Last week, the market reacted to the release of important PCE data from the United States, with multi-directional fluctuations. The US dollar index quickly rose 10 points after the data was released, then fell 15 points and rebounded 15 points within 25 minutes, showing the market's hesitation in interpreting the data. Spot gold prices remained relatively stable with little volatility, which may be related to the fact that the price of gold rose by more than $20 due to tariff-related news before the data was released. In the bond market, the yield on the 10-year US Treasury bond rose slightly by 1.2 basis points to 4.435%, and the yield on the 2-year Treasury bond rose to 3.935%, suggesting that the market remains vigilant about inflationary pressure. The stock market reacted more restrainedly, with Nasdaq and S&P 500 futures holding steady after the data was released, but lacking a clear direction. Earlier, tariff-related uncertainty remained the focus of the market, although specific policy details were not widely discussed. Last week, President Trump accused China of violating the preliminary trade agreement with the United States and re-threatened to impose tariffs. In addition, after the federal appeals court temporarily restored Trump's tariffs, tariffs may once again influence the market next week, adding to market volatility. Fed Chairman Powell will also give an opening speech at an event next Tuesday, his first speech since meeting with Trump this week. Meanwhile, several Fed officials will speak next week. Economists point out that tariff policies could drag down economic growth and push up inflation, and the Fed minutes also expressed similar concerns.

Review of market performance last week:

U.S. stocks performed volatile but strong in May as investors weighed renewed trade tensions with China and cooling inflation data. The S&P 500 fell more than 1% during the session and ended up basically flat, the Nasdaq fell 0.4%, and the Dow Jones rose 53 points. Market volatility increased after President Trump accused China of violating recent trade agreements. In addition, reports that the government plans to expand technology restrictions on Chinese companies further exacerbated market pressure. The S&P 500 closed up 6.2% in May and the Nasdaq rose 9.6%, both of which recorded their best monthly performance since November 2023. The Dow Jones rose 3.9% this month.

Gold prices fell more than 2.0% last week to around $3,288 per ounce as strong economic data offset demand for safety amid resurgent trade war risks. Gold prices were pressured by a strong dollar as the dollar recovered some lost ground despite a slide in Treasury yields following a strong inflation report, keeping alive traders’ hopes of a Fed easing policy in 2025. On the other hand, gold prices failed to gain momentum despite a lower inflation environment as short dollar positions in the futures market were cut last week, according to Commitment of Traders (COT) data.

Silver prices turned negative and are expected to end the month with a loss of more than 1.40%, falling to $32.970 per ounce on the last trading day of May as investors weighed uncertainty around U.S. trade policy and a slew of key economic data releases.

The U.S. dollar index stabilized at 99.4 on Friday, falling for the fifth straight month and marking its longest losing streak in five years. Veteran traders have adjusted their positions in response to the “policy earthquake” triggered by Trump’s tariff policy. Traders are increasingly concerned that President Trump's trade policies could hurt the economy and weaken the dollar's safe-haven appeal. On Friday, Trump accused Beijing of violating a recent trade deal, and Sino-U.S. tensions escalated again. From a technical perspective, the dollar's potential upside may be limited, and the dollar index is expected to continue to fall in June due to trade and fiscal uncertainties.

The euro fell 0.12% against the dollar in late New York trading to $1.1356. Its monthly gain of 0.27% was the smallest since February. German inflation slowed further in May, bringing it closer to the European Central Bank's 2% target, providing a basis for the European Central Bank to cut interest rates next week. The dollar fell 0.21% against the yen to 143.88 yen. The dollar recorded a monthly gain of 0.6% against the yen, the first monthly gain since December. Data on Friday showed that the underlying inflation rate in the Tokyo area hit a more than two-year high in May, which means that the Bank of Japan may still have the possibility of further interest rate hikes.

The British pound recovered some of its earlier losses during the weekend session, climbing back to around 1.3460-70. GBP/USD rebounded as the greenback gave up some of its initial gains following a post by U.S. President Donald Trump on Truth.Social that suggested a renewed escalation in trade tensions between Washington and Beijing. GBP/USD is set to close higher for the fourth straight month. The Australian dollar fell to around $0.6430 heading into the weekend, and is expected to fall more than 0.40% as a slew of disappointing domestic data weighed on investor sentiment. The pair is having trouble finding direction, weighed down by a combination of weak economic fundamentals and technical range-bound conditions.

