Entering 2025, global financial markets are moving forward amid multiple uncertainties. Geopolitical risks, continued tensions between Russia and Ukraine, and the potential impact of Trump's tariff rhetoric on global trade have kept market sentiment cautious. The U.S. Bureau of Labor Statistics released the highly anticipated May non-farm payrolls report. Data showed that the U.S. added 139,000 non-farm payrolls in May, slightly higher than the market's expectation of 130,000, but slower than the revised 147,000 in April. The financial market reacted in a complex manner after the data was released. The U.S. dollar index and U.S. Treasury yields rose in the short term, gold prices fluctuated slightly, and investors made slight adjustments to their bets on the Fed's rate cut path.

After the drastic adjustment in April, the market has shown obvious signs of stabilization recently. Although the prices of major assets have gradually recovered and volatility has fallen significantly, analysts pointed out that the overall market tone is still cautious. The core issue facing the current financial market is no longer a one-way trading opportunity with a clear trend, but a tug-of-war between policy expectations and macro data. Against this background, the dynamic evolution of inflation trends, policy paths and structural risks constitute the main clues to asset pricing in the coming week.

On the other hand, the Trump administration's recent policy style of "tightening first and loosening later" has become the new normal in the market. Whether it is foreign trade measures or direct confrontations with corporate executives, the final result is a three-stage rhythm of "testing-rebounding-retreating". The resulting "TACO transaction" (Trump Always Chickens Out) has gradually become a behavioral consensus in the market.

Overall, the tension between the fiscal path and debt constraints of major European and American economies is becoming an important variable affecting the structure of cross-border risk premiums. Analysts believe that the expansion of debt scale and the rigidity of long-term interest rates will have a profound impact on asset allocation and return expectations.

Review of market performance last week:

The US stock market rose sharply last Friday, with the S&P 500 index rising 1% to break through 6,000 points, the highest level since February, boosted by a strong employment report and renewed optimism in US-China trade negotiations. The Dow Jones Industrial Average rose 442 points and the Nasdaq rose 1.2%. President Trump called on Federal Reserve Chairman Powell to cut interest rates by one percentage point, calling it "rocket fuel" for the economy. All three major stock indexes rose last week, with the S&P and Dow Jones Industrial Average rising more than 1% and the Nasdaq rising 2%. Before the weekend, gold prices fell more than 1% due to the unexpected US non-farm payrolls data in May. Spot gold prices closed at around $3,310/ounce, up about 0.8% on a weekly basis. Although gold prices failed to break through the $3,400/ounce resistance level and may fluctuate in the $3,250-3,400/ounce range in the short term, market resilience and long-term upward trend remain solid. COMEX gold futures rose 0.54% this week to $3,333.10/ounce, and also rose to $3,427.70/ounce on Thursday. Silver performed well, hitting 13-year highs, driven by investment demand and expectations of supply shortages. Spot silver rose 9.04% to $35.964/ounce. It rose significantly on Monday, rising above $34/ounce, and continued to "oscillate at high levels" on Tuesday and Wednesday. It rose again on Thursday and fluctuated at high levels on Friday. COMEX silver futures rose 9.37% to $36.125/ounce.

Last week, the global foreign exchange market showed a divergent trend under the influence of multiple economic data and geopolitical factors. The US dollar index fluctuated in a narrow range, suppressed by market uncertainty caused by Trump's tariff policy, but strong US employment data provided some support for the US dollar. The euro and pound sterling recorded weekly gains against the US dollar, thanks to the policy signals of the European Central Bank and the positive impact of the UK avoiding US tariffs. The yen performed relatively weakly, and the US dollar rose against the yen on a weekly basis, reflecting market concerns about Japan's economic prospects. The Australian dollar's rebound against the US dollar last week continued to slightly below the key level of 0.6500, up nearly 0.9% so far last week. The Canadian dollar rebounded slightly under the cautious stance of the Bank of Canada; the Swiss franc was suppressed by the strength of the US dollar.

