2026-01-27 07:04

Key takeaways USD-JPY fell sharply amid possible US-Japan joint FX intervention. History shows coordinated FX intervention can be impactful, though not a guaranteed solution. Japan faces fiscal consolidation challenges, with FX intervention and policy changes under consideration. USD-JPY experienced a sharp decline late Friday during the US trading session, following reports that the New York Federal Reserve (Fed), on behalf of the US Treasury, conducted rate checks (The New York Times, 23 January). This move came after an earlier surge in USD-JPY during the Bank of Japan (BoJ) Governor Ueda’s press conference, and subsequent remarks from Finance Minister Katayama highlighting the Japanese government’s heightened vigilance over FX market developments (Bloomberg, 23 January). Given how the Japanese and US authorities have already emphasised their shared concerns about the JPY a couple of weeks ago (Bloomberg, 13 January; US Treasury’s readout on 14 January), this recent rate check suggests joint intervention is possible over the near term. Source: Bloomberg, HSBC Historical precedent suggests that coordinated FX intervention between Japan and the US, such as the impactful action on 17 June 1998, tends to be more effective than unilateral measures. On that occasion, both parties sold modest amounts of USD (USD0.8bn by the US and USD1.7bn by Japan), resulting in a 6% move in USD-JPY, with no further intervention for an extended period. However, frequent joint interventions over May 1989-April 1990 (where the US sold USD12bn and Japan sold USD22bn in total over numerous occasions) did not provide a lasting solution, indicating that US involvement is not necessarily a game-changer or a panacea for the JPY’s weakness. Currently, a risk premium is evident for the JPY, as reflected by the divergence between USD-JPY and yield differentials. Market concerns regarding Japan’s fiscal sustainability have intensified amid inflation and political shifts. With general elections on 8 February and ongoing discussions around consumption tax relief, concrete strategies to address fiscal gaps remain under debate. While fiscal dominance is not inevitable, restoring credibility will require time and further action from Japanese authorities. Meanwhile, FX intervention and measures to encourage domestic investment over foreign assets may provide support for the JPY. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/jpy-intervention-speculation/

2026-01-26 08:04

Key takeaways The JPY has stayed weak amid domestic political uncertainty. “Risk-on” G10 currencies have outperformed, supported by global risk appetite and easing trade tensions. Domestic drivers are supporting AUD and NZD strength. The JPY has kicked off 2026 on a weak note (Chart 1), with attention on the snap election set for 8 February (Bloomberg, 19 January). Political uncertainty in Japan has pushed USD-JPY away from the usual yield differential trends (Chart 2), signalling a growing risk premium for the JPY. With market nerves unlikely to settle over the near term, JPY weakness looks set to persist. However, Japan’s Ministry of Finance may intervene if USD-JPY rises further. Source: Bloomberg, HSBC Source: Bloomberg, HSBC Meanwhile, “risk-on” currencies − AUD, NZD, NOK, and SEK – have outperformed other G10 currencies year-to-date, each posting notable gains against the USD (see Chart 1). Their outperformance appears to be somewhat supported by a favourable global risk environment, with international equities (excluding the US) outperforming the S&P 500 Index (Bloomberg, 22 January). Additionally, market sentiment might have improved following the recent easing of tensions surrounding US-EU trade issues related to Greenland. Recent developments have highlighted the potential for rapid shifts in US policy, with periods of escalation followed by sudden reversals. This volatility has weighed on the USD, as well as US equities and bonds − a combination referred to as the “Triple Threat”. These developments warrant close monitoring (see “FX Viewpoint Flash” USD: The “Triple Threat” reminder, 21 January for further details). On the domestic front, several factors are supporting the AUD and NZD. Our economists expect both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) to deliver two rate hikes in 2026, with the RBA anticipated to begin tightening on 3 February. Markets currently price in a c60% chance of this move (Bloomberg, 22 January), suggesting further potential for rates-driven AUD strength. While New Zealand’s rate hikes may come later, its economic recovery is gaining momentum, aided by supportive fiscal policy ahead of the general election on 7 November (ABC news, 21 January). All this could present upside risks for the NZD over the coming months. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/g10-currencies-leaders-and-laggards/

