The market situation has changed suddenly! Trade dawn + Fed turns to crash CPI cooling

Earlier this week, as China and the United States reached an important consensus on the trade agreement, market risk appetite began to recover, and major Wall Street stock indexes ended this week with a positive trend. The S&P 500 is expected to achieve its fifth consecutive trading day. The three major U.S. stock indexes closed up weekly. The S&P 500 recovered all lost ground this year, only about 4% lower than its historical high.

Although the US dollar rose at the beginning of the week due to the trade war truce, it was suppressed by data on Thursday and Friday and still closed higher for the fourth consecutive week.

In terms of commodities, as safe-haven funds began to gradually flow out this week, risk appetite rose, and risk assets were suppressed, especially gold. Gold continued to fall this week, and approached the $3,100 mark on Thursday. At the end of Friday, gold rebounded to near the $3,200 mark due to Moody's downgrade in the United States rating.

Although oil prices rose sharply at the beginning of the week, it failed to hold on to most of the gains, as the market expected that the U.S. and Iran would likely reach a new nuclear agreement and the oil market could fall into oversupply.

Looking forward next week, the US data will be relatively cold, but many Fed officials will speak out, and be sure to pay attention to whether they will support Bostic's statement that the Fed will only cut interest rates once this year. In addition, Moody's downgrade of the US rating may cause a "bloody" at the opening of the market next Monday...

Foreign Exchange Market:The US dollar index this week is affected by the interweaving of trade favorable trade and economic data, showing a trend of rising first and then falling. At the beginning of the week, market confidence boosted, and the US dollar rose sharply, even approaching the 102 mark at one point. Subsequently received by the US CPIThe data was lower than expected and the weakening of retail sales and PPI data, the US dollar fell and closed near the 101 integer mark this week, and closed higher for the fourth consecutive week. Non-US currencies continue to be affected by the trend of the US dollar. The euro and pound sterling fell first against the US dollar and then rebounded. The volatility during the week was significant, and Europe and the United States closed down for the fourth consecutive week; the US dollar continued to fall after rising at the beginning of the week, closed down this week, stopping in three consecutive weeks.

Gold Market:The volatility intensifies after the initial consolidation of the spot gold week, and the overall decline will be recorded this week. Optimism about the trade situation and the delay in the expected time for the Federal Reserve to restart interest rate cuts have all suppressed the gold price trend, and it was approaching $3,120/ounce during the session on Thursday. Although there were signs of a deep V rebound, it was still lower than the previous high and closed at $3,202/ounce this week.

Crude oil market: International oil prices rose first and then fell this week. Oil prices rose at the beginning of the week due to trade optimism, but oil prices turned to decline due to market expectations that the United States and Iraq would reach a nuclear agreement, and EIA data showed that U.S. crude oil inventories increased last week, which triggered investors' concerns about oversupply, and oil prices turned to decline. But overall, the two oils closed higher for the second consecutive week this week.

Review of the news this week

The Federal Reserve policy framework is brewing to adjust the path to interest rate cuts and add variables

Feder Chairman Powell warned at a research meeting on May 15 that the US economy is facing the challenge of normalizing supply shocks and intensifying inflation fluctuations. For the first time, he publicly expressed his support for the re-evaluation of the "average inflation target system", emphasizing that stabilizing inflation expectations is crucial to the effectiveness of policies. Although Powell revealed that the Federal Reserve is promoting the revision of the policy framework to adapt to economic changes in the post-epidemic era, it has made it clear that the interest rate decision mechanism will not change in the short term, and the evaluation results may be announced in the third quarter.

The latest economic data cast a shadow on expectations of interest rate cuts: the US CPI fell to 2.3% year-on-year in April (2.4%), and the core CPI stabilized at 2.8%, but the Fed's PCE indicator that is more concerned about is still higher than the 2% target. Chicago Fed Chairman Goulsby pointed out that more data is needed to eliminate tariff interference and the market should not over-interpret single-month data. Wall Street therefore postponed its interest rate cuts. Goldman Sachs and Barclays are expected to postpone the time point for the first time from September to December, while Atlanta Fed Chairman Bostic expects to cut interest rates only once in 2025.

