Last week kicked off with a rare collective surge in Asian currencies, as the Fed held its ground and boosted the dollar back above the 100 mark. The first formal trade agreement between the United States and the United Kingdom and the first dialogue between China and the United States after the trade war stimulated a surge in risk sentiment, coupled with China's interest rate cuts and reserve requirement ratio cuts, and global stock markets returned to the level before Trump announced "Liberation Day" global tariffs.

Given the uncertainty about tariff increases and their consequences, the Fed is uncertain about the direction of the economy and inflation, and this is not without reason. This was evident in last week's monetary policy decision, when the Fed kept interest rates unchanged and said that risks were increasing in both directions - the risk of rising inflation and the risk of economic weakness. The market may see the market pay more attention to trade negotiations than data releases. Last Thursday, the United States and the United Kingdom reached a trade agreement, but the general tariff of 10% was maintained despite the United States' trade surplus with British goods.

Negotiators from the United States and China will meet in Geneva last weekend, and progress may have been made in reaching a much more significant tariff agreement. The current tariffs imposed by the two countries on each other are well above 100%, which will obviously have a serious negative impact on the economies of both countries. Relatively speaking, there is the possibility of positive and negative surprises.

Review of last week's market performance:

Last week, the U.S. stock market fluctuated, with the three major stock indexes rising and falling. Earlier, Trump hinted that more trade agreements would be reached. At present, it seems that the Fed's meeting resolution has little impact on the U.S. stock market. The market re-examines the impact of trade policies on the forward market and deeply analyzes the driving logic of economic data trends. With the continuous changes in Trump's tariff policy, market variables have begun to gradually increase. Last week, the three major stock indexes closed down less than 0.5%. The S&P 500 fell by about 0.4% and closed at 56,59.91 for the week; the Dow fell by 0.2% and closed at 41,249.38; and the Nasdaq fell by 0.3% and closed at 17,928.92.

The reversal of the US dollar last week and the new news on the Sino-US trade situation caused gold to experience ups and downs. It soared by nearly $200 in the first two trading days of the week, breaking through the 3,400 mark in one fell swoop, reaching a high of 3,434.79 and a low of 3,237.57. It showed a trend of rising and falling during the week, but the weekly increase reached 2.62%. From a trend perspective, gold prices have maintained a high-level oscillation pattern since mid-April. As a psychological and technical double barrier, $3,300 will remain the focus of long-short game in the short term. In the short term, the downward space for gold prices is limited, but the upward breakthrough requires more fundamental positives.

Last week, the price of silver rose by more than 2.0%, close to $32.730 per ounce, making up for the losses of the previous week as investors sought safe haven assets amid continued economic and trade uncertainties. The rebound came after the Federal Reserve decided on Wednesday to keep interest rates unchanged as expected.

At the beginning of last week, the crazy appreciation of Asian currencies put the US dollar at a disadvantage, hitting a low of 99.17, and the 99 mark was almost lost. Then it rebounded strongly under the influence of the Fed's inaction. In addition, the major progress in the trade situation eased the "sell the United States" theme. The US dollar index completely returned to the 100 mark and finally closed at 100.62, with a weekly increase of 0.58%, closing higher for the third consecutive week.

Under the influence of the dollar's decline and then rise, most non-US currencies showed the opposite trend. EUR/USD rose strongly to 1.1381 at the beginning of the week, and began to decline since Wednesday. It not only lost the 1.13 mark, but also fell to the 1.12 support, reaching a low of 1.1196. It fell 0.44% this week and closed at 1.1246, closing lower for the third consecutive week. USD/JPY fell to 142.35 for two consecutive trading days, and then rose strongly to 146.28, and finally closed at 145.32, strengthening for three consecutive weeks.

The pound sterling had a similar trend, rising strongly to 1.3402 at the beginning of the week, but reversed on Wednesday and lost the 1.33 mark, hitting a low of 1.3212, and finally recovered the losses to close at 1.3298, closing up 0.25% for the week. The Australian dollar/dollar fell below $0.6400 to $0.6370 before the weekend, hitting a one-week low as the dollar strengthened against the backdrop of improved global trade sentiment and weakened expectations of recent US interest rate cuts. It finally closed at 0.6411 for the week, down 0.48%.

