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Trump sets off another storm, inflation data may temporarily lose guidance value, the Federal Reserve falls into longer waiting
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Hello everyone, today XM Forex will bring you "[XM Forex Market Review]: Trump has another storm, inflation data may temporarily lose its guiding value, and the Federal Reserve is trapped in a longer wait." Hope it will be helpful to you! The original content is as follows:
In the past week, Moody's downgrade of the US sovereign credit rating and Trump's trillion-dollar "Beautiful Big Act" has once again set off a wave of selling dollar assets. On Friday, Trump's threat of taxing the EU and Apple triggered a "three-kill" in U.S. stocks, bonds and foreign exchanges. He later said at the White House that South Korea's Samsung Electronics and other eouu.cnpanies that make mobile phones will also face tariffs.
The US bond market fluctuated violently, and the cold U.S. 20-year Treasury bond auction also strengthened market concerns, namely, investors' demand for long-term U.S. bonds is weak. Long-term U.S. Treasury bonds led the decline this week, with the 30-year Treasury bond yield breaking through the 5% mark, and the 10-year U.S. Treasury bond yield once broke through 4.6%. Japanese bonds were also cold in auctions. Japan's 20-year Treasury bonds saw the worst auction results since 2012 on Tuesday, causing Japan's long-term Treasury bond yields to soar, raising concerns about deteriorating global liquidity.
The fluctuations in the US bond market are transmitted to the US stock market. The three major U.S. stock indexes fell more than 2% this week. On Friday, after Trump's tariff threat hit U.S. stocks, Becent tried to appease the market. He said he would announce more trade agreements and said that Trump's threat was to prompt the EU to speed up its actions. U.S. stocks narrowed their declines but closed down. The Dow Jones and S&P 500 fell for four consecutive days.
Forex Market:The US dollar index fell sharply by 1.87% this week, ending its four-week continuous gains and closing at 99.102. After the U.S. House of Representatives passed Trump's "Beautiful Big Act", market concerns about U.S. government debt have intensified. In addition, after the 20-year U.S. Treasury auction hit a cold, the long-term yield jumped, and the benchmark 10-year U.S. Treasury yield once rose to 4.63 during the week.%, the highest level since mid-February. The weakening of the US dollar boosted the performance of non-US currencies, with the euro, pound, Australian dollar, Japanese yen and Canadian dollar expected to close higher this week, with the pound rising against the US dollar for five consecutive trading days, and the US dollar falling sharply against the Japanese yen for the second consecutive week.
Gold Market:Spot gold rose this week, closing at $3356.21 per ounce, up 4.81%, mainly affected by the weakening of the US dollar, the continued uncertainty of the global geopolitical situation and trade prospects. The rising fiscal deficit in the United States has also made investors feel uneasy about the economic outlook, thus increasing demand for gold, a safe-haven asset. On Friday, Trump wanted to impose a 50% tariff on the EU and a 25% tariff on Apple, and gold once surged to $3,360 per ounce.
Crude oil market: In terms of international oil prices, at the beginning of Wednesday, affected by foreign media news that Israel was preparing to crack down on Iran's nuclear facilities, WTI crude oil and Brent crude oil opened higher and rose continuously, with an increase of about 3%, but then continued to decline, erasing all the gains in the day and turning to a decline. The US and Blanc oil oil prices closed slightly lower this week.
Review of the news of this week On Friday, US President Trump proposed to directly impose a 50% tariff on the EU from June 1, 2025, and threaten to impose a 25% tariff on Apple. Trump accused the EU of causing the US trade deficit to exceed US$2.5 billion through trade barriers, value-added tax, currency manipulation and other means, calling it "unacceptable." He stressed that if the product is made or produced in the United States, there is no tariff. After the news came out, the market responded violently. Spot gold prices hit $3,360 per ounce, the euro fell against the US dollar in the short term, and European stock markets also fell sharply. Meanwhile, traders have increased their expectations for the ECB rate cut, which is expected to cut three more rates in 2025. The EU has previously proposed a new trade proposal to the United States, aiming to restart trade negotiations between the two sides, but U.S. eouu.cnmerce Secretary Howard Lutnik said some trade negotiations are "not reaching any agreement." The EU is also preparing countermeasures, planning to impose additional tariffs on U.S. exports worth 95 billion euros in response to Trump's "reciprocal" tariffs and 25% tariffs on cars and some parts. Previously, the EU has postponed the implementation of the countermeasures to impose a 25% tariff on US steel and aluminum exports by 90 days. U.S. Treasury Secretary Bescent said that during the 90-day high tariff suspension period announced by Trump, the United States will announce more trade agreements with other countries. He called Trump's tariff threat to the EU a response to the slow pace of EU negotiations and hoped that the EU would speed up the pace of negotiations. Besent also mentioned that significant progress has been made in trade negotiations between the United States and India. Later, Trump once again said he would not seek a deal with the EU and would likely discuss push if the EU starts to turn to the USTax it late. On May 22, Eastern Time, the U.S. House of Representatives passed the "Beautiful Great Act" with a slight advantage of 215 votes to 214. Trump said on social media that this will be one of the most important legislation in U.S. history. House Republican Speaker Johnson made several changes to the bill at the last minute to meet the interests of various Republican factions and prevent his party from losing more votes. The Senate plans to vote at the latest in August. The chairman of the House Ways and Means eouu.cnmittee expects the Senate to further increase tax cuts. The bill