Important calendar events
The dollar was volatile last week, and the dollar index rose from 98.9 to 100.4 mid-week, only to drop to 99.4 at the end of the week. U.S. Treasury yields declined, putting pressure on the dollar, with the US 10-year bond yield dropping from 4.51% to 4.40%.
The Federal Reserve kept interest rates unchanged in a target range of 4.25% - 4.50% at its May policy meeting. The Fed’s decision to keep interest rates steady for a third consecutive time came 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 hinted that, while rate cuts are still possible later in the year, their timing and scale will be dictated strictly by incoming data.
Currently, markets are pricing in two to three additional rate cuts by the end of the year, but some analysts warn that these estimates are exaggerated given the Fed’s cautious tone recently. Market odds of a June rate cut remain close to zero, while the first rate cut is expected in September.
The minutes of the latest Fed meeting were released last week and highlighted uncertainty about the US economic outlook, with officials viewing recession as "almost as likely" as the baseline forecast. While acknowledging solid economic growth, members expressed concerns over sustained inflation and potential risks from escalating trade disputes. FOMC members remain cautious, adopting a "wait-and-see" approach amid economic uncertainties, despite the US government’s pressure to cut interest rates. Policymakers will be closely monitoring inflation trends, labor market conditions, and the potential impact of trade policies, including tariffs.
On the data front, Core PCE Price Index data released on Friday showed an uptick by 0.1% in April from the previous month, which was in line with expectations. Core PCE Price Index eased to 2.5% annually in April from 2.7% in March, dropping to its lowest point since March 2021. Core PCE Price Index is the Fed’s primary inflation gauge, and softer inflation may encourage the central bank to cut interest rates further.
The US economy contracted by 0.2% in Q1 of 2025, marking its first quarterly decline in three years. This slight drop, revised from an earlier estimate of a 0.3% contraction, was primarily driven by the economic disruptions caused by President Donald Trump’s trade policies, causing a record surge in imports ahead of anticipated tariff hikes, which widened the trade deficit.
US Durable Goods Orders declined by 6.3% in April against expectations of a 7.9% decline, suggesting resilience in the manufacturing sector.
Consumer Price Index (CPI) rose 0.2% in April, falling short of the 0.3% expected. Headline inflation cooled to 2.3% year-on-year, the lowest since February 2021. Core CPI, excluding food and energy, also rose by 0.2% month-over-month against 0.3% anticipated, and stood at 2.8% year-over-year.
Global trade war concerns have been causing turmoil in markets. Investor confidence is low, raising the appeal of safe-haven assets. US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries.
Tensions between the US and China intensified last week as President Trump accused China of violating a mid-May tariff pause agreement. In response, China reinstated tariffs on certain US goods. The US and China are expected to engage in direct talks this coming week to address the escalating trade conflict.
Last week, US federal courts ruled that President Trump's tariffs violated the International Emergency Economic Powers Act. The ruling is currently under appeal, but the tariffs have been reinstated pending the appeal court’s decision. Escalating trade tensions and legal uncertainties surrounding tariff policies introduce significant risks to the US economic outlook.
In the week ahead, markets will remain focused on global trading developments as these are likely to affect risk sentiment and are potential drivers of all dollar-related assets. In addition, important economic data and especially US labor data are due throughout the week. The most important data are Non-farm Payrolls, or NFPS, which will be released on Friday and represent the change in the number of employed people in the US.
EUR/USD traded sideways last week, oscillating around the 1.132 level. If the EUR/USD pair declines, it may find support at 1.006, while resistance may be encountered near 1.142.
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 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. Expectations of further ECB rate cuts are on the rise, as policymakers aim to counteract slow economic growth in the Eurozone.
ECB policymakers have expressed a cautious approach regarding future rate cuts. Francois Villeroy de Galhau noted that the normalization of interest rates is likely not yet complete, while Fabio Panetta emphasized the need for flexibility in policy decisions due to ongoing economic uncertainties.
This coming week, market participants will focus on the ECB rate decision on Thursday. The ECB is widely anticipated to implement its eighth consecutive rate cut on June 5, reducing the key deposit rate by 25 basis points. This move is supported by recent inflation data and aims to stimulate economic activity amid signs of weakening growth.
