In April 2024, interest rates at major central banks stayed the same as the prospect of higher-for-longer U.S. Federal Reserve rates exerted some pressure on policymakers. All four of the central banks overseeing the 10 most heavily traded currencies that held meetings in April – the Bank of Japan, the Bank of Canada, the European Central Bank and the Reserve Bank of New Zealand – maintained their benchmark lending rates [1].

In May’s Federal Open Market Committee (FOMC) meeting, Federal Reserve Chair Jerome Powell said it was unlikely that the central bank’s next move will be a rate hike [2]. The remark sparked a rally across the three major averages, with the Dow soaring over 500 points at its peak during the session. At the conclusion of their May meeting, Central bank policymakers decided to keep rates steady, holding at a range of 5.25% to 5.5% [3].

The data on May 3 showed U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years [4], as signs of labour market cooling raised optimism that the U.S. central bank could engineer a “soft landing” for the economy. The markets now believe a rate cut is imminent this year, a change from sentiments in mid-April where some are pricing in no cuts this year, even if it is going to be delayed down the road. New York Fed President John Williams said that “eventually” the central bank will cut interest rates, although he did not give a time frame [5].

Views on Equity

Given a solid and broadening profit growth, as April saw almost 80% of US companies beat profit expectations [6] , disinflation, the end of Fed rate hikes and a likely shift to rate cuts and rising investment in AI infrastructure and applications, UBS expect the environment for US stocks to remain favorable [7]. Crucially, consumer spending is expected to remain bolstered by healthy labor market conditions. Initial claims for unemployment insurance remain low as there were 208,000 jobless claims during the week ending on April 27, the same number as the prior week [8]. Jobs continue to be added in the most cyclical segments of the labour market (e.g., construction), there are 1.4 open jobs for every unemployed worker [9], and real wages are rising [10].

We see opportunities in large-cap tech names, particularly US information technology, as the sector boasts strong balance sheets and high earnings growth. Furthermore, the race to develop and harness new AI capabilities has increased related capital expenditure across industries.

Apart from tech, we retain a positive long-term outlook on gold. Gold has increased by 13% this year [11] and has surpassed global equities and bonds’ performance in recent weeks, despite a robust USD and reduced Fed rate-cut expectations. Furthermore, this rally took place without traditional support from ETF buying, which we anticipate will come once US rates are cut – potentially the next catalyst for higher gold prices. With a rise in ETF buying potentially ahead and gold miner stocks looking undervalued relative to their historical P/E, we see opportunities in gold miner stocks.

Looking at Asia, the outlook remains neutral for Japanese equities. The recent underperformance of the TOPIX compared to MSCI All Country World Index (ACWI) is likely attributed to international investors pausing after two significant macro events in March: the labour union hike as Japan’s biggest companies agreed to raise wages by 5.28% for 2024 [12] and Bank of Japan’s historic shift to policy normalisation. Furthermore, a move toward risk aversion has developed due to US inflation figures surpassing expectations and rising geopolitical tensions. Japan is just beginning to experience inflation and rising wages after 30 years of deflation. The focus remains on fundamentals and quality. Large-cap banks and real estate companies, which stand to gain from Japan’s inflation, a robust domestic economy, and corporate governance reforms continue to be favoured.

Views on Fixed Income

With rate hikes likely over and the Fed’s decision to maintain its rate-cut outlook during the FOMC meeting, base rates are believed to have reached their peaks and the appeal of cash as an asset class is waning. The prevailing view is that fixed income could yield robust returns through potential capital appreciation in this easing environment. We continue to favour short-term investment-grade (IG) bonds at current yields and expect returns for IG bonds in the high-single digit range over the coming 12 months, supported by both elevated yields and price upside on prospects for declining interest rates. Sector wise, we recommend focusing on opportunities in defensive names within the energy, utilities, and financials sectors.

Views on Currency

The upside surprise and a strong labour market have pushed out expectations for Fed policy easing and with the global manufacturing cycle seeming to have turned a corner as the destocking phase that lasted for most of the past year has come to an end. With the Fed likely to delay the start of its rate-cutting cycle until September interest rates at major central banks remained static with the exception of Swiss National Bank (SNB) which unexpectedly cut interest rates, as the prospect of higher-for-longer U.S. Federal Reserve rates exerted some pressure on policymakers. The dollar fell against most currencies as recent labour market data and comments from Federal Reserve officials buoyed rate-cut hopes.

Meanwhile, the yen has been constantly under pressure as U.S. interest rates have risen while Japan’s rates have remained negligible continues to exert pressure on the JPY and Bank of Japan (BOJ) cumulating in BOJ interventions towards the end of Apr after USDJPY hits 160. Traders estimate the Bank of Japan spent nearly $59 billion defending the currency, but likely only bought some time, analysts say, as the market still views the yen as a sell [13].

The Swiss franc has weakened since the SNB’s March interest rate cut as SNB became the first G10 central bank to lead the cutting cycle as it cut rates by 25bp to 1.5% in March [14] . Here is what we think about the currency market:

• Japanese Yen (JPY): Low yielders like the JPY, will continue to struggle to deliver performance in the short run. While Japan clearly has capacity to intervene more, the broader macro environment remains quite negative for the yen as intervention “success” can go only so far for now.

• British Pound (GBP): likely to continue to be range bound but we are leaning towards a lower GBP down the road, where rate cuts are likely to materialize toward year-end.

• Euro (EUR): Economic indicators increasingly suggest weakness, while policymakers remain uncertain about when to implement rate cuts. Consistent with previous trends, the Euro continues to exhibit weakness, trading in a subdued lateral pattern.

• Swiss Franc (CHF): The currency is likely to consolidate as a surprised stronger than expected CPI complicates matters although it was still within the SNB comfort band. However, due to its negative carry and stabilising risk sentiment in markets, it remains a preferred carry option.

• Singapore Dollar (SGD) nicely trading in a broader 1.33-1.37 range and should continue to trade within those band in May.


[1] Major central banks linger in uneasy calm in April | Reuters
[2] Fed’s Powell: It’s ‘Unlikely’ That the Fed’s Next Move Will be a Rate Increase (
[3] Fed meeting today: Live updates on May Fed rate decision (
[4] US job gains fewest in six months as labor market cools | Reuters
[5] Dollar weaker on Fed rate cut hopes, yen retreats after strong week (
[6] Market review | April in review | Ninety One
[7] UBS House View – Monthly Extended May 2024
[8] April 2024 Jobs Report: 175,000 Jobs Added, Lower Than Forecast | J.P. Morgan (
[9] US labour market cooling gradually as job openings, resignations fall | The Straits Times
[10] Solid US job, wage growth expected in April | Reuters
[11] Global Equity Strategy: Fact and Figures: Gold – Breaking the rules… continue to overweight gold stocks | UBS IB Global Research
[12] Japan union group announces biggest wage hikes in 33 years, presaging shift at central bank | Reuters
[13] Japan used $59bn to prop up the yen but consumers may still cut back (
[14] Swiss central bank cuts rates in surprise move, getting ahead of global peers | Reuters

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