2026-01-22 07:04

Key takeaways The “Triple Threat” occurred on 20 January, marking the first simultaneous move in months across USD, equities, and yields. This rare combination may indicate reduced confidence in the US and present challenges to traditional portfolio diversification. If it persists for consecutive days, it could signal deeper structural concerns, which warrant close monitoring. On 20 January, we observed a rare market event: the USD weakened, US equities (S&P 500 Index) declined, and US Treasury yields rose − a combination we refer to as the “Triple Threat”. This was the first instance of such a pattern since the aftermath of “Liberation Day” in April last year. Under typical market conditions, rising Treasury yields are associated with stronger growth expectations or higher inflation, which generally support equity markets. Conversely, when both equities and bond yields fall, it usually signals a deterioration in risk appetite, with the USD often strengthening as investors seek safety. The distinguishing feature of the recent “Triple Threat” is the simultaneous weakness in the USD. A declining US Dollar Index (DXY) alongside rising Treasury yields suggests that nominal yields are not sufficiently attractive to draw in capital. This may reflect concerns about real returns, policy uncertainty, or doubts regarding the sustainability of US fiscal and monetary frameworks. Rather than indicating healthy global risk appetite, USD weakness in this context points to reduced confidence in the US. From a portfolio perspective, this scenario challenges traditional diversification strategies, as both risk assets and defensive holdings like the USD can experience drawdowns at the same time. This shift in correlations raises important considerations for portfolio construction and risk management. Historically, “Triple Threat” has been relatively infrequent. Since 2000, it has occurred on 455 out of 6,797 trading days (around 6.7%), with a maximum run of three consecutive days. Looking further back to the early 1970s, the longest stretch was four days. In summary, the “Triple Threat” serves as a signal of underlying structural concerns in the market, rather than typical cyclical fluctuations. If this pattern persists for consecutive days or over the coming days, it may warrant closer attention and a reassessment of market positioning. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-the-triple-threat-reminder/

