The dollar index fell as weak US PMI data and easing trade fears raised Fed rate cut expectations. However, FOMC minutes signaled caution. The euro stayed below $1.05, with investors eyeing Germany's election and weak Eurozone PMI data. Trump's planned 25% tariffs on imports from April 2 added pressure on European automakers.
Gold closed at $2,940 per ounce, just below its record high, marking an eighth weekly gain amid trade and geopolitical tensions. Trump’s new tariffs on key imports and possibly reduced US support for Ukraine fueled uncertainty. Swiss gold exports to the US hit a 13-year high, while silver stayed near four-month highs on safe-haven demand.
U.S. 2-year Treasury yields finished the week with a decline to 4.20%, while 10-year yields also pulled back, ending the week at 4.4%.
The Reserve Bank of Australia cut its cash rate by 25bps to 4.1%, its first cut since 2020, as inflation slows. The RBA sees inflation trending toward its 2-3% target but remains cautious about further cuts due to economic uncertainties.
The Reserve Bank of New Zealand lowered its official cash rate by 50bps to 3.75%, the lowest since 2022, amid slowing growth and easing inflation. The central bank noted that annual inflation fell to 2.2%, while wage growth and labor demand weakened.
UK inflation jumped to 3% in January, the highest since March 2024, exceeding forecasts of 2.8%. Rising transport and food prices drove the increase, while services inflation hit 5%. Core inflation rose to 3.7%, reinforcing the BoE’s cautious stance on rate cuts.
US jobless claims rose by 5,000 to 219,000, exceeding forecasts of 215,000. Continuing claims remained at 1.869 million, slightly below expectations. The data suggests a still-tight labor market, aligning with FOMC members' cautious stance on rate cuts.
The index fell to 18.1 from 44.3 in January, below the expected 20, signaling slower growth. New orders, shipments, and employment weakened, while price pressures increased. Despite the slowdown, firms remain optimistic about future growth.
The US Services PMI dropped to 49.7, the first contraction in two years, as demand stalled amid political uncertainty. Business confidence hit a five-month low, while rising costs squeezed profit margins, leading firms to cut jobs.
The Manufacturing PMI rose to 51.6, the highest since June 2024, signaling modest expansion. Output increased, but new orders slowed, and hiring stagnated. Supply chain pressures eased, but delivery times remained long.
The dollar fell for a third straight week as weak PMI data and easing trade fears raised expectations for Fed rate cuts. However, FOMC minutes signaled caution. The euro traded just below $1.05 ahead of Germany’s election, while Trump’s planned 25% tariffs on European imports pressured sentiment. The British pound rose to $1.265 after stronger inflation data and better retail sales. Meanwhile, the yen strengthened on higher inflation, fueling speculation of further BoJ rate hikes.
Gold closed at $2,940 per ounce, marking its eighth straight weekly gain as safe-haven demand rose amid global uncertainties. Trump’s new tariffs on key imports and potential cuts to US support for Ukraine heightened market risks. Swiss gold exports to the US surged to a 13-year high. Silver also gained, nearing four-month highs as trade and geopolitical fears drove safe-haven demand.
U.S. indices finished the week with significant pullbacks. The Nasdaq and S&P 500 closed with declines of around 1%, while the Dow Jones saw a larger drop of 2.5%. Tesla and Amazon ended the week with losses, while Apple and Microsoft were among the few stocks that closed with gains.
Risk sentiment shifted this week as Moody’s downgraded the US credit rating, weakening the dollar and supporting major currencies and commodities.
Detail Dollar Strengthens on Trade Deal Pause (05.19.2025)The U.S. dollar gained traction Monday after the U.S. and China agreed to pause retaliatory tariffs for 90 days, prompting a gap lower in EUR/USD to 1.1064. Meanwhile, Moody’s downgraded the U.S. credit rating, citing fiscal concerns, sparking risk aversion and supporting safe-haven assets like gold and the yen.
Detail
Dollar Gains and Gold Slips Amid Risk Appetite (19 - 23 May)The U.S. dollar held near 100.8, heading for a 0.6% weekly gain as weak data increased Fed cut bets. The euro rebounded to $1.12 on firm inflation and ECB cut hopes. The pound hovered near $1.32 as UK jobs data raised BoE cut odds. The yen rose toward 145 despite Japan’s 0.2% GDP drop, with the BoJ staying cautious.
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