The British hawks are hard to match the US index and strengthen, the pound and the US break down, and the US dollar is on the rise. The US dollar is sustainable under the trade progress?

Asian Handicap Market Review

On Thursday, Trump announced a "breakthrough" trade agreement with the UK, and the US dollar index hit its highest reading since April 10, and as of now, the US dollar is quoted at 100.60.

Tariffs

①The United Kingdom and the United States reached a trade agreement: retain a benchmark tariff of 10% on the UK, expand market access between the two sides, cancel tariffs on steel and aluminum on British steel and aluminum, impose zero tariffs on American agricultural products, and implement ladder tariffs on British automobile imports;

②The United States Trade Representative: It may be necessary to take law enforcement actions on import services;

③Trump: The United Kingdom agrees to a Boeing aircraft purchase agreement worth $10 billion;

④The U.S. Secretary of Commerce: Pay attention to the next major country and hopes to reach a trade agreement with a major country from Asia;

⑤If negotiations are not going well, the EU plans to impose additional tariffs on US products worth 95 billion euros;

⑥Indian officials: The free trade agreement with the United Kingdom will be signed in three months.

The Bank of England cut interest rates by 25 basis points, and the vote showed differences.

Prevost was elected as the new Catholic Pope.

The Ukrainian parliament approved the Ukrainian mineral agreement, and Ukraine hopes to obtain more weapons.

Trump

① Call Powell "Mr. Taichi" again, he is a fool;

②At the press conference, it directly issued a call to "buy stocks now";

③It is reported that Trump seeks to increase taxes on wealthy people with annual income of more than US$2.5 million to 39.6%;

④Applications for Russia and Ukraine to unconditionally cease fire for 30 days.

Summary of institutional views

UNB Singapore: Europe and the United States have fallen below key support, and the pullback may extend to the xx moving average

The euro against the US dollar may experience a deeper correction pullback after falling below the key intraday support area. According to the daily chart, the pair fell below the support area between 1.1215-1.1225 on Thursday, suggesting that the recent high of 1.1573 may be a temporary top. The pullback may extend toward the 55-day exponential moving average, currently at 1.1050.

Analyst Christian Borjon Valencia: Trade positive news is hit by the strong dollar, and the signal of long momentum exhaustion is revealed. Market optimism continues to pressure gold prices, with gold prices falling by nearly 4% in the past two days. The U.S.-UK trade deal announced by President Trump and British Prime Minister Stamer has boosted market confidence, and traders generally expect the United States to reach more trade agreements. Meanwhile, the Chinese and US delegations will hold tariff consultations in Switzerland on Saturday, an incident attracting much attention. The trade deal eased concerns among risk-favorable investors and drove U.S. stocks and the dollar to rise simultaneously, both of which posed negative negative for gold. The US dollar index broke through the 100 integer mark, becoming an important factor in suppressing gold prices.

World Gold Council data shows that China, Poland and the Czech central banks all increased their holdings of gold reserves in April. Among them, the People's Bank of China continued to increase its holdings by 2 tons of gold, achieving six consecutive months of increase in positions; the Polish Central Bank increased its gold reserves by 12 tons to 509 tons in April; the Czech Central Bank increased its holdings by 2.5 tons in April. In terms of market expectations, swap trading data shows that investors generally believe that the Fed will cut interest rates by 25 basis points for the first time at its July meeting, and expect two more interest rates to be cuts by the end of the year.

The current gold rise is suspended. After gold fell below the $3,400 mark, it opened the door for a short-term continuous decline. Technically, RSI shows that the bullish momentum is weakening, which is an unfavorable signal for gold. Currently, gold prices are likely to fall further to the low of $3,202 set on May 1. But if gold prices can rebound above $3,350, it is expected to launch a new impact on $3,400.

Andrew Wishart, senior British economist at Belemberg Bank: The Bank of England has extinguished expectations of accelerated easing, and the rate cut cycle this year may have ended

Overall, the Bank of England's position is more hawkish than expected. Although the bank cut interest rates by 25 basis points as scheduled, it is still appropriate to reiterate the "gradual and cautious" rate cut method, which opposes market expectations for a faster rate cut in the future. "Step" so far means a 25 basis point cut rate cut every quarter. Investors' reaction to this is June 19The possibility of another rate cut on the day dropped from 50% before the resolution was announced to just 20%. In addition, due to concerns that market pricing has become too radical and survey data show inflation continues, the two committee members unexpectedly voted to keep interest rates unchanged. This coincides with our view – we also believe that this rate cut is likely to be the last rate cut this year.

