The United States (US) and China agreed to a preliminary deal on how to implement the consensus the two sides reached in Geneva, per Bloomberg.
US negotiators said early Wednesday that they “absolutely expect” that issues around shipments of rare earth minerals and magnets will be resolved with the framework implementation, even though the full details of their deal weren’t immediately available.
Market reaction
At the time of press, the US Dollar Index was down 0.06% on the day at 99.0.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
The Dow Jones is holding steady as markets await Friday’s NFP report.
Despite an overall upbeat tone to equities, market sentiment remains hobbled.
The US is heading into trade talks with China, which Trump staffers historically lack the patience for.
The Dow Jones Industrial Average (DJIA) held steady on Thursday, chugging quietly near the previous day’s closing bids. Investors are braced for this week’s Nonfarm Payrolls (NFP) jobs report, slated to release on Friday, and the Trump administration is hard at work barreling into trade talks with China and exchanging barbs over budget bills with billionaires. However, steep losses
Jobs are the headline datapoint for investors this week. ADP job postings sank in May, causing investors to moderate their expectations for this week’s NFP official follow-up. May’s NFP jobs data report is expected to show a net gain of 130K employment positions over the reference period, down from the previous month’s 177K.
Also in markets: Fed officials still concerned about tariff impacts on inflation
President Trump’s former right-hand hatchet man, Elon Musk, has been lobbing potshots at Trump’s ‘big beautiful budget bill’ this week via social media. Posting to the social media platform that he owns, Musk has been openly deriding the Trump budget that he had a hand in creating.
Musk is ostensibly incensed that the Trump budget codifies functionally none of the federal spending cuts that he swiftly executed without Congressional oversight at the beginning of Trump’s second term. The relationship between two of the most prominent people in the country is souring quickly as the two exchange barbs over social media platforms or through statements to media personnel.
Shares of Tesla (TSLA) were down 17% at their lowest on Thursday, slipping below $305 per share after Elon Musk openly claimed that Donald Trump would have lost the federal election without his “involvement”. Earlier this week, Elon Musk also threatened to primary Congressional lawmakers who support the Trump administration’s deficit-heavy spending bill.
The Trump team is racing toward trade talks with China following a call between President Trump and Chinese President Xi Jinping. According to statements by Donald Trump on Thursday, the two had a productive phone call, and tariff negotiations are expected to continue. However, Donald Trump himself and most of his retinue have a poor track record of maintaining their composure when dealing with Chinese trade officials. Trump and Xi exchanged barbs as recently as this week over trade, with both sides accusing each other of violating pre-deal trade terms agreed upon in Geneva, Switzerland, in early May.
Read more stock news: Circle Internet Group stock spikes 235% on IPO debut
Dow Jones price forecast
The Dow Jones Industrial Average remains trapped in a consolidation zone. Investors are awaiting a fundamental shift in either direction, and a routine of nerve-fraying headlines on trade and tariffs has significantly widened the scope of intraday technical signals.
The Dow Jones is pinned to the 42,500 region, with bullish price action firmly capped below the 43,000 handle. However, downside pressure remains firmly subdued, with bids strung along the north side of the 200-day Exponential Moving Average (EMA) near 41,600.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
EUR/USD ticks lower on Thursday and stalls the previous day’s bounce from over a one-week low.
A turnaround in the global risk sentiment lends some support to the USD and weighs on the pair.
Traders now look to the US PCE Price Index for some impetus ahead of the ECB next Thursday.
The EUR/USD pair struggles to capitalize on the previous day’s solid bounce from the 1.1200 neighborhood, or a one-and-a-half week low, and trades with a mild negative bias during the Asian session on Friday. Spot prices currently hover around the mid-1.1300s, down nearly 0.15% for the day, though the downside remains cushioned.
Following the previous day’s dramatic turnaround, the US Dollar (USD) attracts some dip-buyers amid the flight to safety and turns out to be a key factor acting as a headwind for the EUR/USD pair. A federal appeals court paused a separate trade court ruling and reinstated US President Donald Trump’s sweeping trade tariffs late Thursday. This adds a layer of uncertainty in the markets and revives demand for traditional safe-haven assets.
The USD uptick, however, lacks bullish conviction amid concerns about the worsening US fiscal condition and expectations that the Federal Reserve (Fed) will lower borrowing costs again in 2025. The shared currency, on the other hand, continues to draw some support from US President Donald Trump’s decision to delay the imposition of tariffs on the European Union (EU), which contributes to limiting the downside for the EUR/USD pair.
Moving ahead, the spotlight turns to the release of the US Personal Consumption Expenditure (PCE) Price Index. The crucial data will play a key role in influencing expectations about the Fed’s rate-cut path, which, in turn, will drive the USD demand and provide some impetus to the EUR/USD pair heading into the weekend. The market focus will then shift to the crucial European Central Bank (ECB) monetary policy meeting next Thursday.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Gold price resides below $3,340 on Monday, and takes back some of Friday’s gains.
Markets rejoice and head into risk-on tone after Trump announced a delay on EU tariffs until July 9.
US debt concerns are in the background but remain lingering, capping the downside for the precious metal.
Gold (XAU/USD) price slips on Monday towards $3,330 at the time of writing, while US markets will remain closed due to Memorial Day’s public holiday. The small correction comes after United States (US) President Donald Trump issues a statement on Truth Social that he would extend to July 9 the deadline for the European Union (EU) to face 50% tariffs. The decision came after a call between Trump and European Commission President Ursula Von Der Leyen on Sunday, and should help the EU broker a trade deal with the Trump administration.
