by escalating Middle East conflicts threaten corporate profit margins and could dampen consumer demand, testing the virtuous cycle between wages and inflation.
In a related development, Goldman Sachs has raised its 2026 oil price forecast, citing prolonged disruptions to shipping through the Strait of Hormuz and increased structural concerns over supply concentration. The bank's bullish outlook on oil and energy reinforces expectations of persistent inflationary pressures, which may support commodity-linked currencies while amplifying uncertainties over central bank policies. Its latest projections assume oil transit through this critical Middle Eastern chokepoint will operate at just 5% of normal levels for up to six weeks—a more severe and prolonged disruption than previously anticipated. Goldman Sachs further expects that restoring full transport capacity will take an additional month, indicating a gradual rather than immediate supply recovery.
Key economic data to watch today include preliminary March SPGI manufacturing PMI for the Eurozone, preliminary March SPGI services and manufacturing PMI for the UK, and preliminary March SPGI manufacturing PMI for the US.
Gold/USD Gold declined sharply yesterday, briefly falling below the 4,100 level to hit a 17-week low, and is currently trading around 4,350. Continued expectations of Federal Reserve interest rate cuts have weighed on gold, alongside recent hawkish signals from several central banks. However, a softer US dollar, driven by reduced safe-haven demand following comments from former President Trump, limited the decline. Resistance is seen near 4,500, with support around 4,200.
USD/JPY The USD/JPY pair moved lower in a volatile session, closing slightly down and currently trading near 158.60. Profit-taking exerted some selling pressure, while a weaker US dollar—attributed to diminished safe-haven appeal after Trump's remarks—also contributed to the decline. Concerns over potential currency intervention by Japanese authorities and renewed expectations for a Bank of Japan rate hike added further downward pressure. Resistance is near 159.50, with support around 157.50.
USD/CAD USD/CAD rebounded from session lows to end marginally higher, currently trading near 1.3750. Short covering provided some support, but the main driver was a sharp drop in crude oil prices following speculation that Trump could soon help end ongoing conflicts. A weaker US dollar, however, limited the pair's upward momentum. Resistance is seen near 1.3850, with support around 1.3650.
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