Important calendar events
The dollar edged higher last week, and the dollar index rose from 99.9 to 100.4. U.S. Treasury yields also gained strength, supporting the dollar, with the US 10-year bond yield rising from 4.35% to 4.38%.
Despite uncertain trade dynamics, the dollar gained strength last week, supported by robust economic data and the Fed’s hawkish tilt. However, the dollar’s trajectory going forward hinges on upcoming inflation data and Fed rhetoric after the recent policy meeting.
The Federal Reserve kept interest rates unchanged in a target range of 4.25% - 4.50% at its May policy meeting. The Fed decided to keep interest rates steady for a third consecutive time amid persistent inflationary pressures and an uncertain economic outlook. Fed officials remain cautious, adopting a wait-and-see approach before committing to any policy shift.
Fed Chair Jerome Powell struck a slightly hawkish tone in his post-meeting remarks. Powell emphasized that price stability is not yet assured and that the central bank needs greater confidence that inflation is moving sustainably toward its 2% target. Powell also highlighted that recent price data, especially in core services, point to sticky inflation. Powell hinted that, while rate cuts are still possible later in the year, their timing and scale will be dictated strictly by incoming data.
Markets recalibrated expectations of future rate cuts after Powell’s comments. Odds of a rate cut in June have dropped close to zero, with expectations for the first cut toward September or later. Two cuts are still priced in for 2025, but the Fed’s rate outlook has grown more uncertain as inflation remains sticky and global trade tensions intensify.
Global trade war concerns have been causing turmoil in markets. Investor confidence is low, raising the appeal of safe-haven assets. The dollar’s status as a safe-haven asset, however, is undermined by the uncertainty surrounding US policies and trade tariffs.
US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Concerns that US economic growth will slow down are putting pressure on the dollar, and many analysts are already expressing concerns that the US will enter recession.
On the data front, US labor data released last week offered a mixed view. Initial unemployment claims for the week ending May 3 dropped to 228K from 241K the week before, suggesting continued strength in the job market. However, Preliminary Nonfarm Productivity for the first quarter of 2025 contracted by 0.8% against a 0.4% decline anticipated, marking the first quarterly decline since mid-2022. In addition, annualized unit labor costs rose by 5.7% in Q1 of 2025, indicating rising wage pressures that could keep inflation elevated.
The US economy contracted by 0.3% in Q1 of 2025 against an expansion of 0.2% anticipated. The US economy had expanded by 2.4% in the final quarter of 2024, following a 3.1% expansion in the third quarter of 2024.
Headline inflation in the US rose by 2.4% year-on-year in March after rising by 2.8% in February. Annual Core CPI, which excludes food and energy, rose by 2.8% in March, below the 3.0% estimate, down from 3.1% in February.
This coming week, key US data releases are likely to cause volatility in the dollar. Market participants are especially anticipating the release of the US inflation report for May, which is likely to affect the Fed’s rate outlook. Headline and core CPI data on the 13th will be crucial in determining Fed rate cut expectations. Markets are anticipating a rise in CPI inflation in April, which may induce the Fed to keep interest rates steady for longer. PPI data on the 15th will provide a clearer picture of the direction of US inflation. In addition, Retail Sales data on the 15th are among this week’s most crucial data and may provide a measure of economic momentum and health.
EUR/USD traded lower last week, dropping from 1.133 to 1.123, as the dollar gained strength. If the EUR/USD pair declines, it may find support at 1.080, while resistance may be encountered near 1.157.
The Euro was under pressure last week due to concerns over Germany's political stability. Friedrich Merz was confirmed as Germany’s new Chancellor on May 6, following weeks of coalition negotiations. Newly appointed Chancellor Friedrich Merz secured his position only after a second parliamentary vote, which was a first in German postwar history. Merz's coalition faces challenges implementing its €500 billion infrastructure plan amid internal dissent and rising far-right opposition. Merz's centre-right government was quickly put to the test after an initial failed confidence vote, underscoring the fragility of the coalition.
