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19/05/2025 - 17:20 UTCThe US dollar gained against major currencies last week, with the dollar index closing a fourth consecutive week higher. A surprise downgrade of the US government's credit rating triggers a fresh wave of selling in the US fixed income market, sharply increasing US Treasury bond yields and providing support for the dollar. However, the dollar's gains could be capped by factors such as weaker-than-expected US economic data, which might reignite expectations of Federal Reserve interest rate cuts, thus putting downward pressure on the currency. Furthermore, any setbacks or lack of concrete progress in the US-China trade talks could erode the positive sentiment currently supporting the dollar. Despite these potential headwinds, US Treasury Secretary Scott Bessent's continued emphasis on potential tariff threats, coupled with persistent geopolitical risks, could still act as a tailwind for the safe-haven dollar. Moreover, a reassessment by the market, leading to decreased expectations of significant Federal Reserve interest rate cuts in 2025, would further reduce downward pressure on the US Dollar, contributing to its strength in recent weeks.
China SSE and China SZSE were trading almost unchanged as of 07:00 AM GMT Monday, after paring some earlier losses. This followed the release of April economic data which presented a mixed picture. While China's industrial production showed stronger-than-expected growth, seemingly weathering headwinds from elevated U.S. trade tariffs, other key indicators pointed to persistent challenges within the economy. Retail sales grew at a slower pace than anticipated, signaling ongoing weakness in consumer spending. Similarly, fixed asset investment, a measure of business spending, also fell short of growth expectations. Overall, Monday's data underscored the continued difficulties faced by the Chinese economy as Beijing strives to bolster growth and stimulate consumer demand, even after the recent agreement with the U.S..
Japan 225 was down 0.6% as of 07:00 AM GMT Monday, mildly extending losses following a weak gross domestic product report on Friday. Broader Asian markets generally experienced downward pressure on Monday, influenced by tepid signals from major global economies. Investors in Japan are now turning their attention to the upcoming release of Japanese consumer inflation data for April later in the week. This inflation data is widely expected to play a significant role in shaping the Bank of Japan’s considerations regarding future increases in interest rates.
Fueled by the recent 90-day US-China trade agreement and softer economic indicators, US stock markets experienced significant gains last week. The iFOREX trading platform recorded substantial increases, with the US 30 surging by 3.44%, the US Tech 100 climbing sharply by 6.82%, and the US 500 rising by 5.26%. The economic data, suggesting weaker consumer spending and slower inflation, heightened speculation about potential interest rate cuts by the Federal Reserve, contributing to a notable decline in Treasury yields. These factors collectively propelled the positive momentum across US equities.
In corporate news, following Walmart’s impressive first-quarter earnings that exceeded expectations, President Trump recently added pressure to the Company to absorb import tariff costs, rather than raising consumer prices. This followed Walmart's warning that even reduced tariffs would necessitate price increases on imported goods. The dispute highlights the strain on U.S. companies relying on imports amid ongoing tariff policies. As a major retail indicator, Walmart's position raises concerns about the broader impact of tariffs on U.S. businesses and consumer prices.
Looking ahead, market attention next week will likely focus on the flash manufacturing and services PMIs from the US, the UK, and the eurozone. Price movements could also be influenced by the release of the German ifo Business Climate, CPI data from the UK, and US Home Sales figures. On the earnings calendar, key reports are expected from Home Depot, Palo Alto Networks, Intuit, Best Buy, Target, and Autodesk.
The EUR/USD currency pair ended the session below 1.11500 duron Friday ending the session 0.38% lower as the US Dollar regained strength after recovering from initial losses. The Greenback’s resurgence followed the release of the US consumer sentiment and inflation expectations data for May, which supported the view that the Federal Reserve may hold interest rates steady.
One of the key developments was a rise in the flash one-year Consumer Inflation Expectations, which surged to 7.3% from 6.5% in the previous report. This uptick raises concerns for the Fed, as it may delay any potential rate cuts. Federal Reserve officials have repeatedly expressed their preference to keep rates elevated, arguing that the current level of tariffs remains high enough to maintain inflationary pressures.
In contrast to inflation expectations, the Consumer Sentiment Index fell unexpectedly to 50.8 in May, down from 52.2 in April. This marks the lowest reading since June 2022, and the fifth consecutive decline in sentiment data. Economists had anticipated an increase to 53.4.
ECB officials are voicing support for a dovish stance, with some predicting further rate reductions. ECB Governing Council member Martins Kazaks, during European trading hours, signaled that a couple of rate cuts could be on the table this year. However, Kazaks emphasized that any decision would be made on a “meeting by meeting” basis, cautioning against hasty action due to the uncertain global trade environment.
Gold prices tumbled more than 1% on Friday and closed the week with losses exceeding 4%, as a shift in market sentiment encouraged investors to move away from the safe-haven metal in favor of riskier assets.
The week started off with gold under pressure, following news of a de-escalation in the US-China trade dispute and an agreement to cut tariffs by 115%. This announcement sent gold prices sharply lower.
US economic data throughout the week provided mixed signals. The University of Michigan's May Consumer Sentiment Index showed that American households have grown more pessimistic, with inflation expectations rising sharply. Meanwhile, housing data remained mixed, and import prices increased.
Despite the negative sentiment, gold recovered some losses after market participants began pricing in the possibility of more than 55 basis points of easing from the Federal Reserve (Fed).
Looking ahead, this week’s US economic calendar will feature a series of key events, including speeches from multiple Fed officials, flash PMI data, and housing reports. These releases are likely to influence market sentiment and could provide further clues on the Fed’s future policy direction.
Oil prices posted moderate gains on Friday after sharp losses in the previous session, and ended the week on the upside, buoyed by optimism earlier in the week following a temporary easing in US-China trade tensions. The world’s two largest economies agreed to a 90-day suspension of tariff hikes, improving sentiment across energy markets.
Crude prices declined more than 2% on Thursday after US President Donald Trump signaled that the United States is close to finalizing a nuclear agreement with Iran. He noted that Tehran had “sort of” accepted the proposed terms.
If finalized, the lifting of sanctions could unlock a significant amount of Iranian oil supply, potentially disrupting the current global supply-demand balance.
Adding to supply-side concerns, the International Energy Agency (IEA) projected on Thursday that global oil supply will grow more rapidly than previously anticipated.
Market sentiment received a boost early last week when the US and China agreed to a temporary pause in their ongoing trade war, which includes a sharp reduction in tariffs over the next 90 days. As the two largest oil-consuming nations globally, the easing of tensions has helped reduce fears of a demand shock and revived confidence in global growth prospects.
U.S. equity markets advanced on Friday, capping off a strong week as easing U.S.-China trade tensions continued to buoy investor sentiment, despite disappointing consumer sentiment data.
The US 500, US 30, and US Tech 100 all posted solid gains, with momentum carrying over from Monday’s rally following the announcement of a 90-day truce in the U.S.-China trade dispute. That initial boost was further reinforced by news of a limited bilateral trade agreement between the U.S. and the U.K.
While markets rallied, data from the University of Michigan showed consumer confidence weakened in May, with the Consumer Sentiment Index falling to 50.8, the lowest level since July 2022.
In corporate news, Applied Materials fell 5.24% after missing Q2 revenue estimates. Verizon gained 1.17% following the FCC’s approval of its $20 billion acquisition of Frontier Communications. As part of the deal, Verizon agreed to discontinue its diversity, equity, and inclusion (DEI) programs.
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