Although this risk-on euphoria looks tempting to join, this does not mean the rally in the precious metal is over. A softer stance on trade weakens the safe-haven demand for Gold, but the metal’s safety appeal is still strong amid growing concerns about the fiscal position of the US government. Investors remain concerned that Trump’s tax bill, which last week passed the House and will be debated in the Senate, will further increase both the US deficit and debt.
Daily digest market movers: It is nothing fundamentally changing for the EU
US President Trump on Sunday announced that his plans to hit the EU with 50% tariffs would be delayed until July 9 to allow for time for both sides to negotiate a deal. The US leader on Friday had threatened higher-than-expected 50% levies against the bloc, while also warning Apple Inc. that it would be subject to 25% tariffs if it does not manufacture its iPhones in the US, Bloomberg reports.
Josh Gilbert, market analyst at eToro, warned that these delays aren’t bringing any structural changes to Trump’s tariff policy. “Pauses are all well and good for now, but during this time, we need to see more agreements in place to confirm Trump’s more negotiable approach,” he said, Bloomberg reports.
Vietnam’s Prime Minister Pham Minh Chinh has asked the country’s central bank, finance ministry and relevant agencies to study the establishment of a regulated Gold exchange to enable transparent public trading and prevent smuggling and manipulation, according to a statement on the government’s website, Bloomberg reports.
The US Dollar also falls on Monday, extending Friday’s losses, as enthusiasm appears to have faded for the world’s reserve currency this year amid mounting fiscal concerns in the US. Speculative traders remained bearish on the dollar but trimmed their positioning to $12.4 billion in the week ending May 20 from $16.5 billion in the week prior, according to CFTC data reported Friday, Reuters reports.
Gold Price Technical Analysis: Nothing going on actually
Gold takes a step back as investors flee to risk assets following the agreement between Trump and von der Leyen to continue to negotiate about trade. Still, the delay is only a minor one, by just a month, and brokering a trade agreement between the two blocs is nearly impossible to do in such a short time span.. Therefore, these headlines need to be seen as brief injections of reliefs within an overall narrative that is still supportive for Gold due to heightened uncertainty.
On the upside, the R1 resistance at $3,386 is the first level to look out for as resistance. The R2 resistance at $3,415 follows not far behind and could open the door for a return to the $3,440 round level and potentially further course to new all-time highs at $3,500.
On the other side, some thick-layered support emerges in case the Gold price declines. On the downside, the daily S1 support comes in at $3,307, safeguarding the $3,300 big figure. Some intermediary support could come from the S2 support at $3,258. Further below, there is a technical pivotal level at $3,245, roughly converging with the S2 support at $3,240.
XAU/USD: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
The US Dollar Index sees the previous day’s relief rally pared back in full on Friday.
Trump hints to tariffs for EU and starts to target domestic companies as well, with Apple’s Iphone facing 25% tariff.
The US Dollar Index extends losses and is on its way to test a fresh two-week low near 99.14.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, dips further on Friday and erases the previous day’s recovery, trading near 99.20 at the time of writing. The fresh leg lower comes after the House of Representatives passed United States (US) President Donald Trump’s spending bill, now on its way to the Senate. The nonpartisan Congressional Budget Office revealed that this “big, beautiful bill” comes with a hefty price tag: $3.8 trillion in additional debt to the federal government’s $36.2 trillion over the next decade, according to Reuters.
Markets, and indeed the bond market, have been very concerned about these numbers. The best example was the longer-term 30-year Bond, where yields rallied to 5.15% on Thursday from 4.64% at the start of May, a more than one-year high since the 5.18% seen at the end of December 2023. More concerns could devalue the US Dollar even further.
Meanwhile President Trump came out on his social media platform Truth Social by saying that he is considering putting a 50% tariff on EU goods as of June 1st. Apple might face a 25% tariff on its Iphone if the model is not made in the US. Both Apple and EU equities are diving lower on the back of this news.
Daily digest market movers: The approach raises more questions
United States Secretary of the Treasury Scott Bessent gave further details on President Trump’s comments. Bessent said that the EU was not making enough progress on its talks with the US. The proposals itself from Europea re not that good as from other countries, Bessent said, Bloomberg reports.
President Trump threatens with a 50% tariff on all EU goods from June 1st and a 25% tariff on Iphones if they are not made in the US, Bloomberg reports.
At 12:35 GMT, St. Louis Fed President Alberto Musalem participates in a fireside chat with Kansas City Fed President Jeff Schmid at the Heartland Health Institute, Benthoville.
At 14:00 GMT, April’s New Home Sales data will be released.
At 16:00 GMT, Federal Reserve Bank Governor Lisa Cook speaks on financial stability at the Seventh Annual Women in Macro Conference.
Equities are diving lower, with losses over 2% across Europe and over 1% in the three main US indices.
The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at just 5.3%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 28.2%. Recent hawkish comments from Fed officials have reduced the chances of a rate cut in the short term.
The US 10-year yields trade around 4.47%, cooling down from their peak performance earlier this week at 4.62%.
US Dollar Index Technical Analysis: Another bad week
The US Dollar Index is back to square one, flirting with a fresh two-week low at the time of writing near 99.40. With the spending bill now having cleared that first hurdle, the risk of a substantial shock effect in the US debt could further materialise. Even another cut in its credit rating might be under consideration, denting the US image and the US Dollar even further.