The ECB delivered another 25-basis-point rate cut at its April meeting, lowering its main refinancing rate to 2.40%, down from 2.65%. This decision marked the seventh rate cut within a year, bringing the ECB’s interest rate to its lowest point in over two years. The central bank is intensifying its efforts to support economic growth in a fragile environment.
ECB President Christine Lagarde once again emphasized the need for a data-dependent policy going forward, keeping all options open. Lagarde described the economic outlook as highly uncertain, pointing to ongoing trade disruptions and tightening financial conditions as key risks. She noted that while inflation appears to be stabilizing near the 2% target, the broader impact of recent US tariffs is still unfolding and may weigh further on sentiment and activity.
On the data front, the EU Services sector entered expansionary territory, with a print of 50.1 in April, exceeding expectations of 49.7. German Factory Orders rose by 3.6% in March, rising above expectations of 1.4% growth.
Flash CPI data for April showed that headline inflation remained steady at 2.2% year-on-year, exceeding estimates of 2.1%. Core CPI, which excludes food and energy, rose to 2.7% annually in April from 2.4% in March against 2.5% anticipated.
Preliminary Flash GDP data showed that the Eurozone economy expanded by 0.4% in Q1 of 2025, exceeding expectations of 0.2% growth. The EU economy expanded by 0.2% in the final quarter of 2024 after expanding by 0.3% in the second quarter and is showing signs of slow recovery.
In the upcoming week, several key economic indicators are scheduled for release that may affect the Euro. ZEW Economic Sentiment data for Germany and the Eurozone as a whole on the 13th provide indications of economic sentiment and future economic activity. Eurozone Industrial Production on the 15th of May provides insight into the manufacturing sector's performance and its contribution to overall economic activity. Trade Balance data on the 16th highlight the Eurozone's export and import dynamics and are strong indicators of economic activity.
GBP/USD traded sideways last week, oscillating around the 1.330 level. If the GBP/USD rate goes up, it may encounter resistance at 1.344, while support may be found near 1.320.
The Sterling experienced high volatility last week after the BOE rate decision on Thursday. The BOE reduced its key interest rate by 25 basis points to 4.25% on May 8, the lowest level in over two years. The decision, made with a narrow 5-4 vote margin, reflects concerns over slowing growth and persistent inflationary pressures and indicates policy uncertainty.
BOE Governor Andrew Bailey stressed that global uncertainties and trade tensions influenced the rate cut. Bailey emphasized a cautious approach moving forward, citing global uncertainties and the need to balance inflation control with economic support.
The UK and the US finalized a trade agreement last week that reduces tariffs on key British exports. The deal lowers US tariffs on British cars and eliminates tariffs on British steel and aluminum. In exchange, the UK agreed to remove its 19% tariff on US ethanol imports and align its steel and aluminum tariffs with US levels. The Sterling gained strength after the deal was announced, as some of the uncertainty surrounding trade tariffs with the US was lifted.
On the data front, UK Services PMI dropped to contractionary territory in April, with a print of 49.0, below the threshold of 50.0 that denotes industry expansion. The construction continued to contract, with a print of 46.6 in April, which exceeded expectations of 46,0, however.
Headline inflation in the UK eased to 2.6% year-on-year in March, down from 2.8% in February, against expectations of 2.7%. Monthly CPI dropped to 0.3% in March from 0.4% in February against estimates of 0.4%. Core inflation, which excludes food and energy, rose by 3.4% annually in March, slightly lower than February’s 3.5% reading.
Final GDP data for the fourth quarter of 2024 showed that the British economy expanded by 0.1%, matching previous estimates and following economic stagnation in the third quarter of 2024. Monthly GDP data released on Friday showed that the British economy expanded by 0.5% in February, after contracting by 0.1% in January, exceeding expectations of 0.1% growth.
This coming week, GDP data due on Thursday are expected to show that the British economy remained stagnant in March. Preliminary Quarterly GDP data on Thursday may be more encouraging, showing 0.6% growth in the first quarter of the year.