2026-01-20 12:01

Key takeaways An investment rebound is around the corner, supported by the new wave of government funding and projects. “DeepSeek moments” likely to emerge in other sectors, thanks to China’s continued focus on innovation. Reflation and housing market expectations, on the other hand, depend on policy intensity and implementation. China data review (December, Q4 & full year 2025) China’s GDP grew 5.0% in 2025, meeting the government’s target of “around 5%”. However, GDP growth ended the year softer, rising 4.5% y-o-y in Q4, affected, in part, by a high base. The underlying data showed pressures have grown on the domestic economy with investment spending falling 3.8% for 2025 while ongoing resilience in trade helped keep industry production buoyant. Fixed asset investment (FAI) contracted by 3.8% in 2025, marking the sharpest decline in decades. The weakness remained broad-based, with significant falls in December across property (-36% y-o-y), manufacturing (-11%) and infrastructure (-10%). Insufficient “seed capital” likely hit infrastructure, while tariff uncertainties and weak business confidence weighed on manufacturing. Retail sales grew by 3.7% in 2025, slightly above the 3.5% recorded in 2024. However, growth softened to 0.9% y-o-y in December, due in part to a high base from trade-in subsidies in certain products. The breakdown for December shows positive impact of these consumer goods trade-in subsidies, with communications equipment sales rising by 21% y-o-y. Exports closed the year on a strong note, rising by 6.6% y-o-y in December. The trend of trade restructuring continued as exports to the US fell faster, while those to other markets like EU and ASEAN sustained double digit growth. Meanwhile, imports grew 5.7% y-o-y in December supported mostly by hightech products (+13.5%) and infrastructure-linked commodities, e.g., copper. CPI was up 0.8% y-o-y in December amidst stable core CPI (+1.2% y-o-y) and rising food prices (+1.1%), particular for vegetables (+18.2% y-o-y). On the producer front, PPI recorded a narrower y-o-y decline of 1.9% supported by rising prices of non-ferrous metals manufacturing (+10.8% y-o-y), especially copper, which hit a new record high in December. Five key China macro themes for 2026 China’s 15th Five-Year Plan launches this year, setting the strategic direction for the country through to 2030. The main framework was shared after the Fourth Plenum on 23 October 2025, with further details expected at the annual policy meetings in March. We detail our top five macro themes to watch out for in the year of the horse. 1. We expect a rebound in fixed asset investment Entering 2026, new government funding and project approvals should boost infrastructure and manufacturing investment. Faster government payments of overdue obligations will ease liquidity pressures and support business confidence, while a more stable US-China trade relationship may further encourage capital expenditure. 2. Innovation to drive growth Following China’s DeepSeek moments in Generative AI and biotech, further breakthroughs are likely. The government’s latest Five-Year Plan puts strong emphasis on modernising the industrial system and driving innovation, building on years of investment and talent development. Multinationals are also increasing investment to leverage China’s expanding role as an innovation hub. 3. From exporting goods to exporting production capacity China’s exports have shown unexpected resilience, with the goods trade surplus climbing to a record high of USD1.2trn in 2025, driven by competitive pricing, strong performance, and reliability. However, Chinese manufacturers are increasingly pursuing overseas direct investment (ODI) to optimise supply chains and manage trade uncertainties. This trend is in its early stages. While outbound direct investment may partially substitute goods exports, it is likely to boost service exports. Source: CEIC, OECD, HSBC Source: CEIC, HSBC 4. Reflation hopes While some remain sceptical about the impact of the anti-involution campaign, it is a key element of China’s push for a unified national market. New regulations targeting local protectionism and promoting fair competition are being introduced, and their effectiveness will influence the pace of industry consolidation. 5. Housing stabilisation The ball is in the government’s court. Now in its fifth year, the housing correction faces renewed pressures. Recent calls for action in official channels have raised expectations of stronger intervention. One feasible approach is an asset management company model, which could safeguard financial stability, while using the acquired homes for social housing to support urbanisation. Source: LSEG Eikon * Past performance is not an indication of future returns Source: LSEG Eikon. As of 19 Jan 2026, market close https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/five-key-china-macro-themes-for-2026/

2026-01-19 12:01

Key takeaways Gold broke above USD4,600 per ounce, driven by geopolitical risks and Fed independence concerns. FOMO inflows may reverse, increasing volatility, but central bank buying and “safe haven” demand could sustain gold rally… …at least until geopolitical risks ease or Fed easing expectations fade. Gold rallied to new highs recently on elevated geopolitical risks (Chart 1), notably developments in Iran and Venezuela. Any escalation could further support gold prices, while a reduction in geopolitical tensions may exert downward pressure. Concerns regarding the Federal Reserve’s (Fed) independence have also lent further support to gold and weighed on the USD. While a softer USD provides a foundation for gold prices, it is unlikely to drive significant further gains. In addition, rising fiscal deficits in the US and other countries are also boosting gold demand and may become increasingly influential. According to the International Monetary Fund’s (IMF) biannual Fiscal Monitor report (15 October), global government debt is projected to reach 100% of GDP by 2029 − the highest level since the post-World War II period. Global trade frictions continue to provide some support for gold, although this theme is less pronounced than in 2025. On balance, robust central bank purchases and sustained “safe haven” demand − set against a backdrop of ongoing geopolitical and economic risks and a softer USD − are likely to keep gold trading at historically elevated levels. Note: Geopolitical Risk Index (GRI) is compiled by Fed economists Dario Caldara and Matteo Iacoviello. Source: Bloomberg, HSBC Source: Bloomberg, HSBC Our precious metals analyst cautions that inflows driven by “fear of missing out”’ (FOMO) may push gold prices higher over the near term, but these could reverse rapidly at new highs, resulting in greater volatility and a broad trading range. Should geopolitical risks diminish or expectations for Fed easing not materialise (Chart 2), a correction could be intensified by increased supply from mining and recycling, alongside weaker physical demand. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/gold-hit-usd-4600-oz/