On the upside, the broken ascending trend line and the 100.22 level, which held the DXY back in September-October, are the first resistance zone. Further up, the 55-day Simple Moving Average (SMA) at 101.49 is the next level to watch out for, followed by 101.90, a pivotal level throughout December 2023 and as a base for the inverted head-and-shoulders (H&S) formation during the summer of 2024. In case Dollar bulls push the DXY even higher, the 103.18 pivotal level comes into play.
If the downward pressure continues, a nosedive move could materialize towards the year-to-date low of 97.91 and the pivotal level of 97.73. Further below, a relatively thin technical support comes in at 96.94 before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
EUR/USD rose on Tuesday, but remains capped by 1.1300.
Despite a near-term recovery, the Euro remains down from recent highs against the Greenback.
US PMI figures will be the key data release this week.
EUR/USD caught a bounce for a second day in a row on Tuesday, bolstering the pair back toward the 1.1300 handle. Despite a near-term rise in bullish momentum bolstering the Fiber, EUR/USD remains well back from recent multi-year highs near 1.1575. The pair has found a firm technical floor from key moving averages, and overall market sentiment remains hopeful that traders will be able to keep finding reasons to hit the buy button.
Tariffs dominate market perception, but US data looms ahead
European policymakers are currently wrapped up in G7 meetings, minimizing the trickle of noteworthy headlines from key EU decision-makers. Overall market sentiment remains entirely hinged on trade headlines from the US, with investors hoping that deals will be struck with the Trump administration that will encourage President Donald Trump and his staffers to take the tariff gun away from their own economy’s head. Despite the overall upbeat tone in global markets, the steady drift into the unknown is beginning to limit bullish sentiment. The Trump administration is rapidly approaching its own self-imposed 90-day deadline on its own “reciprocal tariffs” package. While some potential trade deals have been announced, nothing concrete has been forthcoming.
It will be a limited data docket on Wednesday, with only mid-tier data on the offering on both sides of the Pacific. US Purchasing Managers Index (PMI) figures are expected to come in mixed on Thursday. US Manufacturing PMI in May is expected to tick down to 50.1 from 50.2, while the Services component is seen holding flat at 50.8.
EUR/USD price forecast
Fiber rose four-tenths of one percent against the Greenback on Tuesday, pushing EUR/USD within touch range of the 1.1300 handle. The pair is still riding out a halting but determined bullish bounce from the 50-day Exponential Moving Average (EMA) just below 1.1100, but bullish price momentum still has a long way to go to reclaim multi-year highs north of 1.1500 posted in April.
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Federal Reserve (Fed) Bank of St Louis President Alberto Musalem added his voice to the chorus of Fedspeakers warning that US trade policy under the guidance of the Trump administration is poised to not only weigh on growth, but could also exacerbate price volatility, one of the Fed’s favorite stand-in phrases for inflation.
Key highlights
Monetary policy currently well-positioned.
A balanced response to higher inflation and unemployment is feasible if inflation expectations stay anchored.
If inflation expectations become de-anchored, Fed policy should prioritize price stability.
US economy has underlying strength, labor market stable, inflation has eased but above 2% goal.
Economic policy uncertainty is unusually high.
Even after May 12th de-escalation, tariffs likely to lead to labor market softening and higher prices.
Tariffs as likely to have temporary as persistent effect on inflation.
If trade tensions are durably de-escalated, inflation could head back to target, labor market remain resilient, and current monetary policy would remain appropriate.
Long-term inflation expectations remain anchored.
Hearing businesses and households are holding back from decisions amid uncertainty.
If decisions have been somewhat paused, I’d expect it to affect the economic outlook.
Impact of uncertainty on economic activity tends to be pretty meaningful.
The labor force has continued to grow even with decrease in immigration.
I hear there is some scarcity of some types of workers in some industries.
The Dow Jones rose slightly on Friday, clipping into fresh weekly highs.
Equity markets shrugged off a worse-than-expected print from the UoM Consumer Sentiment Index.
Investors are hoping that more clarity will come from the Trump administration on trade.
The Dow Jones Industrial Average (DJIA) stepped into fresh weekly highs on Friday after investors shrugged off the second-worst print from the University of Michigan’s (UoM) Consumer Sentiment Index on record. Market sentiment remains on the high side as traders hope for further clarity on trade from the Trump administration and a continued easing of President Donald Trump’s tariff policies.
The UoM’s Consumer Sentiment Index sank to 50.8 from 52.2 as consumers’ outlook for economic activity, income, and employment continues to decline. Investors were hoping for an uptick in consumer sentiment, but the average consumer apparently disagrees with Wall Street. Consumer 1-year and 5-year inflation expectations also rose, climbing to 7.3% and 4.6% respectively.
Market sentiment holds on the high end, but dark trade clouds remain
While consumers tend to be terrible at forecasting their economic futures, tariff concerns have been playing havoc on consumers’ feelings about the economy. With inflation expectations continuing to climb, it could pave the way for “profit-led inflation”, or businesses taking the opportunity to raise prices in the face of consumers expecting rising prices. US inflation data came in far better than expected this week, helping to assuage market fears that lopsided US trade policies could shatter the US economy’s still-strong position. However, investors habitually understate the amount of time it takes for government policies to show up in headline data, and tariffs are likely no exception.
