Insights 
VT 
Japan released its preliminary Q1 GDP data, revealing a -0.7% annualised quarter-on-quarter decrease. This was the first decline in a year, underscoring challenges in the economic recovery. Exports decreased, despite global increases due to US tariffs.
Following the GDP data, the yen strengthened, with the deflator, indicating inflation, rising by 3.3% year-on-year. The USD/JPY moved down to approximately 145.00, later recovering to figures above 145.40, settling around 145.30.
New Zealand’s Inflation Expectations
The Reserve Bank of New Zealand shared its Q2 inflation expectations survey. Both 1- and 2-year inflation expectations increased, boosting the NZD/USD. The currency rose from about 0.5865 to above 0.5900.
The USD showed a slight decline against several currencies including the EUR, AUD, GBP, and CAD. Gold values decreased, falling below USD 3210.
The preliminary GDP figures from Japan show that output has fallen at an annualised pace of 0.7% compared to the previous three-month period—a drawdown we haven’t seen in about a year. That contraction reflects a cooling in demand both domestically and from abroad, with export activity slipping. What stands out is that this came despite broader global trends which usually suggest exports might hold up better, particularly with the US imposing tariffs that, in theory, should shift some trade flows. But in this case, that wasn’t enough to lift Japan’s outbound shipments.
After the release, the yen strengthened, which isn’t all that surprising considering the GDP deflator climbed by 3.3% year-on-year. That points to rising price pressures, so even though economic output contracted, inflation remains sticky. The USD/JPY edged lower towards 145.00 initially, only to bounce back above 145.40. It later settled very modestly lower near the midpoint of that range, suggesting limited conviction from either side around these levels.
When we shift attention to the South Pacific, the latest data from Wellington offered a modest push for the local currency. The Reserve Bank of New Zealand’s survey showed that inflation outlooks for both the near and medium term have ticked higher. That gave the NZD a gentle lift, moving it from around 0.5865 to just over 0.5900. These surveys matter because they influence central bank thinking—rising expectations suggest the public believes price increases will persist longer, which can force interest rates higher or keep them elevated.
At the same time, the dollar weakened modestly across several major peers. This downward pressure was not dramatic, but it was consistent—against the euro, Aussie, pound, and loonie. It tells us there wasn’t strong buying interest in the greenback, which could stem from mixed data or positioning ahead of upcoming events.
Market Trends and Expectations
In another corner of the market, gold prices slid lower and dropped under the USD 3210 mark. The move felt more flow-driven than data-inspired. Sometimes, we see price actions like this when traders unwind protection plays or shift allocations.
What this means for us in the coming weeks is worth unpacking. Price action in the yen, for instance, has been heavily reactive to inflation rather than growth. Policy divergences remain large. Tokyo may not jump to tighten despite elevated prices, but any move by the US Federal Reserve or even a shift in tone could send ripples across this pair. So, while spot levels around 145.00–145.40 are being respected for now, they are also a line traders keep testing. If growth prints disappoint further and the deflator keeps rising, that could prompt speculation of policy tweaks.
Regarding the kiwi, heightened inflation expectations are likely to revive rate expectations again. That means short-end volatility could pick up, especially if the currency continues to track expectations more than hard data. In other words, there’s room for overreaction. As such, there’s merit in being tactical—placing tighter stops, for instance, or splitting trades when directional conviction isn’t full.
When it comes to the broader dollar declines, the movements feel hesitant. There’s not a big thematic driver, more like gentle nudges from currency-specific catalysts. The outlook remains extremely reliant on upcoming stateside data—inflation, labour, and spending most of all. Any surprise from those fronts can push the dollar back into demand quickly, so it’s worth avoiding complacency in anything dollar-denominated.
As for gold, the dip below USD 3210 could invite further momentum trades, especially if risk appetite picks up again in equities or bonds stabilise. Yet, it serves as a barometer—if investors expect rates to stay high, the metal suffers. If not, it claws back.
All told, the currents of inflation, central bank bias, and risk appetite remain well in frame. Directional trades in these instruments are likely to stay brief unless stronger macro signals arrive. Being nimble helps. Pullbacks still get bought. Rallies still meet resistance.