The US dollar index fluctuated in a narrow range of 98.35 to 99.32 last week, with a slight weekly decline. On Friday, the US dollar rose against major currencies after the release of strong US employment data. The stronger-than-expected employment data prompted the market to start closing short US dollar positions.

The euro fluctuated upward against the US dollar last week, rising 0.41% on a weekly basis. It hit a six-week high of 1.1495 on Thursday, but fell back to 1.1395 on Friday due to the strength of the US dollar. Despite this, the euro performed steadily overall last week. The US dollar fluctuated upward against the Japanese yen this week, rising 0.56% on a weekly basis, closing at 144.87 on Friday, rising for the second consecutive week. The yen, as a safe-haven currency, performed weakly this week, reflecting market concerns about Japan's economic prospects and the impact of Trump's tariff policy.

The British pound fluctuated upward against the US dollar this week, rising 0.5% on a weekly basis, closing at around 1.3525. It performed relatively steadily among major currencies. The UK's avoidance of Trump's newly implemented steel and aluminum tariffs provided support for the pound, and market sentiment was relatively optimistic. The Australian dollar's rebound against the U.S. dollar last week extended to just below the key level of 0.6500 to close at 0.6490, as the U.S. dollar lost ground after a series of disappointing U.S. economic data. AUD/USD rose nearly 0.9% last week.

U.S. WTI crude oil prices fell. Last week, international crude oil prices rose sharply, recording the first weekly increase in three weeks. Strong U.S. employment data and the resumption of trade negotiations between China and the United States boosted growth expectations for the world's two largest economies, bringing hope for the outlook for crude oil demand. Brent crude oil futures settled up $1.13, or 1.73%, at $66.47 per barrel; U.S. WTI crude oil futures rose $1.21, or 1.91%, to close at $64.58. Spot prices rose $64.10.

Bitcoin fell more than 2% to around $102,414 during the weekend trading session, stabilizing above $101,500, showing strong resilience despite market unease caused by the Trump administration's new tariffs. Bitcoin fell nearly 4% in the middle of the week, testing the $100,000 support level before rebounding to above $101,500. The market faced high-volume selling and large outflows from exchanges, reflecting the weakening activity of retail investors.
Before the weekend, the yield on the 10-year U.S. Treasury bond rose nearly 7 basis points to 4.45%, and Friday's employment report showed that the labor market slowed down, but it was still strong, slightly reducing expectations for the Fed to cut interest rates.

Market outlook this week:

Will the U.S. CPI data become a "stumbling block" for the market to rise?

This week, the release of the U.S. Consumer Price Index in May will undoubtedly be the focus of the market. The market as a whole is still cautious. Although it has rebounded significantly from the lows, investors are still waiting for clearer directional signals. CPI data may reveal the risk of inflation rising again, and consumer spending has become the focus of observation. Part of the uncertainty comes from the performance of the U.S. economy in the current changing trade background.

Although Trump has eased after announcing large-scale taxation on "Liberation Day" (April 2), the market is still waiting to see the chain reaction of the remaining tariffs on the economy.

The May CPI report, which will be released on Wednesday, will provide important clues on whether the impact of tariffs is driving inflation higher. The inflation data will also be one of the key references before the Fed's monetary policy meeting on June 17-18. If the CPI data shows that inflation is lower than the market's concerns based on tariff expectations, it will be another catalyst for testing previous highs.

At the same time, investors are also closely watching a large-scale tax cut and fiscal spending bill being considered by the US Senate. On the one hand, the bill may stimulate economic growth, but on the other hand, it may also exacerbate the US fiscal deficit problem, which is one of the potential risks that the market is most concerned about recently. The growing debt scale has a more serious negative impact on economic growth.

