Important calendar events
The dollar dipped last week, and the dollar index dropped from 100.9 to 99.1. U.S. Treasury yields remained steady, with the US 10-year bond yielding approximately 4.50%.
The dollar dipped last week on concerns over the US debt and growing expectations of a more dovish Fed. Moody’s downgrade of the US sovereign debt is undermining confidence in the US economy and is weighing on investor sentiment.
At its May policy meeting, the Federal Reserve kept interest rates unchanged at a target range of 4.25%—4.50%. The 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.
On the data front, US economic activity data released last week were stronger than expected. PMI data for both the manufacturing and services sectors were more optimistic than anticipated. Flash US Manufacturing PMI rose to 52.3 in May, surpassing both the forecast of 49.9 and April's reading of 50.2. US Services PMI climbed to 52.3, exceeding expectations of 51.0 and April's print of 50.8.
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.
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.
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.
Last week, trade tensions between the US and the EU escalated, as Trump threatened the EU with 50% tariffs on EU imports set for June 1. Trump's proposed tariffs on EU imports have been postponed to July 9 following discussions with EU Commission President Ursula von der Leyen. The EU has expressed readiness to negotiate but warns of potential reciprocal measures.
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, US Preliminary GDP data (second estimate) are due on Thursday. Initial estimates showed a contraction in the US economy of 0.3%, a sharp downturn from Q4 2024's 2.4% growth. The upcoming revision will be closely watched for any adjustments that might signal a different economic trajectory. Core PCE Price Index data on Friday is also expected to affect the dollar. This is the Fed’s primary inflation gauge, and market estimates show an uptick by 0.1% in April, indicating rising inflationary pressures.
EUR/USD remained bullish last week, rising from 1.118 to 1.136 as the dollar weakened. If the EUR/USD pair declines, it may find support at 1.006, while resistance may be encountered near 1.157.
The Euro is gaining safe-haven status after the dollar’s recent fall from grace. ECB President Christine Lagarde, speaking at the G7 summit last week, stated that the strong Euro is a sign that Europe is perceived as a stable economic and political area.
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.
Last week, trade tensions between the US and the EU escalated, as Trump threatened the EU with 50% tariffs on EU imports set for June 1. Trump's proposed tariffs on EU imports have been postponed to July 9 following discussions with EU Commission President Ursula von der Leyen. The EU has expressed readiness to negotiate but warns of potential reciprocal measures.
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.
The Euro was under pressure last week following the release of disappointing Eurozone business activity data on Thursday. EU services PMI dropped unexpectedly to 48.9 in May from 50.1 in April. The services sector entered contractionary territory with a print below the 50 threshold, indicating industry expansion. EU Flash Manufacturing PMI remained steady in May, with a print of 49.4.
German Producer Price Index (PPI) contracted by 0.6% in April, versus 0.3% forecasted, according to data released on Tuesday. German PPI dropped 0.9% year-on-year, following a 0.2% decline in March and dropping below estimates of 0.6% contraction. German PPI data are signaling cooling Eurozone inflation and pressuring ECB doves.
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.
GBP/USD surged to the 1.354 mark last week, its highest point since February 2022. If the GBP/USD rate goes up, it may encounter resistance at 1.365, while support may be found near 1.313.
GBP/USD rose to a three-year high last week, following the release of UK CPI data on Wednesday and Retail Sales data on Friday.
The British Consumer Price Index (CPI) surged to 3.5% year-on-year in April, up from 2.6% in March and surpassing forecasts of 3.3%. This unexpected rise boosted the Sterling, as investors adjusted their expectations on the BOE’s monetary policy. The hotter-than-anticipated inflation data have dampened hopes for rate cuts shortly, with markets currently pricing in only one additional cut in 2025. BOE Chief Economist Huw Pill warned against rapid rate cuts before the release of the CPI data, citing wage-driven inflation risks.
Retail Sales data released on Friday exceeded expectations, boosting the Sterling. British Retail Sales rose by 1.2% in April, surpassing estimates of 0.2%. At the same time, March’s reading was revised lower to show 0.1% growth, down from 0.4%.
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.
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 was bearish last week, dropping from 145.2 to 144.4. If the USD/JPY pair declines, it may find support at 139.9. If the pair climbs, it may find resistance at 148.7.
USD/JPY dipped last week as the Yen’s status as a safe-haven asset rose compared to the dollar’s. The recent US credit downgrade by Moody’s has raised concerns over the stability of the US economy, undermining the dollar’s status as a safe-haven asset.