WTI crude oil closed at around $60.70 a barrel last week, marking a gain of more than 4% last week, as easing trade tensions between the United States and China boosted market sentiment. Optimism was driven by news that U.S. Treasury Secretary Benson will meet with China's vice premier in Switzerland on May 10, suggesting that progress could be made in resolving trade disputes. Despite these positive factors, caution is still needed as OPEC+ plans to increase production, which may put pressure on oil prices. In addition, tighter U.S. sanctions on Iran could limit supply, bringing new uncertainty to the market.

Last week, Bitcoin continued to maintain its strength above $10,400 as U.S. President Trump cooled down the trade war, first announcing an important tariff agreement with the UK, and then hinting at a 145% tariff cut on China. The Fed decided not to cut interest rates, but Trump insisted on criticizing Fed Chairman Powell and again called for a rate cut as soon as possible. Goldman Sachs changed its tune and said that the U.S. economy may not fall into recession, which is good for risky assets.

The U.S. 10-year Treasury yield remained above 4.36% before the end of last week and was expected to rise for the second consecutive week, supported by improved global trade sentiment and weakening expectations of recent rate cuts. President Trump outlined a preliminary trade agreement with the UK, the first agreement since the introduction of comprehensive U.S. tariffs last month, boosting investor confidence.

Market Outlook This Week:

Beware of disappointing news from China and the United States that reverses the market! U.S. CPI may not be that bad, don't forget Japan and the UK GDP

The market focus will continue to be on U.S. trade negotiations, followed by key data including inflation, retail sales and speeches by Fed officials, especially Chairman Powell. In the past week, the Federal Reserve kept interest rates unchanged, while there was significant progress in the global trade situation. In the coming week, the market will focus on the progress of the Sino-US Swiss talks, and be careful that the disappointing news between China and the United States will reverse the market! The US CPI report has become the key to evaluating the impact of tariffs. In addition, US retail sales, UK and Japanese GDP are also on the important agenda.

Although the market is still worried that the United States may fall into a recession, the existing data shows that the worst case scenario may only be an economic slowdown. There is no sign that inflation is accelerating, as both CPI and PCE indicators fell in March. However, this cooling of inflation may be only temporary, as the reciprocal tariffs that were fully launched on April 9th ​​came into effect.

The US dollar is at a crossroads; the twilight of the US dollar hegemony?

In the past two weeks, there have been shocking rumors in the Singapore foreign exchange market: Washington is asking Asian countries to sign a "currency appreciation agreement" in exchange for tariff exemptions in July. Although the official denials, the abnormal fluctuations of currencies such as the Korean won reveal that capital is voting with its feet. What is even more intriguing is that the Bank of Japan suddenly adjusted its YCC policy at a critical time for the US-Japan trade negotiations. Is this a coincidence or is it forced to "pay protection fees"?

It is no coincidence that the German central bank recently increased the proportion of RMB reserves to 5%. When Trump wielded the tariff stick, the Saudi sovereign fund was converting crude oil dollars into Japanese yen bonds, and India settled Russian oil trade with rupees. These fragmented signals pieced together a terrifying picture: countries are planning for the post-dollar era, and the chaotic policies of the White House have accelerated this process.

Standing at the crossroads, the US dollar is facing the most severe challenge since the establishment of the Bretton Woods system in 1944. The seemingly chaotic monetary policy of the Trump team may hide a deeper calculation-using short-term pain in exchange for the revival of the manufacturing industry, but the price may be to shake the foundation of the US dollar hegemony. While Bessant and others continue to play with "strategic ambiguity", global central banks have been quietly reducing their holdings of US debt. This quiet currency uprising may eventually turn the slogan of "Make America Great Again" into a pusher to destroy its financial throne.

Gold "counterattack" moment! Does the technical combo suggest a direction?

Looking ahead to the next week, the trend of the gold market will be highly dependent on the results of the Sino-US trade negotiations over the weekend. If the negotiations make substantial progress, such as tariff cuts or the two sides reach a preliminary agreement, risk aversion may cool down, and gold prices may face correction pressure, and may retest the support area of ​​$3,260 or even $3,200 in the short term. On the contrary, if the negotiations are deadlocked or Trump's tariff remarks escalate further, the inflow of safe-haven funds will push gold prices up, and the resistance levels of $3,336 and $3,384 will become bullish targets. From a technical perspective, gold prices are likely to maintain a volatile upward pattern in the short term, but breaking through the previous high of $3,440 requires more momentum accumulation.

It should be noted that the progress of the situation in Russia and Ukraine and the fluctuation of the US dollar index are still variables that cannot be ignored. In particular, if the US dollar rebounds due to changes in the Fed's policy expectations, it may suppress gold prices. Traders should pay close attention to official statements from weekend negotiations, as well as macroeconomic data (such as US CPI and retail sales) at the beginning of this week to judge the further evolution of market sentiment.