French Inflation dropped to 0.6% year-on-year in May, below the expected 0.9%. Monthly, French CPI contracted by 0.1% in May. Germany's inflation rate decreased to 2.1% annually from 2.2% in April, while Spain and Italy reported rates of 1.9%. Easing inflationary pressures in the Eurozone may open the door for further easing by the ECB. In addition, France's Q1 GDP rose by 0.1%, which fell within market expectations.
Eurozone Headline CPI rose 2.2% year-on-year, while Core CPI increased by 2.7%, both aligning with previous estimates and market forecasts. This suggests stabilizing inflationary pressures, giving the ECB some leeway in its monetary policy decisions.
Eurozone Flash GDP data showed a quarterly growth of 0.3%, down from the initial 0.4% estimate. This modest expansion, while outperforming the 0.3% contraction of the US economy, highlighted the Eurozone's sluggish economic growth.
The Sterling weakened last week, and GBP/USD dropped from a three-year high of 1.360 to 1.346. If the GBP/USD rate goes up, it may encounter resistance at 1.360, while support may be found near 1.313.
The BOE reduced its key interest rate by 25 basis points to 4.25% in May, 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.
Bank of England Governor Andrew Bailey, speaking on Thursday, stressed the need for continued vigilance against inflation, signaling that interest rates will remain elevated for the foreseeable future.
British headline inflation surged to 3.5% year-on-year in April, up from 2.6% in March and surpassing forecasts of 3.3%. The hotter-than-anticipated inflation data have dampened hopes for rate cuts shortly, with markets currently pricing in only one additional cut in 2025.
The British economy grew by 0.7% in Q1 2025, outperforming forecasts of 0.6% growth and marking the fastest growth among G7 nations. This expansion was driven by robust services and production sectors, as well as increased business investment and exports. Monthly GDP rose by 0.2% in March, beating expectations of economic stagnation.
USD/JPY surged to 146.2 mid-week but plummeted to 143.7 on Friday after the release of hotter-than-anticipated Japanese inflation data. If the USD/JPY pair declines, it may find support at 141.9. If the pair climbs, it may find resistance at 148.7.
The Yen gained strength last week on hotter-than-expected inflation data, which raised expectations of a hawkish shift in the BOJ's monetary policy stance. Last week, Tokyo Core CPI for May rose by 3.6% year-on-year, up from April's 3.4%, surpassing market forecasts of 3.5% and marking the highest level since January 2025. National Core CPI also rose to 3.5% in April from 3.2% in March, exceeding expectations of 3.4% growth.
Rising inflationary pressures reinforced expectations that the BOJ may consider a 25 basis point interest rate hike as early as July, despite ongoing concerns about economic growth and external trade uncertainties.
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%.
Japan's economy contracted by 0.2% in the first quarter of 2025, exceeding the anticipated 0.1% decline, and marking the first negative quarterly result in a year. On an annualized basis, GDP shrank by 0.7%, surpassing the projected 0.3% contraction. The BOJ may delay interest rate hikes further to support the country’s weakening economy, especially if trade tensions rise.
Gold prices deflated a little last week, dropping to $3,300 per ounce. If gold prices rise, they may encounter resistance at $3,435 per ounce, while if gold prices decline, support may be encountered near $3,120 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 have declined since and were slightly bearish last week despite rising trade tensions and a weaker dollar.
Global trade war concerns have been raising the appeal of safe-haven assets. US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump’s tariffs are likely to raise global inflation and lower the economic outlook, promoting a risk-averse sentiment.
Tensions between the US and China intensified last week as President Trump accused China of violating a mid-May tariff pause agreement. In response, China reinstated tariffs on certain US goods. The US and China are expected to engage in direct talks this coming week to address the escalating trade conflict.
In addition, ongoing conflicts in the Middle East and rising tensions between Russia and Ukraine have further fueled investor anxiety, reinforcing gold's appeal as a safe-haven asset.
Central banks, and especially the Bank of China, continue to increase their gold reserves. Sustained demand from official institutions provides support for gold prices.