China-US trade negotiations remain the main line of close attention in the market. Trump has announced that the 90-day "pause" of tariffs on a wide range of goods will end on July 8. Trump said that three senior US cabinet officials will meet with Chinese representatives in London on Monday to discuss potential trade agreements. At present, the policy signals from Washington are still full of uncertainty.

Foreign exchange "abnormal logic": good news does not rise, bad news does not fall?

Last week, the global foreign exchange market showed a differentiated trend under the influence of multiple economic data and geopolitical factors. The US dollar index fluctuated in a narrow range, suppressed by the market uncertainty caused by Trump's tariff policy, but the strong US employment data provided some support for the US dollar. The euro and pound recorded weekly gains against the US dollar, thanks to the policy signals of the European Central Bank and the positive impact of the UK avoiding US tariffs. The yen performed relatively weakly, and the US dollar rose against the yen on a weekly basis, reflecting market concerns about Japan's economic prospects. The Canadian dollar fluctuated downward against the US dollar, and the Bank of Canada's concerns about US trade policy dragged down the performance of the Canadian dollar.

Trump's newly implemented 50% steel and aluminum tariffs and his continued criticism of Federal Reserve Chairman Powell may continue to affect the trend of the US dollar. This week, the US May CPI data will be the focus. If the CPI data shows rising inflation, it may push the US dollar to further strengthen. Although the long-term bearish view on the US dollar is dominant, the strong performance of employment and wage data in the short term has reversed some short positions.

In the short term, the May non-agricultural data provided some support to the market, and the US dollar index still has room to rise above the 99 mark, but it is necessary to be wary of the potential suppression of the US dollar by risk aversion caused by tariff rhetoric. In the short term, it may continue to be affected by the trend of inflation expectations.

In the medium and long term, the resilience of the labor market provides the Fed with more policy space. Investors need to pay close attention to inflation data (such as CPI and PCE) in the coming weeks and the statements of Fed officials to judge the further direction of monetary policy. Tariff rhetoric and geopolitical risks remain uncertain factors in the market and may continue to push up demand for safe-haven assets in the short term.

Overall, the May non-farm payrolls report did not bring major surprises at the data level. Institutional and retail views show that the market still has differences in its judgment on the Fed's policies and economic prospects. Traders need to remain flexible and pay attention to subsequent data and policy signals to cope with potential market fluctuations.

Gold prices closed higher on a weekly basis, but there are concerns: Will CPI become a "life-saving straw" for bulls next week?

Last week, the gold market fluctuated more under the interweaving of multiple factors. Spot gold prices fell more than 1% on Friday due to strong US employment data, but still recorded a 0.8% increase for the week, showing the game between safe-haven demand and a stronger dollar. Trade uncertainty caused by Trump's tariff policy, continued gold holdings by global central banks, and geopolitical tensions provide support for gold prices, while the solid US employment data pushed up US Treasury yields, weakened the Fed's expectations of rate cuts, and put pressure on gold prices.

This week, US CPI data and trade negotiation progress will be the focus of the market.

US employment data met expectations, suggesting that the Fed may postpone rate cuts. Financial markets expect rate cuts as early as September and only two rate cuts in 2025. This pushed up 10-year US Treasury yields and put pressure on gold prices.

Trade policy and geopolitical situation. Trump's tariff policy continues to dominate market sentiment. Market uncertainty about the Trump administration's steel and aluminum tariffs and fiscal policies has driven global central banks to increase their gold holdings. The People's Bank of China increased its gold holdings by 60,000 ounces in May, increasing its holdings for seven consecutive months, with a total scale of 73.83 million ounces. Gold reserves accounted for 6.7% of foreign exchange reserves, which is still lower than the level of major countries.

Looking ahead to this week, the US CPI data for May will be key. If inflationary pressure rises, it may further push up US bond yields and put pressure on gold prices; if the data is soft, it may rekindle expectations of interest rate cuts, which is good for gold. In addition, the progress of trade negotiations and geopolitical risks such as the conflict between Russia and Ukraine will continue to affect market sentiment.