Last week, at the G7 finance ministers' meeting in Canada, Japan intensified its efforts to address the persistent depreciation of the Yen, which has been exerting pressure on the nation's economy. The Yen’s stability is especially important to the Japanese government, especially since the US has been exerting pressure on Japan to strengthen the Yen, in order to trade deficits between the two countries.
Japanese Finance Minister Katsunobu Kato and US Treasury Secretary Scott Bessent agreed that the current dollar-Yen exchange rate reflects market fundamentals but avoided discussing FX levels. This joint statement suggests a shared view that the exchange rate is determined by market forces, despite concerns over the yen's depreciation. The G7 ministers reaffirmed their commitment to the May 2017 exchange rate principles, emphasizing that excessive volatility and disorderly movements in exchange rates are undesirable.
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. This downturn was primarily attributed to reduced net exports and escalating trade tensions with the US.
The unexpected contraction has raised concerns about a potential technical recession, especially as US tariffs have begun to impact Japanese exports. The BOJ may delay interest rate hikes further to support the country’s weakening economy, especially if trade tensions rise.
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 3.5% in April from 3.2% in March, exceeding expectations of 3.4% growth.
Gold prices rallied last week, rising from $3,220 to $3,360 per ounce on increased safe-haven demand. If gold prices rise, they may encounter resistance at $3,500 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 dipped to $3,120 per ounce earlier in May but rallied last week as the US dollar weakened following Moody's downgrade of the US credit rating. Investors are turning to gold as a safe-haven amid concerns over US fiscal stability.
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. Trump's announcement of potential 50% tariffs on EU imports last week raised the appeal of safe-haven assets.
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.
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 dipped last week, and the dollar index dropped from 100.9 to 99.1.U.S. Treasuryy yields remained steady, with the US 10-year bond yielding approximately 4.50%.
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.
Oil prices traded sideways last week, oscillating around the $62.2 per barrel level. If oil prices retreat, they may encounter support near $55.6 per barrel, while resistance may be found near $65.3 per barrel.
Reports that OPEC+ is considering a significant increase in oil production for July put pressure on oil prices last week. OPEC+ members are discussing another output rriseof 411,000 barrels per day (bpd) in July. OPEC is planning to increase output by 2.2 million bpd by November, raising fears of oversupply and driving oil prices down. Markets will closely monitor the upcoming OPEC+ ministerial meeting on May 28 for further guidance on output policy.
US crude oil stockpiles released last week, xceeded expectations, putting pressure on oil prices. The Energy Information Administration (EIA) reported a rise in US crude oil inventories of 1.3 million barrels for the week ending May 16, against market expectations of a 0.9 million-barrel draw.
Oil prices traded sideways last week as markets awaited geopolitical developments. The US and Iran have initiated a series of negotiations aimed at reaching a nuclear peace agreement. The outcome of these negotiations could significantly impact global energy markets and geopolitical stability. Talks between the US and Iran in Rome ended last week with limited progress beehaving n made as Iranian representatives expressed skepticism over the chances of a deal with the US.
US President Donald Trump initiated a two-hour phone call with Russian President Vladimir Putin, but the Russian President did not commit to a ceasefire. Meanwhile, Ukraine conducted a successful drone strike in Russian territory, marking a significant escalation in the conflict.
Oil prices are kept in check by high central bank’ interest rates. The Federal Reserve kept interest rates unchanged tina 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 surged to a record high of $111,875 on Thursday but deflated to $107,600 over the weekend as traders rushed to realize their gains. If BTC price declines, support can be found at $93,200, while resistance may be encountered at $111,875.
Ethereum rose to $2,740 mid-week but pared some gains over the weekend, dropping to $2,520. 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 surged to a record high of $111,875, driven by optimism over US regulatory developments and increased institutional investment. The surge coincided with the 15th anniversary of Bitcoin Pizza Day, commemorating the first real-world Bitcoin transaction. Strong institutional inflows into ETFs like BlackRock’s IBI, raised investor optimism. Macroeconomic concerns, including a weakening dollar and soaring US debt, also fueled Bitcoin’s rally.
Regulatory developments are also boosting crypto markets. The US Senate advanced the GENIUS Act, aimed at regulating stablecoins, which is perceived as a step toward mainstream acceptance of cryptocurrencies.
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, Trump hosted a lavish dinner at his Virginia golf club for top holders of his meme coin, $TRUMP. The event was attended by 220 investors who collectively spent $148 million on the token. Trump’s dinner confirmed his ties to the crypto industry and reaffirmed his intentions to promote 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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