USD/JPY rose from 144.6 to 145.9 last week as the dollar rallied. If the USD/JPY pair declines, it may find support at 139.9. If the pair climbs, it may find resistance at 148.3.
The BOJ left interest rates unchanged at its policy meeting in April at 0.50%, but its overall tone was more dovish than anticipated. The BOJ’s slightly more cautious tone on growth and inflation reinforced the view that any further tightening is likely to be gradual.
BOJ Governor Kazuo Ueda acknowledged that while inflation remains above target for now, weaker external demand and recent trading developments have complicated the outlook. Ueda emphasized the need for flexibility moving forward, suggesting that the BOJ is not in a rush to adjust its policy settings further.
Markets anticipate that the BOJ will raise interest rates at least one more time this year, and there is a high probability of a second 25-bp rate hike within the year. The BOJ is expected to raise interest rates by approximately 75 basis points in the next two years, which will bring the central bank’s peak rate to 1.25%.
The BOJ March meeting minutes released last week revealed a cautious and divided stance among policymakers on future interest rate hikes. BPJ members stressed that inflationary pressures from past import price increases would gradually ease, but underlying inflation is set to rise due to tightening labor markets. Policymakers were divided, with some urging caution due to uncertainties like US trade policies and others advocating for quicker action.
The BOJ has expressed concerns over Japan's economy, as the effect of US tariffs is likely to affect the country’s industries and economic stability. The BOJ has warned that Trump's tariffs could undermine the wage and price cycle necessary for future interest rate hikes.
Inflation in Japan is on the rise, raising the odds of future rate hikes and providing support for the Yen. Tokyo Core CPI rose sharply to 3.4% year-on-year in April from 2.4% in March against expectations of a 3.2% reading. National Core CPI rose to 3.2% in March from 3.0% in February, which was in line with expectations.
The Japanese economy expanded by only 0.6% in the final quarter of 2024 against expectations of 0.7% growth and 0.3% expansion in the third quarter.
Gold prices gained strength last week, rising from $3,250 per ounce to $3,330 per ounce, approaching their recent all-time high of $3,250 per ounce. If gold prices rise, they may encounter resistance at $3,500 per ounce, while if gold prices decline, support may be encountered near $3,200 per ounce.
Gold prices hit an all-time high of $3,500 per ounce in April, boosted by the dollar’s decline and trade war concerns. Gold prices pulled back later in April but are rising again, despite the rivaling dollar’s rally. Demand for safe-haven assets remains elevated, and gold prices are sensitive to geopolitical risks and global trading developments.
Gold prices have typically been directed by the dollar’s movement, as the competing dollar typically loses appeal as an investment when the dollar rises. The dollar edged higher last week, and the dollar index rose from 99.9 to 100.4. U.S. Treasury yields also gained strength, providing support for the dollar, with the US 10-year bond yield rising from 4.35% to 4.38%.
Global trade war concerns have been causing turmoil in markets. Investor confidence is low, raising the appeal of safe-haven assets. Trump’s tariffs are likely to raise global inflation and lower economic outlook, promoting a risk aversion sentiment.
Gold prices are supported by rising Fed rate cut expectations. The Federal Reserve kept interest rates unchanged in a target range of 4.25% - 4.50% at its May policy meeting. The Fed decided to keep interest rates steady for a third consecutive time amid persistent inflationary pressures and an uncertain economic outlook. Fed officials remain cautious, adopting a wait-and-see approach before committing to any policy shift.
Fed Chair Jerome Powell struck a slightly hawkish tone in his post-meeting remarks. Powell hinted that, while rate cuts are still possible later in the year, their timing and scale will be dictated by incoming data. Markets recalibrated expectations of future rate cuts after Powell’s comments. Odds of a rate cut in June have dropped close to zero, with expectations for the first cut toward September at the earliest. Two cuts are still priced in for 2025, but the Fed’s rate outlook has grown more uncertain as inflation remains sticky and global trade tensions intensify.