2026-01-14 12:02

Key takeaways US action in Venezuela is inevitably raising questions about the new world order… …but the still buoyant markets will be steered by the macro picture and policy outcomes. We recently raised our global GDP forecasts to 2.8% in 2025 and 2.7% in 2026. While 2025 ended with trade uncertainty abating and some optimism that major conflicts in the world may be moving a little closer to some kind of resolution, US action in Venezuela could once again upend the world order. The implications will only become clear in time, so with global growth still seemingly resilient and global inflation still mostly trending lower, financial market optimism has not faded. Muddling through Uncertainty is here to stay though. The global economy in 2025 performed better than most had expected. Despite tariffs, global trade growth was strong, consumer spending held up. The gradual decline in inflation mostly continued. We still expect the global economy to muddle through in 2026, albeit supported globally by fiscal spending and the rollout of AI infrastructure. AI continues to drive multiple K-shaped expansions. In the US, higher-income households (particularly baby boomers) are driving consumer spending, partly on the back of wealth effects from AI equity holdings. The US is also at the forefront of the surge in AI-related investment. This is benefitting Asian exporters that are most exposed to AI-related electronics production – Taiwan, Korea, and much of ASEAN – and related areas of the AI ecosystem. Such rapid growth in world trade is unlikely to be repeated in 2026, given tariffs and such a high base for Asian exports, but we still expect expansion. Source: Macrobond Note: CPI held constant in October due to missing data. Source: Macrobond Volatile US data Although there is now a raft of US data that have become available with the end of the government shutdown, they are still hard to interpret. Payroll softness may have been driven by deferred government job losses, and, while private payrolls are steady, Federal Reserve (Fed) Chair Powell has stated that they could be an overestimate. And with immigration slowing and productivity rising, the unemployment rate edged back down to 4.4% in December. Also, US inflation has come down, but technical quirks are playing a role and globally input prices, particularly memory chips, are clearly on the rise. Moreover, government opening effects and tax cuts should support US growth in 1H26. Fiscal support Outside the US, Europe is showing early signs of recovery (Chart 3), though in 2026 much hinges on the execution of the fiscal support. Asia’s macroeconomic fundamentals have improved, but the recovery in mainland China has underwhelmed, and further policy stimulus will likely be needed to provide a boost (Chart 4). Monetary policy divergence is expected to be a prominent theme this year. We expect Australia, New Zealand, and Sweden to join Japan in raising rates, while the European Central Bank and the Fed stay on hold. In contrast, we see the Bank of England delivering another 75bp of cuts and some emerging market central banks, especially in Asia, continuing to ease. Source: Macrobond Source: Macrobond Our GDP forecasts Our global GDP estimate for 2025 now stands at 2.8%, higher than the 2.7% at the start of the year. We also recently raised our 2026 forecast from 2.5% to 2.7%, much of this is driven by a US upgrade reflecting payback after the government re-opening. That being said we are mindful that another possible US government shutdown could occur at the end of January, which could be a potential source of volatility. Another notable upgrade is in Japan, reflecting the recently approved fiscal stimulus. Note: *India data is calendar year forecast here for comparability. Previous forecasts are shown in parenthesis and are from the Macro Monthly dated 6 October 2025. Green indicates an upward revision, red indicates a downward revision. Source: Bloomberg, HSBC Economics ⬆ Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus Source: Bloomberg, HSBC Source: LSEG Eikon, HSBC https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/the-global-economy-in-2026/