In the coming week, the market will play around the outcome of the negotiations and global geopolitical dynamics, and gold prices are likely to fluctuate in the range of $3,260-3,440.

Global trade concerns have eased, driving oil prices to rebound from oversold levels, and the medium-term trend has not yet reversed

The main driving force behind this round of crude oil rebound is the market's optimism about the upcoming trade negotiations between US Treasury Secretary Bessant and Chinese economic officials. Despite the rise in oil prices, market volatility caused by trade concerns will continue. The global risk premium that has driven oil prices up and down in the past few years has been replaced by a tariff premium, which will also fluctuate with the latest news from the Trump administration.

From a technical perspective, the daily chart of US crude oil shows a clear short-term upward trend. The current price has risen to around $60, successfully breaking through multiple short-term moving average pressures, indicating that the market sentiment is strong in the short term.

The current rise in oil prices is driven more by short-term optimism than by improved fundamentals. Once Iran returns to the global crude oil market, it will trigger a risk of a surge in supply. In addition, although the easing of global trade sentiment brings hope, it may not necessarily solve the deep-seated contradictions in the trade structure. Therefore, oil prices may fluctuate sharply in the short term, and we should pay close attention to geopolitical trends and policy adjustments of oil-producing countries.

Overall, the technical trend is bullish in the short term, but we need to beware of the risk of high-level shocks near the resistance zone. Market sentiment will be directly affected by global trade sentiment.

Conclusion:

When the United States and the United Kingdom announced the conclusion of the US-UK trade agreement, behind this superficial harmony, there is a dangerous signal: the United States is using this agreement to announce to the world that a 10% tariff will become the baseline of the new era, and the "zero tariff" ideal that once dominated globalization has completely died.

This seemingly bland agreement is actually a milestone in the trade war in the 21st century. When the United States no longer grants preferential treatment to its allies, globalization officially enters the "tariff stratification era": 10% for close allies, 25% for strategic competitors, and other "special cases" may be maintained in the range of 15-20% for a long time. Starmer's compromise may have saved the British auto industry, but the cost is to bring the world one step closer to the "economic iron curtain".

The market expects the United States to continue to maintain high tariffs and may even further pressure trading partners such as the European Union. This protectionist stance may boost the US dollar in the short term. The US dollar and gold are usually negatively correlated. If the US dollar strengthens due to trade policies, gold prices may be under pressure. But in the long run, high tariffs may harm global economic growth. If the US economy slows down due to trade frictions, the Federal Reserve may be forced to cut interest rates, and the US dollar may weaken, thereby supporting gold prices.

In addition, the US-UK agreement may only be the beginning. If the United States subsequently imposes higher tariffs on economies such as the European Union (such as the rumored 20% for the European Union), global trade tensions will intensify, market risk aversion will heat up, and funds may flow into gold again.

Overview of important overseas economic events and matters this week:

Monday (May 12): Japan's trade balance in March; US New York Fed's 1-year inflation expectations in April (%)

Tuesday (May 13): UK unemployment rate in March - by ILO standard (%); Eurozone ZEW economic sentiment index in May; US CPI annual rate in April not seasonally adjusted (%); Bank of Japan releases summary of opinions of review committee members of April monetary policy meeting; Bank of England Governor Bailey delivers a speech

Wednesday (May 14): Germany's April CPI annual rate final value (%); US EIA crude oil inventory change for the week ending May 9 (10,000 barrels); US IPSOS main consumer sentiment index PCSI in May; OPEC releases monthly crude oil market report

Thursday (May 15): Australia's unemployment rate/employment population change after seasonal adjustment in April; UK GDP monthly rate in March (%); UK first quarter production method GDP annual rate initial value (%); Eurozone first quarter seasonally adjusted GDP quarterly rate revised value (%); US PPI annual rate in April (%); US retail sales monthly/annual rate in April (%); US industrial output monthly rate in April (%); IEA releases monthly crude oil market report; Fed Chairman Powell delivers opening remarks at an event

Friday (May 16): Japan's first quarter seasonally adjusted real GDP quarterly rate preliminary value (%); Eurozone March seasonally adjusted trade account (billion euros); US import price index monthly/annual rate in April (%); US University of Michigan Consumer Confidence Index preliminary value in May; US new housing starts annualized monthly rate in April (%)

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