Oil prices rallied last week, and the WTI price rose from $56.2 to $61.2 per barrel. If oil prices retreat, they may encounter support near $55.1 per barrel, while resistance may be found near $65.2 per barrel.
Oil prices experienced a notable uptick last week, driven by a combination of tightening US crude stockpiles and ongoing global supply concerns. The Energy Information Administration (EIA) reported a sharp draw in US crude oil inventories. Crude Oil Inventories dropped by 2.0M barrels for the week ending May 2 against expectations of a 1.7M barrel draw and following an even larger draw by 2.7M barrels the week before.
Oil prices have been under pressure since OPEC+ announced a second consecutive monthly production increase earlier this month, adding 411,000 barrels per day in June. The move, led by Saudi Arabia, signaled a strategic shift toward reclaiming market share, even at the expense of lower prices. OPEC’s decision to raise oil output defied already softening demand and growing global economic concerns. Markets will closely monitor the upcoming OPEC+ ministerial meeting on May 28 for further guidance on output policy.
Oil prices are kept in check by high central bank interest rates. The Federal Reserve kept interest rates unchanged in a target range of 4.25% - 4.50% at its May policy meeting. The Fed decided to keep interest rates steady for a third consecutive time amid persistent inflationary pressures and an uncertain economic outlook. Fed officials remain cautious, adopting a wait-and-see approach before committing to any policy shift.
Fed Chair Jerome Powell struck a slightly hawkish tone in his post-meeting remarks. Powell hinted that, while rate cuts are still possible later in the year, their timing and scale will be dictated by incoming data. Markets recalibrated expectations of future rate cuts after Powell’s comments. Odds of a rate cut in June have dropped close to zero, with expectations for the first cut toward September at the earliest. Two cuts are still priced in for 2025, but the Fed’s rate outlook has grown more uncertain as inflation remains sticky and global trade tensions intensify.
Bitcoin surged from $94,300 to $104,300 last week, its highest value since January. If BTC price declines, support can be found at $93,200, while resistance may be encountered at $108,000.
Ethereum skyrocketed from $1,800 to 2,500 last week, its highest value in over two months. If the Ethereum price declines, it may encounter support near $1,720, while if it increases, it may encounter resistance near $2,600.
Bitcoin turned bullish last week, breaking through the $100,000 barrier and rising above the $104,000 mark over the weekend.
The crypto market remains buoyed by a rising realized cap and institutional inflows. Significant institutional investments, including BlackRock's recent $4.44 billion Bitcoin purchase, are driving BTC price up. Rising investor confidence has bolstered crypto markets and other major cryptocurrencies, such as ETH are going up.
Regulatory developments also boosted crypto markets last week. US President Donald Trump has recently announced the creation of a national Bitcoin reserve, stressing his determination to make the US the crypto capital of the world. Last week, New Hampshire became the first US state to establish a cryptocurrency reserve, allowing the state to allocate up to 5% of public funds into digital assets like Bitcoin.
Cryptocurrency prices are also affected by central banks’ interest rates. High interest rates stifle economic growth, putting pressure on crypto markets. The Federal Reserve kept interest rates unchanged in a target range of 4.25% - 4.50% at its May policy meeting. The Fed decided to keep interest rates steady for a third consecutive time amid persistent inflationary pressures and an uncertain economic outlook. Fed officials remain cautious, adopting a wait-and-see approach before committing to any policy shift.
Fed Chair Jerome Powell struck a slightly hawkish tone in his post-meeting remarks. Powell hinted that, while rate cuts are still possible later in the year, their timing and scale will be dictated by incoming data. Markets recalibrated expectations of future rate cuts after Powell’s comments. Odds of a rate cut in June have dropped close to zero, with expectations for the first cut toward September at the earliest. Two cuts are still priced in for 2025, but the Fed’s rate outlook has grown more uncertain as inflation remains sticky and global trade tensions intensify.
BTC/USD 1h Chart
ETH/USD 1h Chart
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Written by:
Myrsini Giannouli
चलनिधि प्रदाता के रूप में उद्योग उपस्थिति
और विश्वसनीय निष्पादन
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