The main risk facing our view is that demand and employment performance may be far worse than expected, when the Bank of England may be forced to continue to cut interest rates. However, our benchmark scenario remains that Thursday's rate cut will be the last of the year for the Bank of England. The decision-making basis for the majority of the committee members who supported the 25 basis points in interest rate cuts was "the potential domestic anti-inflation process is developing as expected." But we question whether this judgment can continue to the next interest rate meeting in August (thinking that the "gradual" wording is retained, the possibility of a rate cut in June is slim). In fact, the Bank of England's own forecast shows that the inflation rate of core goods and services prices in September will be the same as the latest reading in March - which confirms our judgment that the previous downward trend of potential inflation has ended. With trade policy uncertainty eliminating, we expect the Monetary Policy Committee (MPC) to keep interest rates unchanged for the remainder of 2025, a move that may surprise financial markets and other economic forecasting institutions. When inflation further eases and fiscal austerity policies suppress demand in 2026, MPC may cut interest rates one or two more times.

Fanong Credit Forecast US April CPI: The forecast for the time being that only two interest rate cuts were cut before the end of the year

Overall CPI annual rate: 2.31%; core CPI monthly rate: 0.24%

We expect the overall CPI annual rate to be 2.31%, lower than 2.39% in March; the core CPI monthly rate is 0.24% (0.06% last month). The market has not reached a consensus yet, and our forecast is 3 basis points lower than the level reflected in the current market pricing.

Looking ahead after April, we still expect tariffs to lead to accelerated growth in core commodity CPI, and the overall core CPI will be close to 4% by the end of the year. The market was once more optimistic than us, but the inflation expectations implicitly in the market in the recent past have generally converged to our prediction path. If this forecast is achieved, we believe that the Fed may find it difficult to cut interest rates as aggressively as market pricing, so we temporarily maintain the forecast of only two more interest rates before the end of the year. Even if the April CPI report meets expectations, it will not change our view.

Authentic, any weakness in the labor market will put the Fed in trouble, and conflicting pressure will come from both ends of its dual mission (inflation and employment), which the Fed must weigh. We think the Fed will eventually prioritize the inflation-controlled side of its mission, although the market seems to focus more on the jobs side.

Deutsche Bank: Powell's hawkish stance still successfully boosts the dollar

The two clash points are quite meaningful: several reporters question whether the Fed should act based on weak investigative data, rather than waitingWait for the hard data to weaken. Powell reiterated that the US real economy is solid, consumer spending continues to expand, and growth in the first quarter remains strong after excluding import outliers. Given that inflation is still above target, he ruled out the possibility of preventive rate cuts, emphasizing that action will only be taken if sentiment indicators are truly reflected in hard data. However, its statements show that the decision-makers are skeptical about the prospect of economic deterioration and repeatedly suggest that the current dilemma may be resolved quickly. The overall wording completely ruled out the possibility of a recent interest rate cut.

When talking about Trump's sharp criticism, the scene was at a loss. In response to the first question, Powell insisted that external pressure will not affect decision-making independence, and then directly blocked relevant questions. His statement was obviously carefully verbally, and he tried his best to avoid giving him a handle. The only exceptional moment appears when talking about fiscal deficits, he stressed that monetary policy should not provide advice on fiscal policy, just as the fiscal policy has no right to interfere in monetary decision-making.

Overall, Powell's hawkish stance was in line with expectations, but it still managed to boost the dollar. The core issue is whether the U.S. government can effectively improve economic expectations and curb inflation risks through trade agreements. Although the progress of the US-UK agreement that was rumored overnight was positive, this was only the beginning. If the subsequent agreement fails to be implemented, the Fed will eventually be forced to cut interest rates - but until then, hawkish monetary policy will still support the dollar.

The above content is all about "[XM Foreign Exchange Market Review]: The British hawks are hard to resist the US index and strengthen, the US pound breaks down, and the US dollar is on the decline. The US dollar's upward trend is sustainable under the trade progress?", which was carefully compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!

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