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 was volatile last week, and the dollar index rose from 98.9 to 100.4 mid-week, only to drop to 99.4 at the end of the week. U.S. Treasury yields declined, putting pressure on the dollar, with the US 10-year bond yield dropping from 4.51% to 4.40%.
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. 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 strictly by incoming data.
Currently, markets are pricing in two to three additional rate cuts by the end of the year, but some analysts warn that these estimates are exaggerated given the Fed’s cautious tone recently. Market odds of a June rate cut remain close to zero, while the first rate cut is expected in September.
The minutes of the latest Fed meeting, released last week, revealed a cautious approach among policymakers. While acknowledging solid economic growth, members expressed concerns over sustained inflation and potential risks from escalating trade disputes.
The US economy contracted at an annualized rate of 0.2% in the first quarter of 2025, marking its first quarterly decline in three years. This downturn was primarily attributed to trade disruptions and tariff-induced uncertainties, which heightened investor concerns about economic stability, raising the appeal of safe-havenn assets.
Oil prices edged lower last week, and the WTI price dropped below the $62.0 per barrel level. If oil prices retreat, they may encounter support near $55.6 per barrel, while resistance may be found near $64.6 per barrel.
Last week, OPEC+ members announced anoutput risee of 411,000 barrels per day (bpd) in July, marking the third consecutive monthly increase. This decision aims to regain market share and address overproduction issues among member states. OPEC is planning to increase output by 2.2 million bpd by November, raising fears of oversupply and driving oil prices down.
US crude oil stockpiles released last week were surprisingly low, boosting oil prices. The Energy Information Administration (EIA) reported a draw of 2.8 million barrels in US crude oil inventories for the week ending May 23, against market expectations of a 0.3 million-barrel build.
Ongoing trade disputes, particularly between the US and China, raised economic uncertainty last week, dampening oil demand and putting pressure on oil prices.
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. Fed Chair Jerome Powell struck a slightly hawkish tone in his post-meeting remarks. Currently, markets are pricing in two to three additional rate cuts by the end of the year, but some analysts warn that these estimates are exaggerated given the Fed’s cautious tone recently. Market odds of a June rate cut remain close to zero, while the first rate cut is expected in September.
Bitcoin was bearish last week, retreating further from its recent all-time high of $111,875 to $105,000 on profit taking. If BTC price declines, support can be found at $95,600, while resistance may be encountered at $111,875.
Ethereum traded sideways last week, oscillating around the $2,560 level. If the Ethereum price declines, it may encounter support near $1,720, while if it increases, it may encounter resistance near $2,740.
Bitcoin price recently surged to a record high of $111,875, driven by optimism over US regulatory developments and increased institutional investment. Bitcoin price dipped last week, however, mainly due to profit-taking and market consolidation following recent gains. The 2025 Bitcoin Conferenc,e which took place last week in Las Vegas, attracted market attention but failed to provide a bullish catalyst.
Regulatory developments are boosting crypto markets. US President Donald Trump has announced the creation of a national Bitcoin reserve, stressing his determination to make the US the crypto capital of the world. Last week, the US House of Representatives introduced the Digital Asset Market Clarity (CLARITY) Act, aiming to establish a formal regulatory framework for digital assets. Concurrently, the Securities and Exchange Commission (SEC) dropped its lawsuit against Binance, signaling a potential shift towards more favorable regulatory conditions for cryptocurrencies.
The US government is taking rapid steps to promote crypto-friendly legislation. The week before, the US Senate advanced the GENIUS Act, aimed at regulating stablecoins, which is perceived as a step toward mainstream acceptance of cryptocurrencies.
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.
Fed Chair Jerome Powell struck a slightly hawkish tone in his post-meeting remarks. Currently, markets are pricing in two to three additional rate cuts by the end of the year, but some analysts warn that these estimates are exaggerated given the Fed’s cautious tone recently. Market odds of a June rate cut remain close to zero, while the first rate cut is expected in September.
BTC/USD 1h Chart
ETH/USD 1h Chart
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Written by:
Myrsini Giannouli
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