Bonds Asia: Inflation concerns have eased, and gold closes slightly higher

On March 26, the U.S. Bureau of Labor Statistics released data showing that U.S. import prices surged by 1.3% month-over-month in February 2026. This increase not only far exceeded the market’s previous expectation of 0.5% but also marked the largest rise in nearly four years, indicating that prices were generally rising even before the outbreak of the Middle East war. Analyzing the composition of the data reveals that the rise in oil and natural gas prices is the main driver pushing the overall index higher. Excluding oil, import costs still increased by 1.2%, the largest gain since January 2022, mainly driven by rising prices for capital goods and non-automotive consumer goods.

Meanwhile, U.S. export prices in February also grew strongly by 1.5%, the largest increase since May 2022. The acceleration in import prices highlights the increasing risk of a resurgence of inflation. Companies are facing rising energy costs related to the Iran conflict, and U.S. importers also need to contend with higher tariffs imposed by the Trump administration. Notably, government import price data do not include the impact of tariffs.

Additionally, amid ongoing inflation data that has fallen short of expectations, divisions within the Federal Reserve over the path of interest rates have become more apparent. “Hawkish Doves” Fed Governor Michelle Bowman stated that she has raised her expectations for the year-end interest rate but still believes rate cuts are necessary this year. Speaking at an event in New York, Bowman said that due to recent poor inflation data, she has increased her forecast for the policy rate at year-end by 50 basis points. “This is not because of oil prices or the Iran conflict, but based on the latest inflation data we received,” she said, adding that the current adjusted rate path is closer to a “neutral level.” However, Bowman still holds a relatively dovish view on current monetary policy. She voted against the March 18 rate hike, advocating for a 25 basis point cut instead of holding rates steady. At that meeting, Fed officials unanimously acknowledged rising uncertainties from the Middle East situation and emphasized that rate cuts would only resume after further inflation decline.

Key data to watch today include Germany’s April GfK Consumer Confidence Index, the Eurozone’s February M3 money supply growth rate (seasonally adjusted), and U.S. initial jobless claims for the week ending March 21.

Gold/USD

Gold fluctuated upward yesterday, closing slightly higher on the daily chart, with the spot price around 4495. The rebound was mainly supported by easing inflation concerns due to a correction in oil prices and expectations of rate hikes by multiple central banks. However, strong U.S. economic data and optimistic comments from Fed officials limited the rally. Today, focus on resistance around 4600, with support near 4400.

USD/JPY

USD/JPY rose yesterday, reclaiming the 159.00 level and reaching a two-day high, with the spot around 159.50. The dollar index’s rise, supported by expectations of Fed rate hikes and strong U.S. economic data, was the main driver. However, concerns about possible intervention by the Bank of Japan limited the upside. Today, watch for resistance near 160.50 and support around 158.50.

USD/CAD

USD/CAD rose yesterday, breaking through 1.3800 and reaching a nine-week high, with the spot around 1.3830. The rise was supported by a stronger dollar, driven by good economic data and expectations of Fed rate hikes, as well as a decline in oil prices. Today, focus on resistance near 1.3900 and support around 1.3750.