According to estimates from the Fitch Ratings agency, the US’s headline Effective Tariff Rate has reached 13% following the Trump administration’s fun new toy of using tariffs to try and control global trade. Prior to widespread tariffs, the US’s ETR was 2.5%. The US’s ETR specifically on China remains above 30% even after the walkback of President Trump’s unhinged 145% import taxes.
The Trump administration has developed a pattern of threatening deeply damaging policy changes before walking them back, temporarily suspending them, or outright canceling them at the eleventh hour. Market perception broadly anticipates a continued clawback of Donald Trump’s policy strategies; however, bullish animal spirits are likely to remain tepid until the Trump administration delivers some solid results and provides some clarity from the many trade agreements that White House staff have been insisting are due to be announced any day now for the last two months.
The latest US government budget bill failed in Congress on Friday. Hardline Conservatives rejected the spending bill, which would add trillions to the national debt and includes steep tax breaks for high net worth individuals and drastic cuts to Medicaid spending. Several key Republicans rejected the bill for introducing excessive deficit spending, something the Republican party has spent years accusing their Democratic opponents of doing. In contrast, select Republicans rejected the bill because they felt it didn’t include enough cuts to national healthcare provisions. The budget rejection deals a blow to the Trump administration’s plans of muscling the spending bill through the US legislature. President Trump will likely have choice words to share on the matter over the weekend on his Truth Social account, especially as this is one key aspect of his administration’s strategy that he cannot circumvent using a flood of executive orders.
Dow Jones price forecast
The Dow Jones Industrial Average has finally clawed its way back the 42,500 level for the first time since March. Trade headlines sent US equity markets into a freefall in the first quarter, sending the Dow Jones into the 36,600 region. After weeks of paring back losses, the DJIA is finally back into positive territory for 2025.
Bullish momentum has bolstered the Dow Jones back above the 200-day Exponential Moving Average (EMA) near 41,500, and the DJIA has rebounded 16.25% bottom-to-top. Price action is heading for a technical resistance zone priced in from March’s swing high into 42,800, while the 42,000 handle is set to begin providing a technical floor.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
The US Dollar trades steady lower on Thursday despite a slew of key US economic data released.
Markets see talks in Turkey between Russia and Ukraine fall apart before even starting.
The US Dollar Index holds just below 101.00 and could move either way after a volatile Wednesday.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is catching its breath and trades slightly lower just below the 101.00 level at the time of writing on Thursday, ahead of a chunky United States (US) economic calendar. The Greenback is not really moving on the back of the geopolitical defusing by US President Donald Trump, who commented during his Middle Eastern trip that nuclear talks with Iran have good hopes, while both Yemen and Syria deserve a second chance.
After Wednesday’s sharp volatility affecting the Korean Won (KRW), traders are looking to Asia for possible more currency hiccups and evidence that the Trump administration is seeking a currency deal with countries in the region to devalue the Greenback.
Meanwhile in Turkey it appears talks between Russia and Ukraine are not going well. Even before the two negotiating teams have joined, talks seem to already have been broken down. US President Trump meanwhile said on Air Force One that peace will not come if Trump and Russian President Vladimir Putin do not meet, Bloomberg reports.
Daily digest market movers: Going Nowhere
The US economic calendar kicked off at 12:30 GMT with a string of data:
Weekly Initial Jobless Claims came in at 229,000, as expected and from 228,00 in the previous week. The Continuing Claims came in softer at 1.881 million, beating the 1.89 million estimate and from 1.879 million previously.
The NY Empire State Manufacturing Index for May only fell to -9.2, beating the expected -10, from -8.1 the previous month. The Philadelphia Fed Manufacturing Survey for May was a surprise -4, far better than the expected -11 and from -26.4 in April.
The monthly April headline Producer Price Index contracted by -0.5%, where an increase by 0.2% was expected and from the 0.4% decline in March. The core PPI contracted by -0.4%, missing the 0.3% estimate and compared to -0.1% previously.
April Retail Sales fell to just 0.1%, a small beat on the 0% estimate and compared to the 1.5% previous release. Retail Sales excluding Cars and Transportation only increased by 0.1%, missing the 0.3% estimate and compared to the 0.5% rise in March. That same 0.5% for March got revised up to 0.8%.
Federal Reserve Chairman Jerome Powell delivered a speech about the Fed’s framework review at the Thomas Laubach Research Conference in Washington DC. Though the Fed Chairman did not comment on any near-term economic outlook or rate path.
The monthly Industrial Production data for April fell to 0.0%, a miss on the estimated 0.2%, though up from the -0.3% in March.
At 18:05 GMT, Federal Reserve Bank Vice Chair for Supervision Michael Barr will deliver opening remarks (via pre-recorded video) at the 2025 Northeast/Mid-Atlantic Small Business Credit Symposium.
Equities are slumping across the board on Thursday, though nowhere more than 1% losses to report from Asia, across Europe, and into the US equity futures markets.
The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at just 8.2%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 38.6%.
The US 10-year yields trade around 4.53%, and keep ticking higher, nearing a one-month high.
US Dollar Index Technical Analysis: Stuck between two forces
The US Dollar Index saw the pivotal technical level at 100.22 hold firmly, delivering a small bounce for the Greenback on Wednesday. With the slide below 101.00, the DXY looks well-positioned to go either way, driven by the US economic data releases later this Thursday. A return to 101.90 could materialize, while the downside support at 100.22 is not far off.
