Economic summary on the night of May 27 and the early morning of May 28: Gold prices continuously decreased after each newly announced economic report index.
The latest world economic summary took place on the night of May 27 and the morning of May 28: Gold prices continued to decrease due to positive signals from the US economy after the durable goods order index and the Consumer Confidence Index.
Day 3 saw global financial markets enter a crucial phase with many key economic data.
Consumer Confidence Index
The Consumer Confidence Index rose to 98 in May, well above economists' median forecast of 87 and also above April's revised 85.7, the Conference Board said Tuesday.
The Present Situation Index, which assesses current business and labor market conditions, rose 4.8 points to 135.9. Meanwhile, the Expectations Index, which reflects the short-term outlook for income, business and employment, rose sharply by 17.4 points to 72.8. However, this figure is still below the threshold of 80, which usually signals the risk of economic recession.
US manufacturing remains in decline but there are positive signs
Orders for durable goods fell 6.3% in April, after rising 7.5% in March (the revised figure), according to the US Commerce Department. Still, the figure was better than economists' forecasts, which expected a decline of 7.6%.
The core durable goods sector, which excludes the volatile transportation sector, rose slightly by 0.2% in April, beating expectations for a 0.1% decline. However, orders for non-defense capital goods excluding aircraft fell by 1.3%, compared with a 0.3% increase in March, while analysts had expected a 0.1% decline.
Stock market
Stock markets continued to be cautiously optimistic. European stocks recorded gains of nearly 1%, while major US indices are forecast to rise more than 1% after the Memorial Day holiday. However, in the bond market, the yield on the 10-year US government bond fell to 4.47%, indicating that money is still looking for safe havens and investors are still cautious about macro risks.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates at the June meeting is still very low – only 2.1%. However, the market is pricing in a 24.4% probability of a rate cut at the July 30 meeting, showing that the expectation of loose monetary policy has not disappeared in the long term, especially when the fiscal risks from the US increase.
On the foreign exchange market
In currency markets, the euro (EUR) was under pressure after France released preliminary CPI data for May, which showed inflation rose just 0.6% year-on-year, down from 0.9% in April. Monthly inflation also fell 0.2% after a sharp increase of 0.7%. This sharp slowdown increases the likelihood that the ECB will ease monetary policy at its meeting next week.
ECB officials have expressed different views. François Villeroy de Galhau, governor of the Bank of France, called the new inflation rate “very encouraging” and expressed a dovish stance, hinting at a possible rate cut. Similarly, Lithuania’s Gediminas Šimkus also said the ECB should consider cutting rates in June to support growth.
However, Robert Holzmann, one of the ECB's most hawkish officials, said that cutting interest rates now is too early and will not have a clear effect on the economy. He said that we should wait until September to have a clearer view.
Ahead of the ECB policy meeting, markets will receive a batch of preliminary inflation data from Germany, Spain, Italy and the Eurozone at the end of the week. These numbers will determine whether the ECB has a strong enough basis to adjust interest rate policy in early June.