Economic summary on the night of May 23 to the morning of May 24: Gold prices increased sharply amid the resurgence of US-China trade tensions, Mr. Trump put the iPhone in the eye of the storm
The latest world economic summary took place on the night of May 23 and the morning of May 24: Gold prices increased sharply amid US-China tensions and global risks.
Gold price nears $3,500/ounce: Demand for shelter surges amid US-China tensions and global risks
Gold (XAU/USD) recovered in the Asian trading session on Friday morning and traded close to $3,500/ounce after a slight correction the previous day. The renewed buying momentum reflects investors’ optimism about the price outlook, especially as the global backdrop remains supportive of the precious metal’s upward trend.
US-China trade tensions are heating up again after Washington warned businesses not to use Huawei's Ascend AI chips. Beijing accused the US of violating international trade regulations and vowed to take legal action, indicating the risk of a prolonged confrontation between the world's two largest economies.
Meanwhile, the US fiscal situation continues to raise concerns. The US House of Representatives has just passed President Donald Trump's tax cut and spending bill, which is expected to increase the US public debt by $3.8 trillion over 10 years. This comes after Moody's downgraded the US credit rating and a failed 20-year bond auction, showing investors' loss of confidence in US government assets.
The dollar is also under pressure as investors expect the Federal Reserve to start cutting interest rates this year. Last week’s CPI and PPI data reinforced expectations that the Fed will cut interest rates at least twice, by 25 basis points each, by the end of the year.
On the other hand, global geopolitical risks are rising. US President Trump is said to have revealed to European leaders that Mr. Putin believes Russia is winning and is therefore not willing to stop the war with Ukraine.
Meanwhile, tensions escalated in the Middle East as the Israeli military intensified airstrikes on Gaza, killing at least 85 people. The killing of two Israeli diplomats further raised fears of a wider conflict.
Pressure from US-EU trade tensions
US Treasury Secretary Scott Bessent has confirmed the Trump administration's tough stance on Europe, saying the European Union (EU) has made no significant progress in trade negotiations with the US. He stressed that the EU's proposals are less attractive than those of other partners.
According to Bloomberg, Mr. Trump is threatening to impose a 50% tax on all EU goods from June 1 and a 25% tax on iPhones if they are not made in the US.
This situation continues to weigh on market sentiment, especially in the context of Federal Reserve officials sending tough signals on inflation and interest rate policy. St. Louis Fed President Alberto Musalem said that inflation expectations among businesses are trending up, which could make the Fed more cautious in easing monetary policy.
In addition, the recently released US housing data also shows that consumer spending is recovering. New home sales in April increased sharply to 0.743 million units, nearly double the 0.37 million units in March. This is a signal that the economy still has bright spots, further reinforcing the view that the Fed is not in a hurry to cut interest rates.
At 16:00 GMT, Fed Governor Lisa Cook continues to deliver a speech on financial stability, but markets are now more focused on messages related to interest rates.
In the stock market, major indexes in the US all fell more than 1%, while the European market even lost more than 2%, showing that the worrying sentiment is covering the whole world.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates at the June meeting is only 5.3%, and the possibility of cutting at the end of July is only 28.2%. Hawkish comments from Fed officials have significantly reduced expectations of easing policy in the near term.
The yield on the 10-year US government bond is currently around 4.51%, down slightly from a peak of 4.62% earlier this week, reflecting market expectations of higher interest rates for longer.
EUR/USD keeps positive momentum near 1.1330 as the US dollar weakens
EUR/USD maintained a slight uptrend around 1.1330 in the new trading session, thanks to the weakening of the USD after a brief recovery the previous day.
The DXY index, which measures the greenback's strength, fell to near a two-week low around 99.30 as investors continued to sell off the dollar on growing concerns about the US financial situation.
The eurozone also faces low inflation pressures and slow growth. Wage growth in the first quarter was just 2.38%, down sharply from 4.12% in the previous quarter, raising the possibility that the European Central Bank (ECB) will cut interest rates further at its June meeting.
However, not all policymakers support the move. Bundesbank President Joachim Nagel sounded a cautious note at the G7 meeting, saying that the current interest rate of 2.25% is no longer a barrier to growth. He also noted that further rate cuts may not be necessary.
Weak PMI data released on Thursday further complicated the euro's situation. The May PMI report showed business activity in the region unexpectedly contracted, driven largely by a decline in the services sector.