is Trump's core domestic agenda and aims to cut taxes and expenditures across the board. The bill includes permanent tax cuts during Trump's first term, tightening Medicaid medical insurance spending, increasing border security and defense spending, gradually abolishing the clean energy tax credit, exempting tips and overtime tax burdens, etc. However, the bill will focus tax cuts on the first few years of the next 10 years, while spending cuts will focus on the years after Trump leaves office, which will lead to a rapid rise in the U.S. fiscal deficit during Trump’s tenure. According to the U.S. Congressional Budget Office (CBO), the bill will increase the $2.3 trillion deficit over the next 10 years, accounting for more than 10% of the existing deficit expectation. The calculation results of non-governmental agencies are even more severe, with the bill expected to increase the deficit by $3.3 trillion. Ri Dalio, founder of Bridgewater Fund, warned investors to remain vigilant about the U.S. bond market. He believes that the US deficit has exceeded the market's ability to bear and may face a severe situation in the next three years. Dalio pointed out that factors such as rising U.S. bond yields, expanding fiscal deficits and political differences have led to increased risks in the U.S. bond market. The Trump administration notified Harvard University to prohibit it from recruiting international students, citing that Harvard management has created an unsafe campus environment and allowed anti-American and terrorist inciteers to harass students and undermine the academic environment. The U.S. Department of Homeland Security has revoked Harvard's Student and Exchange Visitor Program (SEVP) certification qualification, which has caused the school to be unable to recruit foreign students. International students currently in school must transfer schools or lose their legal student status. Harvard University once again filed a lawsuit against Trump, and the president bluntly stated, "Warvard will no longer be Harvard without international students." Early, U.S. Secretary of Homeland Security Nome asked Harvard to submit records of foreign students involved in violence or illegal behavior by April 30, otherwise it would cancel its federal student visa program certification qualification. Harvard University has about 6,800 international students, accounting for 27% of the total number of students in the school. The lockdown for international students will put Harvard under greater fiscal pressure as the Trump administration has frozen over $2.6 billion in funding and cut off future grants. In addition, Trump also asked Harvard to lose tax exemption, which Harvard warned would have serious consequences for U.S. higher education. This week, the U.S. Supreme Court ruled that the Fed was a "unique structured quasi-private entity", a ruling alleviating market concerns that Trump might arbitrarily fire Fed Chairman Powell. The court held that Fed officials could only be fired for malfeasance or misconduct, rather than political or policy differences. The ruling provided protection for Powell but did not eouu.cnpletely ban the president from the possibility of firing Fed officials. In addition, several Fed officials poured cold water on interest rate cuts, suggesting that interest rates will not be cut at least September. The money market forecasts only two rate cuts of 25 basis points this year. CME's "Feder Observation" shows that the probability of keeping interest rates unchanged in June is 94.6%. New York Fed Chairman Williams said that in the face of uncertain economic outlook, monetary policy policy makers may not be ready to lower interest rates by September. He pointed out that the next few months will be a process of continuously collecting data and gradually clarifying the situation, so it is difficult to clearly cut interest rates in June or July. Williams also mentioned that the current monetary policy is in a "good position", but we need to pay close attention to loan defaults and consumer spending intentions. Atlanta Fed Chairman Bostic also expressed a similar attitude, believing that the economy is in great fluctuations and policy uncertainty is high, and it takes three to six months to see the developments. He was particularly concerned about inflation and public expectations for future price increases, believing that changes in inflation expectations are worrying. Federal Vice Chairman Jefferson emphasized the "wait and see" position, pointing out that the Fed must ensure that price increases do not evolve into sustained inflation. St. Louis Fed Chairman Mousalem warned that tariffs could drag down the U.S. economy and weaken the labor market, even as trade situations eased recently. He stressed that monetary policy needs to be prepared to respond to changes in the economic outlook and pay attention to inflation expectations. Federal Director Waller expressed a more dovish view, pointing out that if the tariff policy can be stabilized at around 10%, the Fed may take rate cuts in the second half of 2025. He believes that tariff-related inflation rises will be temporary, but if tariffs are further raised, it will have a greater impact on inflation and limit the Federal Reserve's ability to adjust interest rates. Waller also mentioned that the recent sell-off in the U.S. bond market is related to the Republican tax reform bill, but the Federal Reserve will not buy bonds in a first-tier auction. The above content is all about "[XM Foreign Exchange Market Review]: Trump has set off another storm, inflation data may temporarily lose its guiding value, and the Federal Reserve is trapped in a longer wait". It is carefully eouu.cnpiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your transactions! Thanks for the support! Every successful person has a beginning. Only by having the courage to start can you find the way to success. Read the next article now! 1. Trump wants to impose a 50% tariff on the EU and 25% tariff on Apple
2. Trump's "Beautiful Great Act" was passed by the House of Representatives
3. Trump bans Harvard from recruiting international students
4. Federal Reserve officials pour cold water on expectations of interest rate cuts,The Supreme Court held a protective umbrella for Powell
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