Economic summary on the night of May 28 and the morning of May 29: Gold prices increased slightly thanks to Russia-Ukraine tensions, but the recovery momentum was restrained by the US-EU trade outlook
Economic summary on the night of May 28 to the morning of May 29: Gold prices increased slightly thanks to Russia-Ukraine tensions, but the recovery was restrained by the US-EU trade outlook. The British pound cooled down after a series of strong increases, under pressure from the recovery of the USD.
Gold prices recover slightly amid geopolitical tensions
Gold edged up 0.15% in North American trading on Wednesday, trading around $3,305 an ounce, after falling more than 1% the previous day, as hopes for a ceasefire between Russia and Ukraine faded, boosting demand for the metal – a safe haven asset in times of uncertainty.
Russia-West negotiations remain deadlocked
Russian President Vladimir Putin has demanded that the West commit to not expanding NATO eastward and lift sanctions to end the fighting in Ukraine. However, the European side continues to discuss with the US about increasing sanctions on Russia, reducing the possibility of achieving peace soon.
US-EU trade hopes make it difficult for gold to break out
Despite the slight increase in gold prices, the recovery prospects are still limited due to the market sentiment becoming more optimistic about the possibility of reaching a trade agreement between the US and the European Union. Officials from both sides have started regular discussions, while major German automakers such as BMW, Mercedes and Volkswagen are in direct negotiations with the US Department of Commerce.
Mr. Trump promotes the negotiation process
US President Donald Trump said the EU has reached out to schedule early talks. He expressed satisfaction with the 50% tariff imposed on the EU and hoped the two sides would soon reach an agreement to promote global trade.
Next in focus: FOMC minutes and PCE data
Investors are awaiting the release of the Fed's May meeting minutes tonight for more clarity on why the agency kept interest rates unchanged in the 4.25%–4.50% range. The Fed also said it would maintain interest rates for a longer period due to the uncertainty over the effectiveness of new economic policies under Mr. Trump. In addition, US PCE inflation data due Friday is expected to have a limited impact due to the unclear impact of tax policy.
Fed's View: Patient on Interest Rates
Minneapolis Fed President Neel Kashkari said it was appropriate to maintain current interest rates amid rising inflation and unemployment risks, stressing that monetary policy should be more cautious as the impact of new tariffs is unclear.
Pound corrects after hot rally
The pound edged lower in European trade on Wednesday after a strong rally in recent sessions, as investors await fresh signals from the Bank of England (BoE) on the possibility of further interest rate cuts at its June meeting.
The BoE had previously cut interest rates to 4.25%, pledging to be cautious in its next steps. However, a series of positive economic data from the UK has made the possibility of further cuts less likely. Specifically, service inflation increased to 5.4% in April, while retail sales and GDP growth both exceeded expectations.
Growth prospects help keep pound steady
The UK economy is showing clear signs of recovery. Retail sales rose 1.2% in April, while GDP in the first quarter increased by 0.7% – much higher than the 0.1% increase in the final quarter of last year. As a result, the International Monetary Fund (IMF) has raised its growth forecast for the UK to 1.2% for this year.
Pound under pressure from strong USD
Meanwhile, the British pound continued to correct near 1.3460 against the US dollar in North American trading. Previously, the GBP/USD pair hit a three-year high of 1.3600 earlier in the week.
The renewed strength of the US dollar has been the main source of pressure, supported by hopes of an imminent trade deal between the US and the EU, along with a recovery in domestic consumer sentiment.
US consumer confidence recovers strongly
The US Consumer Confidence Index jumped to 98.0 in May, ending a five-month decline. The improvement was attributed to positive developments in US-China trade relations, which contributed to rising expectations among US consumers.
Next in focus: April PCE data
Investors are now turning their attention to the US Personal Consumption Expenditures (PCE) Price Index data, due for release on Friday. However, analysts say the data will not have a strong impact on the Federal Reserve's policy expectations, as the agency is still waiting for more clarity on the impact of new economic policies under President Trump.