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• Prior -$1.52B
• Trade Balance for March C$-0.51B vs C$-1.56B est.
• Exports C$69.90 billion versus C$70.04B last month
• Imports C$70.40 billion versus C$71.44B last month

The modest decline is still a drag on the Canadian growth, but it was still better than expectations and something closer to 0 is better for US/Canada relations.

PM Carney will be meeting with Pres. Trump today. I wonder what his mood will be on the first visit since it being elected?

This article was written by Greg Michalowski at www.forexlive.com.

Where are the US red lines on trade?

This is the big question that needs an answer for me to have any kind of conviction in the macro outlook. Yesterday Kyodo reported this:

U.S. officials including Treasury Secretary Scott Bessent told Japan’s
top negotiator Ryosei Akazawa in their meeting in Washington last week
that the administration of President Donald Trump intends to put only a
cut in the 14 percent country-specific tariff, suspended through early
July, on the negotiating table, the sources said

That’s a big problem for Japan and the rest of the world. If the US is putting a floor on 10% tariffs then we’re in for a bruising trade war. I just can’t see many countries conceding anything if the US isn’t aiming for free trade.

Moreover, I fear that Trump wants these negotiations to fail so he can put on tariffs. Maybe that sets up a showdown with Congress that restores order but that’s a hard bet to make at this point.

In the meantime, we get US and Canadian trade balance numbers today for March. At 11:30 pm ET, Carney will arrive to meet Trump and the pair will have a meeting 15 minutes later and then lunch at 12:15 pm ET. It’s not clear when they will address the media.

As for the trade data, I wouldn’t expect it to be a market mover.

This article was written by Adam Button at www.forexlive.com.

Chris Lunday, a reporter for Politico, is saying that the Bundestag will hold a second Merz vote today at 15:15 Berlin time. He adds “all factions have been summoned and full attendence is expected. This is the make or break moment for Merz.”

Link to his post on X here

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• China will hold press conference on Wednesday on financial policy package
• EU’s Sefcovic: EU doesn’t feel weak or under pressure to accept unfair deal with the US
• Taiwan central bank says will visit FX custodian banks to carry out inspections
• Germany’s AfD backs new vote for chancellor on Wednesday
• Eurozone March PPI -1.6% vs -1.6% m/m expected
• German parliament reportedly won’t be going ahead with another chancellor vote today
• UK April final services PMI 49.0 vs 48.9 prelim
• China’s Xi: China and EU should oppose unilateral bullying
• Merz falls short of majority needed to become German chancellor in first voting round
• Eurozone April final services PMI 50.1 vs 49.7 prelim
• SNB’s Schlegel: We haven’t ruled out negative interest rates
• Germany April final services PMI 49.0 vs 48.8 prelim
• France April final services PMI 47.3 vs 46.8 prelim
• Italy April services PMI 52.9 vs 51.5 expected
• EU Trade Commissioner Sefcovic: Proposed 0 for 0 tariffs on industrial goods
• SNB’s Schlegel: We remain committed to our mandate of price stability
• Spain April services PMI 53.4 vs 54.0 expected
• China says would welcome EU leaders to visit in a timely manner to hold new round of talks
• What are the main events for today?
• Switzerland April seasonally adjusted unemployment rate 2.8% vs 2.8% expected
• Gold keeps the push higher after another round of bids in Asia
• FX option expiries for 6 May 10am New York cut
• Goldman Sachs expects USD/CNY to decline further

It would have been a pretty boring session in terms of data and news releases if it wasn’t for German politics. Merz fell short of majority needed to become German chancellor in the first voting round.

He needed 316 votes to win a majority but didn’t manage to reach that
(only got 310 votes) even though the CDU/CSU/SPD coalition has 328 MPs.

The DAX reacted by selling off but eventually bottomed and started to recover the losses as AfD backed a new vote as early as Wednesday.

Another notable news was the Chinese State Council Information Office reporting that Chinese officials
including the PBoC would hold a press conference tomorrow on financial
policy package to stabilise market and expectations. Chinese stocks rallied on the news as expectations for a proper stimulus started to build.