Technically, the price of gold is in a stalemate near the middle track, and we need to pay close attention to the gains and losses of $3,300.

Crude oil soared 6% last week, and the trend showed a "golden cross"! Is this rebound coming for real?

After two consecutive weeks of decline, the crude oil market ushered in a strong rebound last week. The two major benchmark crude oils, Brent crude oil and WTI crude oil, both achieved significant increases, with weekly closing increases of 6.30% and 6.55% respectively, injecting positive signals into the market.

Last week, oil prices showed a volatile upward pattern. After stabilizing at the low level at the beginning of the week, driven by multiple positive factors, the daily increase on Friday exceeded $1, which ultimately laid the foundation for a weekly increase.

The US employment report boosted expectations of interest rate cuts. The employment data was "just right", neither too hot nor too cold, but it strengthened the possibility of the Fed's interest rate cut. The rising expectation of interest rate cuts is seen as a potential positive for the crude oil market, as loose policies may stimulate economic recovery and boost oil demand.

The resumption of trade negotiations improves demand prospects. As the world's two largest economies, the easing of trade relations has boosted the market's optimism about global economic growth, indirectly pushing up expectations for crude oil demand. It should be noted that the uncertainty of the US trade policy (such as tariff measures) still triggers market risk aversion fluctuations, but the negotiation process itself provides support for oil prices.

The rebound in the crude oil market last week set the tone for the second half of the year, but investors need to be wary of the return of volatility. Against the backdrop of supply and demand rebalancing and policy games, oil prices may continue to fluctuate upward in the short term, while the medium- and long-term trends still need to observe the quality of global economic recovery and the evolution of geopolitical risks. Market participants should maintain flexible strategies and closely track core variables to seize structural opportunities.

Conclusion:

The current market focus is shifting to reassessing the trend of US inflation, policy direction and structural risks. The US CPI data for May, which will be released this week, will become an important basis for the Fed's next interest rate decision, and will affect the direction of the expected rate cut within the year. At the same time, the Trump administration's erratic policy operations have caused the market to form a "TACO transaction" model. Although volatility has fallen, uncertainty is still accumulating. In addition, the US fiscal stimulus bill is intertwined with debt pressure, and Europe is also facing a rebalancing of fiscal and market trust. In the current environment, we need to pay close attention to the far-reaching impact of macro data-driven and policy style changes on asset allocation and risk pricing.

Overall, the tension between the fiscal path and debt constraints of major European and American economies is becoming an important variable affecting the cross-border risk premium structure. Analysts believe that the expansion of debt scale and the rigidity of long-term interest rates will have a profound impact on asset allocation and return expectations.

Overview of important overseas economic events and matters this week:

Monday (June 09): Japan's first quarter seasonally adjusted real GDP quarterly rate revised value (%); Eurozone June Sentix Investor Confidence Index; US April wholesale inventory monthly rate final value (%); US May New York Fed 1-year inflation expectations (%)

Tuesday (June 10): UK April unemployment rate - by ILO standard (%); UK April three-month average wage annual rate including bonuses (%)

Wednesday (June 11): US May CPI annual rate not seasonally adjusted (%); US May core CPI annual rate not seasonally adjusted (%); US EIA crude oil inventory change for the week ending June 6 (10,000 barrels); US June IPSOS main consumer sentiment index PCSI; EIA releases monthly short-term energy outlook report

Thursday (June 12): Japan's second quarter BSI large manufacturing confidence index; UK April GDP monthly rate (%); UK April industrial output monthly rate (%); US initial jobless claims for the week ending June 7 (10,000); US May PPI annual rate (%); US May core PPI annual rate (%)

Friday (June 13): Eurozone April seasonally adjusted trade account (billion euros); Canada April manufacturing sales monthly rate (%); US June University of Michigan consumer confidence index preliminary value; Federal Reserve releases US quarterly financial account report

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