WTI crude oil prices fell in the U.S. as OPEC+ is widely expected to decide on a larger-than-previously expected increase in July production at its meeting on Saturday. Brent crude futures for July fell $0.25, or 0.39%, to $63.90 a barrel, while U.S. WTI crude oil spot fell $0.30, or 0.50%, to $60.30, falling more than $1 at one point during the session. At current price levels, both benchmark contracts fell more than 1% last week and are expected to record weekly declines.
Bitcoin reversed trend after hitting a record high. Last week, Bitcoin prices fell 1.5% to around $106,000 as investors sold off due to profit-taking. Continuing the low-level consolidation momentum, it once lost the 10.5 mark during the session, which was more than 5% lower than its peak price of $119,900. Bitcoin hit a record high on the 22nd, benefiting from the Trump administration's reform of the asset-backed system and the weakening of the U.S. dollar. But since then, Bitcoin prices have continued to fall for a week due to profit-taking by investors and market concerns about a U.S. recession. After hitting an all-time high of $111,970, Bitcoin retreated to around $105,500. Such volatility is normal during the price exploration phase.

Before the weekend, the 10-year U.S. Treasury yield fluctuated around 4.4% on Friday as traders assessed the latest developments in the trade war and new economic data. President Trump claimed on social media that China "completely violated" its agreement with the United States, although he did not provide further details. Market expectations that the Federal Reserve may have room to cut interest rates later this year. Considering that in May, the U.S. benchmark bond yield fell more than 20 basis points.

Market Outlook This Week:

Does Trump always back down on tariff threats?

Concerns about the negative impact of the ongoing trade war remain lurking, and Trump's latest remarks on trade policy indicate that the trade truce may be only temporary, and Trump is still injecting uncertainty into the market. On Friday, Trump announced that he would double the tariffs on imported steel and aluminum products, saying that the move would provide more protection for the domestic steel industry."

Faced with tariff threats, the "TACO trade" has become the most popular strategy on Wall Street right now. TACO is an abbreviation for "Trump always chickens out," which means "Trump always chickens out." TACO trading refers to investors profiting by buying on dips after Trump's tariff threats cause the market to fall.

Does Trump always chicken out on tariff threats? So far, the answer is yes. History does show that Trump will not follow through on tariff threats that are destabilizing or extreme. These threats appear to be part of his negotiating strategy, which centers on threatening outrageous tariffs to achieve a more moderate goal.

Markets are preparing for another volatile week as President Trump renews his threat to impose tariffs after accusing China of violating its initial trade agreement with the United States.

On the other hand, The European Central Bank, the Bank of Canada and the Reserve Bank of India are expected to announce interest rate decisions.

Perhaps the most far-reaching impact of the tariff war is that it has promoted the global trend of "de-dollarization"?

Perhaps the most far-reaching impact of the tariff war is that it has promoted the global trend of "de-dollarization". Major economies subject to US tariff sanctions are actively seeking alternatives. If this trend continues, it will fundamentally shake the dollar's position as the world's reserve currency.

Trump's tariff war is like a stress test for the dollar's hegemony, exposing the fragility of this system, but no alternative has been found. The result of this experiment may be that the dollar remains the most important currency in the world, but its halo is slowly fading, and the world will have to learn to operate in an environment where the dollar is not so dominant. This transformation will not happen overnight, but tariff policy has undoubtedly pressed the accelerator.

What the market is seeing now is not the end of the trade dispute, but a more protracted economic war The beginning of the US GDP. Data showed that the revised value of the US GDP in the first quarter of last week was also lowered to 1.1%, which confirmed economists' concerns about the "Trump recession". More worrying are the danger signals sent by the global debt market. The US 30-year Treasury auction encountered a historic cold reception, with the winning rate soaring to 4.85%, and the Bank of Japan was forced to intervene to suppress the 10-year Japanese bond yield. The debt ratio of the US and Japanese governments to GDP has exceeded 135% and 265% respectively. This unsustainable fiscal situation is shaking the foundation of the US dollar.

The financial tsunami caused by Trump's policies is far from over. When the tariff stick encounters the debt ceiling and when protectionism collides with the global supply chain, the summer of 2025 is destined to be recorded in the annals of financial history. The only thing that can be confirmed is that the old order built on the hegemony of the US dollar is shaking violently in this perfect storm.

Gold prices retreated below $3,300 as the market digested the tug-of-war between tariffs and inflation

Last week, Gold prices fell and the dollar rose as the market digested the latest tariff developments, while a weaker inflation report kept hopes of a U.S. rate cut alive. The core PCE price index, the Fed's preferred inflation measure, rose 2.5% year-on-year last week, the smallest gain since March 2021, after rising 2.7% in March. .Gold prices were therefore pressured to retreat back below $3,300.00 and fluctuate.

Several Fed officials recently said that if economic data and inflation fall further, it is reasonable to expect two rate cuts this year. The market still prefers a rate cut this year. This uncertainty in the interest rate path has become one of the medium- and long-term support factors for gold.
After a federal appeals court temporarily reinstated Trump's tariffs last week, tariffs may once again influence the market this week, with Fed Chairman on Tuesday Powell will also give an opening speech at an event, his first speech since meeting with Trump this week. Meanwhile, several Fed officials will speak next week.