On the upside, 101.90 is the first big resistance again. It already acted as a pivotal level throughout December 2023 and as a base for the inverted head-and-shoulders (H&S) formation during the summer of 2024. In case Dollar bulls push the DXY even higher, the 55-day Simple Moving Average (SMA) at 102.06 comes into play.
On the other hand, the previous resistance at 100.22 is now acting as firm support, followed by the year-to-date low of 97.91 and the pivotal level of 97.73. Further below, a relatively thin technical support comes in at 96.94 before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
Banking crisis FAQs
The Banking Crisis of March 2023 occurred when three US-based banks with heavy exposure to the tech-sector and crypto suffered a spike in withdrawals that revealed severe weaknesses in their balance sheets, resulting in their insolvency.
The most high profile of the banks was California-based Silicon Valley Bank (SVB) which experienced a surge in withdrawal requests due to a combination of customers fearing fallout from the FTX debacle, and substantially higher returns being offered elsewhere.
In order to fulfill the redemptions, Silicon Valley Bank had to sell its holdings of predominantly US Treasury bonds. Due to the rise in interest rates caused by the Federal Reserve’s rapid tightening measures, however, Treasury bonds had substantially fallen in value. The news that SVB had taken a $1.8B loss from the sale of its bonds triggered a panic and precipitated a full scale run on the bank that ended with the Federal Deposit Insurance Corporation (FDIC) having to take it over.The crisis spread to San-Francisco-based First Republic which ended up being rescued by a coordinated effort from a group of large US banks. On March 19, Credit Suisse in Switzerland fell foul after several years of poor performance and had to be taken over by UBS.
The Banking Crisis was negative for the US Dollar (USD) because it changed expectations about the future course of interest rates. Prior to the crisis investors had expected the Federal Reserve (Fed) to continue raising interest rates to combat persistently high inflation, however, once it became clear how much stress this was placing on the banking sector by devaluing bank holdings of US Treasury bonds, the expectation was the Fed would pause or even reverse its policy trajectory. Since higher interest rates are positive for the US Dollar, it fell as it discounted the possibility of a policy pivot.
The Banking Crisis was a bullish event for Gold. Firstly it benefited from demand due to its status as a safe-haven asset. Secondly, it led to investors expecting the Federal Reserve (Fed) to pause its aggressive rate-hiking policy, out of fear of the impact on the financial stability of the banking system – lower interest rate expectations reduced the opportunity cost of holding Gold. Thirdly, Gold, which is priced in US Dollars (XAU/USD), rose in value because the US Dollar weakened.
The Greenback on the backfoot this Tuesday while the US-China trade deal euphoria quickly fades.
Traders see April’s US CPI release not really showing inflationary signals after Liberation Day.
The US Dollar Index slips back to 101.50 after failing to reclaim the 102.00 level.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, corrects to near 101.50 ahead of the US trading session on Tuesday. The partial paring back of Monday’s gains comes as traders become wary of the lack of detail on the recent trade deal between China and the United States (US). Besides slashing the tariffs, no forward dates or topics are set, raising questions on what has been discussed, similar to the UK-US trade deal from Thursday.
Meanwhile, on the economic data front, the US Consumer Price Index (CPI) release for April came in broadly in line of expectations. For now, that feared inflationary shock has not materialized and sees traders carefully consider the possibility of rate cuts from the Federal Reserve. Overnight, Federal Reserve (Fed) Bank President of Chicago Austan Goolsbee warned that even current tariff levels will still have an inflationary impulse, the New York Times reported. That theory does not seem to be translated into the April CPI numbers for now.
Daily digest market movers: Not for now
On Monday, President Trump lashed out at the European Union (EU), saying that the US has the upper hand in its trade discussions with the EU. “The European Union is in many ways nastier than China. We’ve just started with them. We have all the cards. They treated us very unfairly,” Trump said at the White House.
At 10:00 GMT, the National Federation of Independent Business (NFIB) released its Business Optimism Index for April. The actual number came in at 95.8 compared to the previous 97.4. The expectation was for a 94.5.
The April US Consumer Price Index data came in not really shocking:
Monthly headline CPI came in at 0.2%, lower than the 0.3% expected and away from the disinflationary -0.1% in March. The yearly figure came in at 2.3% from the previous 2.4%.
The Monthly core CPI came in at as well at 0.2%, just missing the 0.3% estimate and a touch higher from 0.1% in March. The yearly figure is set to remain unchanged at 2.8%.
Equities in the US are rallying near 1% with a second sigh of relief, this time on US inflation which has not run out of control in April.
The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at just 8.2%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 38.6%.
The US 10-year yields trade around 4.47%, with traders mulling possible rate cut bets for the Fed after these steady CPI numbers.
US Dollar Index Technical Analysis: Rate gap issues
Warning lights flashing this Tuesday for the US Dollar Index from a pure technical point of view. The fact that the DXY was unable to break 102.00 and closed below the important 101.90 technical level is opening up the door for a harsh retracement back to 100.00. The US CPI release later this Tuesday could be vital to either broaden the rejection with a weaker Greenback or push it firmly above 102.00.
On the upside, the DXY is flirting with a technical rejection against 101.90, which acted as a pivotal level throughout December 2023 and as a base for the inverted head-and-shoulders (H&S) formation during the summer of 2024. In case Dollar bulls push the DXY even higher, the 55-day Simple Moving Average (SMA) at 102.29 comes into play.
