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Hello everyone, today Avatrade Avatrade Ava Foreign Exchange will bring you "[Ava Ava Foreign Exchange Decision Analysis]: Sino-US tariffs suddenly spread and Trump's words are amazing!". Hope it will be helpful to you! The original content is as follows:
The US dollar index maintained a fluctuation of 99.18, Bitcoin remained stable around $94,500, and gold fell back by $3,319 to breathe. China exempts US ethane from 125% tariffs, and US President Trump said China will digest the new impact of tariffs. The weak U.S. labor market and consumer confidence data have boosted market expectations for policy easing.
The U.S. dollar also benefited from buying at the end of the month, and investors sought to rebalance their portfolios after Trump announced a reciprocal tariff policy that led to sharp declines in U.S. stocks and U.S. bonds in April.
A European trader said that the end of the month-end fund flows support the US dollar, with a larger scale than usual.
Trump signed an executive order on Tuesday to ease the pressure on local operators by passing tariff reductions and other credit mechanisms. This move is a policy adjustment made after car dealers actively lobby.
U.S. Treasury Secretary Bescent said on Tuesday that the government has made "substantial progress" in tariff negotiations and predicted that a trade agreement with India and South Korea will be released soon. He noted that talks will be held with at least 17 trading partners in the avaforexcn.coming weeks.
U.S. avaforexcn.commerce Secretary Lutnik revealed that the United States has reached a trade agreement with a certain country and is waiting for the country's approval to announce it.
UBS foreign exchange strategist Vassili Serebriakov said: "This is partly due to factors such as auto parts tariff reductions, and the dollar usually performs better when the stock market has risen recently. But I think these effects should not be over-interpreted, and the dollar buying caused by asset redistribution at the end of the month may also be the main cause."
Asian Market
Australian Treasury Secretary Jim Chalmers said on Wednesday, “The market expects further rate cuts after inflation data are released.
He added: “(I) see nothing in these numbers that will substantially change market expectations.
European Market
The ECB March consumer expectations survey showed that consumers raised inflation views in a relatively cautious way, rather than panic. Overall, the results showed slight inflation concerns on the one hand, but still suppressed the growth prospects on the other.
Medium expected inflation for the next 12 months rose 0.3% to 2.9%, the highest level since April 2024.
Looking forward, expectations for future inflation rose slightly by 0.1% to 2.5%, also hitting a one-year high.
The newly introduced five-year inflation expectations remained stable at 2.1%, indicating that long-term expectations remained relatively stable.
Uncertainty in the inflation outlook remains at its lowest level since January 2022.
In the broader economy, the survey shows that consumer expectations for next year's revenue growth remained at a moderate level of 1.0%, while expected nominal spending growth fell slightly to 3.4%.
Economic growth expectations remain weak, with a steady increase of -1.2% in the next 12 months.
Piero Cipollone, a member of the Executive avaforexcn.committee of the European Central Bank, warned today that the recent surge in trade policy uncertainty poses a significant risk to euro zone growth. In a speech, he highlighted that internal research by the ECB showed that rising uncertainty could reduce euro zone business investment by -1.1% in the first year, while real GDP growth could fall by about -0.2% in 2025-26.
The volatility of financial markets due to increased global trade tensions may further drag on growth. ECB staff estimates that the observed increase in volatility alone can reduce the eurozone GDP by another 0.2% in 2025.
Cipollone stressed that in the medium term, tariffs will have a "clear recession effect" on the two economies that impose and accept restrictions, noting that the exchange rate's ability to "absorb tariff shocks" seems to have weakened.
The ECB's analysis of fragmented scenarios paints a bleaker picture. With moderate decoupling of the East and the West, global output could drop by nearly -2%. In the case of severe decoupling, trade between groups has ceased avaforexcn.completely and global output may plummet as much as -9%.
Economies that rely on trade will suffer the worst losses, with the EU's GDP dropping between -2.4% and -9.5%, depending on the severity. It is worth noting that in the most extreme cases, the United States itself may shrink by nearly -11% if it "imposes additional trade restrictions on Western and neutral economies."
While the impact of trade fragmentation on growth is obvious, the impact of inflation remains uncertain. For the euro zone, economic recessionThe strength of the economy, stronger real interest rates and the appreciation of the euro may create a "deflation: trend" in the short and medium term.
GfK consumer confidence index in Germany rose from -24.3 to -20.6 in May, and performed better than expected to fall to -26.0.
In April, key basic indicators also showed encouraging signs. Revenue expectations rose sharply for the second consecutive month, climbing 7.4 points to 4.3, the highest level since October 2024. Economic expectations have been moderately raised for the third consecutive month. The willingness to save decreased, while the willingness to purchase improved slightly.
NIM consumer expert Rolf Bürkl pointed out that the radical tariffs announced by U.S. President Donald Trump in early April "has not yet had a lasting impact on consumer sentiment in Germany."
In contrast, German consumers seem to be more at ease with their domestic political background, especially the successful end of the alliance negotiations and the impending formation of a new government. Easing of political uncertainty can help alleviate the potential negative impact of external trade tensions.
US Market
The World Federation of Large Enterprises Consumer Confidence Index fell from 93.9 to 86.0 for the fifth consecutive month, lower than the expected 87.1. The current situation index fell slightly by -0.9 points to 113.5. But what is really worrying is the expectation index, which plummeted -12.5 points to 5.4, the lowest level since October 2011. It is well below the 80 threshold, traditionally suggesting a recession may occur next year.
Stephanie Guichard, senior economist at the ConferenceBoard, noted that the deterioration was almost entirely due to weaker expectations for business conditions, employment prospects and future income.
It is particularly worrying that the percentage of consumers who expect job reductions to soar to 32.1% in the next six months, the worst of the Great Recession in 2009. For the first time in five years, expectations for future income outlooks have turned negative, suggesting that economic concerns are now spreading to personal financial concerns.
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