Markets Are Mixed as U.S. Data Softens, Fed Signals Caution (2 - 6 June, 2025)

The US Dollar Index hovered near 99.4 as weak GDP and revived Trump tariffs added uncertainty. Fed’s Daly signaled possible 2025 cuts but urged patience. The euro steadied near $1.13 on soft inflation in Spain and France, increasing ECB cut expectations. The pound stayed around $1.35 amid UK trade optimism and pension reform plans. Weak US data supported Fed cut bets. The yen weakened despite strong Tokyo inflation, with some support from safe-haven demand. A BOJ hike is expected in July.

Gold fell to $3,290, down over 1% for the week as traders awaited US inflation data. Earlier gains came after Trump’s tariffs were briefly reinstated. Silver slipped toward $33 on trade tensions and stalled US - China talks. Brent crude hovered near $63.70, headed for a second weekly drop. Trump tariffs spurred volatility, while a surprise US inventory draw offered support. OPEC+ is expected to raise output.

The US 10-year yield dropped 1.8% this week to 4.42% amid safe-haven demand and soft US data. Japan’s 10-year yield fell to 1.50% as bond issuance cuts are expected. German bund yields slipped to 2.43%, following the global bond rally.

Durable Goods Orders (MoM, April)

U.S. durable goods orders fell 6.3% to $296.3 billion in April 2025, the largest decline since January 2024, though smaller than the expected 7.8% drop. The decrease followed a revised 7.6% surge in March, driven by the introduction of 10% reciprocal tariffs and softened demand after prior order front-loading. Transportation equipment orders declined 17.1%, with non-defense aircraft orders plunging 51.5% as Boeing received only eight orders. Capital goods orders also dropped 14.6% to $101.4 billion.

CB Consumer Confidence (May)

Consumer confidence improved sharply, rising to 98.0 in May from 86.0 in April, according to The Conference Board. The figure exceeded market expectations of 87, reflecting stronger consumer sentiment.

RBNZ Interest Rate Decision (May)

The Reserve Bank of New Zealand reduced its official cash rate by 25 basis points to 3.25%, the lowest since August 2022, in line with expectations. The cut follows a similar move in April and larger reductions in prior months. While inflation remains within the 1%–3% target, the RBNZ warned of global risks, including U.S. tariffs and policy uncertainty, which could weigh on exports and domestic growth. The cash rate is now projected to reach 2.92% in Q4 2025 and 2.85% in Q1 2026.

U.S. GDP (Q1 2025, QoQ)

The U.S. economy contracted at an annualized rate of 0.2% in Q1, a slight improvement from the initial 0.3% estimate, marking the first contraction in three years. A strong 7.8% rise in fixed investment and 2.4% growth in exports partially offset weak consumption and a 4.6% drop in federal spending. Imports surged 42.6% amid tariff-related stockpiling, while consumer spending growth slowed to 1.2%.

Initial Jobless Claims (May 24)

Initial jobless claims rose by 14,000 to 240,000, the highest in a month and above the forecast of 230,000. Continuing claims increased by 26,000 to 1.919 million, the highest since November 2021. Claims under federal employee programs rose by 15 to 610 amid ongoing government layoffs, suggesting a softening labor market.

German CPI (May, Preliminary)

Germany’s annual inflation held steady at 2.1% in May, slightly above the 2.0% forecast. Services inflation eased to 3.4%, while goods inflation rose to 0.9% due to smaller energy price declines. Food inflation remained at 2.8%, and core inflation edged down to 2.8%. On a monthly basis, CPI rose by 0.1%, slowing from April’s 0.4%.

U.S. Core PCE Price Index (April)

Annual U.S. PCE inflation slowed to 2.1% in April from 2.3% in March, below the expected 2.2%. Core PCE, which excludes food and energy, eased to 2.5%, in line with forecasts. Both headline and core prices rose 0.1% month-on-month. Personal income grew 0.8%, and personal spending increased 0.2%.

Currencies

The U.S. Dollar Index hovered near 99.4 as investors reacted to weak economic data and shifting trade signals. A Q1 GDP contraction increased expectations for Fed rate cuts, despite Fed’s Mary Daly emphasizing the need for caution. The dollar saw volatility following court rulings on Trump-era tariffs.

The euro traded near $1.13, unchanged for the month. Weaker German retail sales and easing inflation in Spain and France supported expectations of an ECB rate cut next week.

The British pound settled near $1.35, down from recent highs, weighed by U.S. trade uncertainty. In the UK, discussions on a U.S. trade deal and a proposed £27.5 billion pension fund reform drew attention.

The Japanese yen weakened despite Tokyo’s stronger core inflation. Safe-haven demand provided some support after the reinstatement of U.S. tariffs. BOJ Governor Ueda said inflation forecasts were revised down due to global risks but near-term policy remains unchanged.

Commodities

Gold slipped to around $3,290 per ounce on Friday, heading for a weekly loss of over 1% as investors turned cautious ahead of key data. This followed a near 1% rebound Thursday after Trump’s tariffs were reinstated. Despite the volatility, gold remains up 0.2% for the month, aiming for a fifth consecutive monthly gain.

Silver declined toward $33 per ounce, pressured by renewed trade uncertainty and the Fed’s cautious stance. Treasury Secretary Scott Bessent said U.S.-China talks remain stalled, potentially requiring intervention by Presidents Trump and Xi.

Brent crude hovered around $63.70, on track for a second weekly loss amid trade policy uncertainty and the upcoming OPEC+ meeting. Another July output hike is expected, while Kazakhstan’s overproduction raised supply concerns. A slight U.S. GDP contraction signaled weak fuel demand, though a 2.8 million barrel inventory draw lent limited support.

Equities

U.S. stock indexes are set to close the week higher. The Nasdaq and S&P 500 are each up around 2%, while the Dow Jones is on track for a 1.5% weekly gain. Nvidia, Amazon, and Tesla led gains with increases of roughly 5%, 5.5%, and 8%, respectively. In contrast, Apple and Netflix are expected to post slight weekly losses.