On the other hand, the previous resistance at 100.22 is acting as firm support, followed by 97.73 near the low of 2025. Further below, a relatively thin technical support comes in at 96.94 before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
(This story was corrected on May 13 at 13:04 GMT to say that Headline yearly inflation is 2.3% instead of 2.4%.)
Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee took a cautionary stance on the ever-evolving trade stance of the Trump administration on Monday. According to Goolsbee’s interview with The New York Times, constantly-changing tariffs and trade strategies from the White House have thrown a very large wrench in plans for hiring and investment for many industries, pinning the Fed in a wait-and-see mode on interest rates.
Key highlights
On the US-China tariff reduction: It is definitely less impactful stagflationarily than the path they were on.
Yet it’s three to five times higher than what it was before, so it is going to have a stagflationary impulse on the economy. It’s going to make growth slower and make prices rise.
The way that we’re doing this is not free for the economy.
On hiring and investment by business contacts: the risk of trade agreements and tariff suspensions lapsing is preventing businesses from taking the leap.
Business’ statements are coming with explicit recognition that this isn’t permanent and that it’s going to be revisited in the near future.
Part of those business announcements are explicitly putting off into the future major decisions.
If we could get the dust out of the air, it would make sense to think that rates would be going down.
The bar for action has to be high when there’s so much uncertainty.
White House Press Secretary Karoline Leavitt addressed media staff on Friday, walking back some of the tone and market interpretations of President Donald Trump’s early morning tweets.
Key highlights
Trump confident in US Treasury Secretary Bessent with discussions (with China).
The US needs to see concessions from China.
Trump committed to the 10% baseline tariff.
The 10% baseline tariff will remain for the UK.
It is ridiculous that Trump would do anything for his own gain.
The White House will let Congress work out SALT tax issue.
On possible 80% tariff concession: That’s not what Trump said.
Trump will not unilaterally bring down tariffs on China. 80% was a number Trump threw out there.
Gold price struggles to capitalize on its weekly gains registered over the past two days.
The optimism over US-China trade talks is seen weighing on the safe-haven commodity.
Investors now look to the crucial FOMC policy decision for a fresh directional impetus.
Gold price (XAU/USD) recovers slightly from the Asian session low, around the $3,360 area, though maintains its offered tone amid the latest optimism over the announcement of the US-China trade talks in Switzerland this week. Apart from this, some repositioning trades ahead of the key central bank event risk assists the US Dollar (USD) to gain some positive traction, which is seen as another factor undermining the commodity.
The USD bulls, however, seem reluctant to place aggressive bets and opt to wait for the outcome of the highly-anticipated two-day FOMC policy meeting. Furthermore, persistent geopolitical risks stemming from the protracted Russia-Ukraine war, conflicts in the Middle East, and a military escalation along the India-Pakistan border act as a tailwind for the safe-haven bullion. This, in turn, warrants some caution for the XAU/USD bears.
US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet their Chinese counterparts in Switzerland on Saturday to discuss trade and economic issues. This marks the first direct talks since the US imposed tariffs on China and a step toward resolving a trade war between the world’s two largest economies.
Meanwhile, US President Donald Trump said on Tuesday that he and top administration officials will review potential trade deals over the next two weeks to decide which ones to accept. This, however, counters Trump’s earlier statement that his administration could announce trade deals with some countries as soon as this week.
Furthermore, Trump had announced 100% tariffs on movies produced outside the US and also indicated that he plans to announce fresh tariffs on pharmaceutical imports over the next two weeks. This keeps investors on the edge and might continue to act as a tailwind for the safe-haven Gold price amid rising geopolitical risks.
A Kremlin spokesman says Russia will stick to its plans for a unilaterally-imposed ceasefire between 8 and 11 May but warned that an appropriate response will be given immediately if Ukraine does not also halt the fire. Meanwhile, Russia and Ukraine swapped 205 prisoners of war each in an exchange mediated by the United Arab Emirates.
Israel’s security Cabinet unanimously approved a plan to widen the military offensive in Gaza. The plan involves the Israel Defense Forces (IDF) invading and gradually seizing control of Gaza territory. Although no formal details were announced, officials said the operation would not begin until after Trump’s visit to the Middle East next week.
Investors keenly await the Federal Reserve’s decision later this Wednesday. The accompanying monetary policy statement and Fed Chair Jerome Powell’s comments at the post-meeting press conference will be scrutinized for cues about the future rate-cut path. This will drive the US Dollar demand and influence the non-yielding yellow metal.
Gold price needs to break below the $3,360 area to support prospects for a further intraday depreciating move
From a technical perspective, the overnight sustained breakout through the $3,360-3,365 horizontal barrier and a subsequent move beyond the $3,400 mark was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart are holding comfortably in positive territory, suggesting that the path of least resistance for the Gold price is to the upside. However, the strong uptrend witnessed since the beginning of this week falters near the $3,430-3,435 resistance. The said area should now act as a pivotal point, above which the XAU/USD could aim to challenge the all-time peak touched in April and conquer the $3,500 psychological mark.