The Sino-US economic and trade negotiations have now broken through the local easing of the tariff war

China and the United States have reached phased results after the talks in Geneva. The two sides announced that they would cancel 91% of the additional tariffs and suspend 24% of the remaining 34% of the tariffs (for 90 days), and retain 10% as bargaining chips. China simultaneously suspends non-tariff countermeasures, including export controls. The Ministry of Foreign Affairs stressed on the issue of fentanyl tariffs that the US should stop "passing the blame" and restart dialogue with an equal attitude.

Russia-Ukraine peace talks are in a deadlock, the battlefield conflict continues to escalate

The negotiations of the Russian-Ukraine delegation in Istanbul on May 16 have not made substantial progress.The meeting lasted only two hours and broke down. Russia insisted on evacuating the Ukrainian army from the four states of Donbas and recognizing the ownership of Crimea, which was denounced as "unacceptable" by Ukrainian representatives. The two sides reached an agreement on exchanges of thousands of prisoners of war, and the intensity of firefighting on the battlefield increased instead of falling: the Russian army shot down 65 Ukrainian drones in a single day, and the Ukrainian army claimed to intercept 73 Russian drones.

Trump's "gold-dollar diplomacy" in the Middle East won a trillion-dollar order

U.S. President Trump signed a business agreement with a total value of over US$840 billion during his visit to Saudi Arabia, Qatar and the UAE. Saudi Arabia promised to invest $600 billion in the United States, covering technology, arms and other fields, of which US$142 billion in arms sales set a record; Qatar signed a contract for US$243.5 billion in Boeing passenger aircraft and drone procurement; the UAE reached US$200 billion in energy and data center cooperation. Trump also put pressure on Apple CEO Cook to dissuade him from expanding India's production scale.

The US-Iran nuclear negotiations are turning around and key differences remain

Trump revealed in Doha that the US-Iran nuclear agreement is "close to reach", but Iran refused to completely stop uranium enrichment activities and only agreed to lower it to the level of the 2015 agreement. Iranian political adviser Shamhani proposed to "permanently abandon nuclear power" in exchange for a complete lifting of the ban, but Revolutionary Guard Commander Salami criticized the US for "destructing regional stability." The two sides still have disputes over the location where the enriched uranium is transferred.

The global institutional holdings are reshuffled: Bridgewater bets on Chinese stocks Buffett withdrew from the banking industry

The 13F report in the first quarter of 2025 shows that Bridgewater Fund significantly increased its holdings of Chinese stocks such as Alibaba, Baidu, and JD.com, and also established new positions in gold ETFs; Hillhouse Capital increased its holdings in nearly 20 Chinese stocks such as Baidu and Ideal Auto, but reduced its holdings in Alibaba and BeiGene. Buffett's Berkshire cleared Citibank, reduced its holdings in Bank of America, and maintained Apple's position unchanged. Soros Fund has turned to AI, space communications and cryptocurrency fields, increasing its holdings in Nvidia and ASTSpaceMobile.

The tariff game between the United States, Japan and India has escalated. The global trade pattern has changed. Trump announced that he will finalize the "stage tariff rate" in the next three weeks, requiring trading partners to "pay" for entering the US market. India has actively proposed a zero-tax plan for US goods, trying to resolve the steel and aluminum tariff dispute; Japan and the United States will launch the third round of negotiations, and Japan's strategy will turn to "focus on quality and neglect speed", focusing on automobile tariff reductions. Japan's GDP unexpectedly shrank by 0.2% in the first quarter, highlighting the urgency of negotiations.

IEA and OPEC have diverged in demand forecasts

OPEC maintains global oil demand growth expectations from 2025 to 2026 (1.3 million barrels per day, 1.28 million barrels per day), but the actual increase in production in April was only 25,000 barrels per day, far lower than the plan. The International Energy Agency (IEA) raised its 2025 demand forecast to 104 million barrels per day, believing that low oil prices will stimulate consumption, but warned of oversupply in non-OPEC countries in 2026. The US sanctions on Iran and Venezuela may become a key variable in the balanced market.

The above content is all about "[XM Foreign Exchange Market Review]: The market situation suddenly changes! The dawn of trade + the Fed turns to crash CPI cooling". It is carefully compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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