The focus now switches to Trump-Carney meeting due at 11:45 ET/15:45 GMT and potential trade related headlines. There’s no data release in the American session other than the 10y auction for those following them.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

I don’t know what is the source of the news but many newswires are reporting it. This is likely an algo driven reaction to the headline but it’s not something new. I wouldn’t be surprised if the moves get faded shortly.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

It’s been a nice day for DAX traders as political volatility provided some nice opportunities. Below you can see the 5 minute chart of the DAX where I marked the two main headlines that triggered the biggest moves.

I thought this was a great example for new traders on being open minded and nimble when conditions change. The fear of political instability triggered by the failure of the first voting round sent the DAX lower.

But when we started to get more and more news of support for a second round as soon as tomorrow, the fears started to ease and the dip-buyers started to pile in.

It’s critical for a trader to be open minded and not get attached to his/her own bias when conditions change. If you took a trade because of X and something invalidates the original reason, just get out. This will not save you money in the long term, but might also improve your performance if you can also take the other side.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The State Council Information Office is reporting that Chinese officials including the PBoC will hold a press conference tomorrow on financial policy package to stabilise market and expectations.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• EU doesn’t feel weak or under pressure to accept unfair deal with the US.
• The US tariffs are unfair.
• Everyone wants to accelerate free trade agreements with EU.
• We also need to look at what we can do better inside the single market.

As a reminder, Sefkovic indicated last week that the EU would not accept a deal that kept tariffs at 10%.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Germany’s AfD backs new vote for chancellor on Wednesday after Merz failed to win the majority today. AfD is the second biggest party in the Bundestag lower house.

Earlier:

• Merz falls short of majority needed to become German chancellor in first voting round

• German parliament reportedly won’t be going ahead with another chancellor vote today

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +0.2%
• PPI +1.9% vs +2.5% y/y expected
• Prior +3.0%

The drop here owes largely to a decline in prices for energy (-5.8%). If you strip that out, producer prices were actually up 0.1% on the month. There were increases in prices for capital goods (+0.1%), durable consumer goods (+0.2%), and non-durable consumer goods (+0.5%).

This article was written by Justin Low at www.forexlive.com.

The problem with a secret ballot is that it is as the name implies, a secret. That means as things stand, Merz wouldn’t even know who he has to talk to in order to turn the votes around unless those who opposed owns up to it. And let’s face it, that never happens in politics.

If they just go in blindly and he loses again, it would be extremely damaging to his and the coalition’s position and credibility. The risk outweighs the reward in this case. As such, it would be prudent to hold it off for the time being.

As a reminder, a second vote can be called within the next 14 days now but the same ruling applies i.e. an absolute majority of 316 votes is needed to win.

If the second round of voting fails again, then a third round of voting must take place immediately. For that, only a relative majority i.e. candidate with the most votes, is needed to be elected as chancellor. But in this case, the president has the authority to not appoint said person to be chancellor and dissolve the Bundestag instead as an option.

This article was written by Justin Low at www.forexlive.com.

• Final Services PMI 49.0 vs 48.9 preliminary
• Prior 52.5
• Final Composite PMI 48.5 vs 48.2 preliminary
• Prior 51.5

Key findings:

• Renewed downturn in new work weighs on service
  sector output
• Fastest decline in export sales since February 2021
• Business activity expectations slump to a two-and-
  a-half year low

Comment:

Tim Moore, Economics Director at S&P Global Market
Intelligence, said:

“UK service sector output slipped into contraction for
the first time in one-and-a-half years as heightened
business uncertainty weighed on order books during
April. Export conditions were particularly weak, with new
business from abroad falling to the greatest extent since
February 2021.

“Survey respondents often commented on the impact
of global financial market turbulence in the wake of US
tariff announcements. Businesses in the technology and
financial service sectors noted rising risk aversion and
delayed spending decisions among clients, especially in
relation to major investment plans. Consumer service
providers meanwhile cited subdued domestic economic
conditions and challenges with passing on rising payroll
costs, especially those in the hospitality and leisure
sectors.

“Input prices increased at the steepest pace since the
summer of 2023 as higher National Living Wage rates and
National Insurance contributions added to payroll costs
in April. Prices charged inflation was also the strongest
for nearly two years as service providers sought to pass
on additional costs to clients despite fragile demand.

“Business expectations for the year ahead fell sharply
as service sector firms braced for an extended period of
global economic turbulence and heightened recession
risks. Some 22% of the survey panel predict an outright
decline in business activity during the next 12 months, up
from 14% in March and well above the post-election low
of 6% in July 2024.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.