On the flip side, weakness below the $3,365-3,360 area could find some support near the $3,328-3,327 region ahead of the $3,300 round figure. Failure to defend the said support levels would negate the near-term positive outlook and make the Gold price vulnerable. The downward trajectory might then drag the XAU/USD pair to the $3,265-$3,260 intermediate support en route to the $3,223-3,222 region and the last week’s swing low, around the $3,200 neighborhood.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.12%
0.12%
0.52%
0.10%
0.16%
0.09%
0.35%
EUR
-0.12%
0.00%
0.42%
-0.01%
0.05%
-0.03%
0.24%
GBP
-0.12%
-0.00%
0.42%
-0.01%
0.05%
-0.03%
0.24%
JPY
-0.52%
-0.42%
-0.42%
-0.43%
-0.37%
-0.39%
-0.15%
CAD
-0.10%
0.01%
0.00%
0.43%
0.07%
-0.01%
0.25%
AUD
-0.16%
-0.05%
-0.05%
0.37%
-0.07%
-0.08%
0.17%
NZD
-0.09%
0.03%
0.03%
0.39%
0.01%
0.08%
0.27%
CHF
-0.35%
-0.24%
-0.24%
0.15%
-0.25%
-0.17%
-0.27%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
GBP/USD rallied on Tuesday, bolstered by headlines of an incoming US-UK trade agreement.
Specific details remain limited, but GBP markets were buoyed by hopes to avert US tariffs.
The Pound Sterling settled 0.4% higher against the Greenback after testing 1.3400.
GBP/USD rose on Tuesday, climbing four-tenths of one percent on the day and testing the 1.3400 handle on headlines of a possible US-UK trade deal that would see the UK avoid the brunt of trade tariffs being actively pursued by the Trump administration.
The Federal Reserve’s (Fed) upcoming rate call due on Wednesday still hangs over markets as the key market event of the week. Despite markets broadly anticipating another hold on Fed rates, investors will be taking a close look at policymaker comments, specifically Fed Chair Jerome Powell’s statement, for any signs that the Fed might be pivoting toward a rate-cutting cycle sooner rather than later.
Fed, Boe double header due this week
The Fed has come under pressure on multiple fronts to drop interest rates recently: market participants are always on the hunt for cheaper financing options, and the Trump administration has been incredibly vocal and adamant that the Fed’s job should be to lower interest rates in order to make US debt servicing cheaper. This runs largely opposite the Fed’s dual mandates of supporting full employment and keeping price volatility in check, however these key aspects of the Fed’s mandate are largely lost on US President Donald Trump.
The Bank of England (BoE) will be following up Wednesday’s Fed action with its own rate call on Thursday. Unlike the Fed, the BoE is broadly expected to deliver another quarter-point rate trim, with the BoE’s Monetary Policy Committee (MPC) expected to vote nine-to-one in favor of delivering its fourth rate cut since August of last year.
GBP/USD price forecast
Despite a firm bullish performance on Tuesday, GBP/USD remains embroiled in a near-term consolidation range baked in between 1.3450 and 1.3250. Price action is leaning into the midrange, with technical oscillators showing momentum has largely drained out of Cable markets.
GBP/USD is still well supported far above the 200-day Exponential Moving Average (EMA) near 1.2830, however further topside momentum will take a strong showing from bidders that have remained trapped below the 1.3400 handle for the time being.
GBP/USD daily chart
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The Japanese Yen attracts some intraday sellers on Tuesday, though the downside risk remains limited.
Trade-related uncertainties and geopolitical risks continue to act as a tailwind for the safe-haven JPY.
The divergent BoJ-Fed expectations further contribute to capping USD/JPY ahead of the FOMC meeting.
The Japanese Yen (JPY) reverses an Asian session dip against its American counterpart and looks to build on the gains registered over the past two days. The uncertainty over US President Donald Trump’s trade policies and rising geopolitical tensions keep investors on edge, which, in turn, is seen lending some support to the safe-haven JPY. Furthermore, bets that the Bank of Japan (BoJ) will hike interest rates further in 2025, despite last week’s dovish pause, turn out to be another factor underpinning the JPY.
However, the optimism over the potential de-escalation of the US-China trade war and easing concerns about a US recession hold back the JPY bulls from placing aggressive bets. Traders also seem reluctant and opt to wait for more cues about the Federal Reserve’s (Fed) rate cut path, which will play a key role in influencing the US Dollar (USD) and provide a fresh impetus to the USD/JPY pair. Hence, the market focus will remain glued to the outcome of a two-day FOMC meeting starting this Tuesday.
Japanese Yen traders seem non-committed amid mixed cues, ahead of the crucial FOMC meeting
The Bank of Japan struck a cautious tone last week by slashing its growth and inflation forecasts, forcing investors to scale back their bets for the next rate hike in June or July. The central bank, however, reiterated that it remains committed to raising rates further if the economy and prices move in line with its forecasts.
US President Donald Trump’s erratic trade policies overshadow the optimism led by signs of easing US-China trade tensions and keep investors on edge. In fact, Trump on Sunday announced a 100% tariff on all movies produced in foreign countries. Moreover, geopolitical risks lend support to the safe-haven Japanese Yen.
Russia’s defense ministry said that Ukraine launched a drone attack targeting Moscow for the second night in a row on Monday. This follows reports of fresh attempts by Ukraine to cross into Russia’s Kursk region. This comes days after Russian President Vladimir Putin declared a three-day ceasefire over May 8-10.
Adding to this, Israel struck targets in Yemen in response to the Iranian-backed Houthis’ ballistic missile attack that hit Israel’s main airport on Sunday. The Houthis warned on Sunday that they could strike again and would impose a comprehensive air blockade on Israel by repeatedly targeting airports.