In addition, gold prices are concerned about geopolitical situations. Russian Foreign Minister Lavrov previously said that the Russian delegation is ready to submit a memorandum of understanding to Ukraine during the second round of talks in Istanbul on June 2. Russia's permanent representative to the United Nations, Nebenzia, said that Russia is ready to continue and expand its military operations in Ukraine for as long as it takes. In addition, due to the increase in demand for tariff hedging, gold prices may continue to test around $3,300. If geopolitical tensions ease, it is expected to test around $3,200.

OPEC+ production increase expectations and Trump's tariff increase, US oil $60 mark is put to the test again

Sources familiar with OPEC+ negotiations said that OPEC+ may discuss accelerating the pace of oil production increases in July at the Saturday meeting, so that the increase exceeds 411,000 barrels per day in May and June. OPEC+'s plan doesn't look particularly good for the oil market. A federal appeals court temporarily restored Trump's tariff measures on Thursday, overturning a trade court's decision a day earlier to immediately block comprehensive tariffs, and Trump's tariffs are expected to remain in effect.

Trump's latest tariff statement has put pressure on crude oil prices. Last week, US President Trump said he would increase tariffs on imported steel from 25% to 50%. Trump signed an executive order on February 10, announcing a 25% tariff on all steel and aluminum imported into the United States. On March 12, local time, Trump imposed a 25% tariff on all steel and aluminum imported into the United States. The move to impose a 25% tariff officially took effect. Trump said he was confident in the steel agreement, and mortgage rates and gasoline prices were falling.

The White House expressed concern about the increase in global natural gas prices caused by the implementation of tough sanctions. Some White House officials are also cautious about secondary sanctions because they may anger US trading partners that buy Russian energy.

With the rekindled tariff risks and the expectation that OPEC+ will accelerate oil production in July, oil prices may be dominated by short forces next week, and US oil is expected to test the $60/barrel mark again. In addition, oil prices also need to focus on next week's non-agricultural data.

Conclusion:

Looking forward to June, The market will face a complex environment. The mild PCE data in April did not completely eliminate concerns about inflationary pressures later in 2025, especially as tariff costs may gradually be transmitted to the supply chain. Traders will focus on June data, when economists expect the impact of tariffs may be more obvious, and core PCE may be close to 3% by the end of the year.

In the short term, the market may continue its "own logic". If inflation remains mild, the stock market may be supported, but if growth continues to slow, downside risks will increase. Gold's resilience reflects the safe-haven demand caused by tariff uncertainty and the situation in Russia and Ukraine, while the decline in crude oil prices shows that demand concerns have overshadowed supply. The dollar's move will depend on the market's judgment on whether the Fed is inclined to tighten or ease. If growth slows further, expectations of easing may prevail.

In short, last week's US PCE data did not bring major surprises, but it highlighted the coexistence of economic cooling and inflationary pressures. The market reaction was mild but volatile, reflecting the cautious balance between the relief of mild inflation and growth risks. Under the continued influence of tariff rhetoric and global geopolitical factors (such as the situation in Russia and Ukraine), investors will continue to pay close attention to each data to judge the Fed's next move.

Overview of important overseas economic events and matters this week:

Monday (June 2): UK Nationwide House Price Index Monthly Rate in May, Eurozone Manufacturing PMI Final Value in May, UK Manufacturing PMI Final Value in May, US S&P Global Manufacturing PMI Final Value in May, US ISM Manufacturing PMI in May, US Construction Spending Monthly Rate in April

Tuesday (June 3): Eurozone CPI Annual Rate Preliminary Value in May, Eurozone Unemployment Rate in April, US JOLTs Job Vacancies in April, US Factory Order Monthly Rate in April, Reserve Bank of Australia Releases Minutes of June Monetary Policy Meeting, Bank of Japan Governor Kazuo Ueda Speech

Wednesday (June 4): API crude oil inventory in the United States for the week ending May 30, Australia's first quarter GDP annual rate, the final value of the Eurozone's May service industry PMI, the final value of the UK's May service industry PMI, the US ADP employment in May, the final value of the US S&P Global service industry PMI in May, the US ISM non-manufacturing PMI in May, the US EIA crude oil inventory for the week ending May 30, the Bank of Canada announced its interest rate decision

Thursday (June 5): Eurozone PPI monthly rate in April, the European Central Bank announced its interest rate decision, the number of initial jobless claims in the United States for the week ending May 31, the US trade account in April, the Federal Reserve announced the Beige Book on economic conditions, and the European Central Bank President Lagarde held a monetary policy press conference

Friday (June 6): Eurozone first quarter GDP annual rate revised value, Eurozone April retail sales monthly rate, Canada's May employment, US May unemployment rate, US May seasonally adjusted non-farm payrolls, US May average hourly wage monthly rate, Federal Reserve Board member Kugler delivered a speech at the New York Economic Club

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