Meanwhile, Trump hinted at possible trade agreements with certain countries as early as this week and also signaled that he is open to lowering massive tariffs imposed on China. Furthermore, China’s Commerce Ministry said last Friday that it was evaluating the possibility of trade talks with the US.
On the economic data front, the Institute for Supply Management (ISM) survey showed on Monday that the growth in the US services sector picked up in April. Adding to this, signs of a still resilient US labor market help ease concerns about a US recession and act as a tailwind for the US Dollar.
Traders, however, seem reluctant to place aggressive bets and opt to move to the sidelines ahead of a two-day FOMC policy meeting starting this Tuesday. Investors will look for fresh cues about the Fed’s future interest rate-cut path, which, in turn, will influence the USD and the USD/JPY pair.
USD/JPY remains vulnerable; last week’s failure near the 200-period SMA on H4 remains in play
From a technical perspective, the USD/JPY pair last week struggled to find acceptance above the 50% Fibonacci retracement level of the March-April downfall and faced rejection near the 200-period Simple Moving Average (SMA) on the 4-hour chart. The subsequent decline and negative oscillators on daily/hourly charts suggest that the path of least resistance for spot prices is to the downside. Hence, any attempted recovery back above the 144.00 mark might still be seen as a selling opportunity near the 144.25-144.30 supply zone. A sustained strength beyond the latter, however, could trigger a short-covering rally and allow spot prices to reclaim the 145.00 psychological mark.
On the flip side, weakness below the Asian session low, around the 143.55-143.50 area, has the potential to drag the USD/JPY pair to the 143.30 intermediate support en route to the 143.00 mark. The next relevant support is pegged near the 142.65 region, which if broken decisively would expose the 142.00 level before the currency pair eventually drops to the 141.60-141.55 zone and the 141.00 round figure.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Gold price rallies more than 2% on Monday with nervousness towards the Fed interest-rate decision.
Geopolitical risks coming from Trump and Israel are pushing investors back into Gold.
The Greenback is losing its status as safe haven in favor of Bullion.
Gold (XAU/USD) rises by more than 2% on Monday to $3,317 at the time of writing, as geopolitical risk surges. The Houthi attack that hit Ben Gurion airport this weekend and Israel’s promise to retaliate while preparing for a broad ground offensive in Gaza are elevating risks again in the region. Meanwhile, US President Donald Trump said that military action might be an option to consider for the US to seize control of Greenland.
Gold’s appeal increases as traders brace for the Federal Reserve’s rate decision on May 7. Over the weekend, Trump expressed his dislike again of the Fed and its Chairman Jerome Powell. After calling Powell “stiff”, the US President called upon the Federal Open Market Committee (FOMC) members to pressure Chairman Powell to deliver rate cuts.
According to the Chicago Mercantile Exchange (CME) Fedwatch tool, no rate cut is foreseen for this Wednesday. Given the recent Nonfarm Payrolls print and the latest string of data from sectors such as Manufacturing and Services, the US economy is starting to ease, but is not crashing. This could be ammunition for Fed Chairman Powell to push against the political pressure and channel to markets that rates will stay steady for longer until the Fed is comfortable enough to lower them..
Daily digest market movers: Taiwan mayhem
Several Asian markets are closed for a public holiday on Monday. The United Kingdom is closed as well.
The Taiwan Dollar (TWD) gained as much as 5% at one point over the US Dollar (USD). The move came after local exporters started selling their Dollar holdings after the Taiwan central bank on Friday issued a late statement asking exporters not to do so. Several traders are pointing out as well that in the tariff discussions between Taiwan and the Trump administration, the demand to strengthen the Taiwan Dollar is one of the elements to avoid further tariff implications for the Taiwan economy, Bloomberg reports.
In the Gold mining sector, some takeover news with Gold Road Resources agreeing to be bought for $3.7 billion after South African suitor Gold Fields sweetened its offer, concluding a public spat between the joint venture partners, Financial Review reports.
The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in May’s meeting stands at 5.2% against a 94.6% probability of no change. The June meeting sees a 46.6% chance of a rate cut.
Gold Price Technical Analysis: Elastic band ready to slingshot higher
Bullion is sprinting higher on Monday, while the Greenback dipped lower at the start of the trading day. The communication vessels synergy between the two assets comes just a few days ahead of the Fed rate decision. Generally, steady or higher rates are bad for Gold as the returns from interests in bonds are more attractive than the return from Gold. However, there might be a breakout in that narrative: if rates remain elevated at current levels, the US economy could weaken further, contract and trigger stagflation or recession, and Gold is a better positioned hedge to withstand that scenario.
On the upside, the R1 resistance at $3,265 has already been broken in a topside test in early trading this Monday. Should some follow-through come, the R2 at $3,337 might be a bit too far off. Rather look for $3,290 (May 1 high) and $3,320 (April 30 high) as intermediary levels nearby for upside resistance.
On the downside, pivot at $3,244 together with the technical level at $3,245 should do the trick and hold. In case Bullion dips further, very close supports are present near $3,219 S1 intraday support and $3,197 S2 intraday support for Monday.
XAU/USD: Daily Chart
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
US President Donald Trump said late Sunday that he is authorizing the US Trade Representative and the Commerce Department to begin the process of imposing a 100% tariff on imports of foreign-produced movies.
Market reaction
At the time of press, the US Dollar Index (DXY) was down 0.05% on the day at 99.98.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
