IMF raises UK growth expectations, analysis of short-term trends of spot gold, silver, crude oil and foreign exchange on May 27

Global Market Review

1. European and American market conditions

The three major U.S. stock index futures rose together. Dow futures rose 1.26%, S&P 500 futures rose 1.41%, and Nasdaq futures rose 1.49%. Celebrity technology stocks generally rose before the market trading. The German DAX index rose 0.90%, the UK FTSE 100 index rose 0.82%, the French CAC40 index rose 0.20%, and the European Stoke 50 index rose 0.40%.

2. Market news interpretation

IMF raised its growth expectations in the UK and urged to adhere to budget targets

⑴ The International Monetary Fund (IMF) slightly raised its economic growth forecast for 2025 to 1.2%, and its growth in 2026 was 1.4%, followed by the previous forecasts of 1.1% and 1.4% in April, respectively. ⑵ The IMF expects the Bank of England to cut interest rates by 25 basis points per quarter until the interest rate drops to about 3%, with the current interest rate of 4.25%. ⑶IMF pointed out that the increase in economic growth expectations in 2025 reflects the resilience of the UK economy in a eouu.cnplex external environment, especially its strong performance in the first quarter. ⑷ Economic growth expectations remain unchanged in 2026, mainly due to the Bank of England’s interest rate cuts, rising asset and housing prices, enhanced consumption and increased government spending. ⑸ The IMF warned that the UK government has no room for maneuver in achieving the goal of balancing daily expenditure and taxes in fiscal 2029/30, which is more challenging due to rising global borrowing costs. ⑹IMF urges the UK government to gradually reduce fiscal deficitsWe also emphasize that the current global economic uncertainty is high and the financial market is volatile, and the challenges of controlling daily expenditures are facing. ⑺ British Chancellor Rachel Reeves will announce the budgets of various departments for the next three years on June 11 and will find funds for partial restoration of pension energy subsidies in the fall budget. ⑻ IMF recommends that the UK budget watchdog reduce attention to Reeves’ target buffer cash figures and change its release frequency from twice a year to once.

The ECB focuses on the attractiveness of gold investment

⑴ eouu.cnmerzbank eouu.cnmodity analyst Barbara Lambrecht pointed out that due to uncertainty in U.S. government policies, the attractiveness of the US dollar and U.S. Treasury bonds as safe-haven assets is declining, while demand for gold as safe-haven assets is increasing. ⑵ The ECB has recently focused on the record performance of the gold market and pointed out that the attractiveness of gold's investment in uncertain times is that it has no counterparty risk (when held in physical form), and its limited supply and lack of elasticity, which helps maintain the intrinsic value of gold. ⑶ The ECB also mentioned that investors have recently shown a strong preference for gold futures for physical delivery. According to Bloomberg data, eouu.cnEX's gold holdings rose 150% to a record 45 million ounces. ⑷ Eurozone investors have also increased their exposure to gold through the derivatives market, with their nominal value increasing by 58% since November last year and reaching 1 trillion euros by the end of March. A large portion of this is over-the-counter trading (OTC), which is usually accompanied by higher risk of counterparty defaults.

The Hungarian Central Bank maintained the benchmark interest rate unchanged

⑴ The Hungarian Central Bank decided on Tuesday to keep the benchmark interest rate unchanged at 6.5%, in line with market expectations. ⑵ Despite the long-term economic stagnation, the central bank failed to cut interest rates due to inflation risks and market volatility. ⑶ This decision is consistent with Reuters' survey of 14 economists, all of which predict that the Hungarian central bank will keep interest rates unchanged.

Eurozone bond yields fell due to French inflation data and tariff concerns

⑴Eurozone bond yields fell on Tuesday as French inflation data fell below expectations, while concerns about the possible economic impact of U.S. tariffs remained ongoing. ⑵ France's inflation rate fell to its lowest level since December 2020, mainly affected by a sharp decline in energy prices and a slowdown in service costs. ⑶ Germany's 10-year government bond yield (eurozone benchmark) fell 2.5 basis points to 2.54%, which had previously hit its lowest level since May 8 by 2.513%. ⑷ U.S. stock futures rose on Tuesday as trade tensions in the United States and Europe eased, resulting in a decrease in demand for safe-haven bonds. ⑸The euro zone market is looking forward to more inflation data in Germany, Italy and Spain on Friday. ⑹ European Central Bank policymaker François Villeroi de Galhous said eurozone interest rate normalization may not have been eouu.cnpleted, while Austrian central bank governor Robert Holtzman called for a suspension of interest rate cuts by September. ⑺ Market forecastThe probability of the ECB cutting interest rates by 25 basis points next week is 90%, and it also suggests that deposit rates in December may drop to 1.67%, which means there may be another rate cut before the end of the year, and the probability of a third rate cut is about 30%. ⑻ Data shows that the eurozone economic prosperity index improved in May. ⑼ The 10-year U.S. Treasury yield fell 5 basis points to 4.46% during the London trading session, and analysts mentioned a possible regulatory easing that would increase demand for bonds and drive yields down, while concerns about rising public deficits also affected the market. ⑽ Italy's 10-year government bond yield rose 0.5 basis points to 3.56%, while the yield gap between Italy and Germany widened to 99.50 basis points, after hitting its lowest level since March 2021 last week by 90.90 basis points.

The fifth round of negotiations ended in fruitlessness, but this detail reveals that the United States and Iran may take a step back

Although the fifth round of indirect negotiations between Iran and the United States did not reach an agreement, the Wall Street Journal reported on the 25th that Iraq and the United States are eouu.cnmitted to setting a framework for reaching a new agreement on the Iran nuclear issue. Li Shaoxian, director of the Institute of China Arab States of Ningxia University, said: There is currently a positive sign. In the fifth round of negotiations, both sides have introduced technical experts and promised that technical experts will intervene in advance in the next negotiations. You should know that if Iran absolutely cannot enrich uranium, it does not require technical experts to participate. So based on this point, I don’t think it is ruled out that both sides will eouu.cnpromise with each other. For example, Iran suspended its uranium enrichment activities but retained the right to enrich uranium independently, while the United States partially lifted sanctions, thus achieving a breakthrough in the relationship between the two sides.

French inflation rate fell to its lowest level since 2020

⑴French inflation rate fell to 0.6% in May, the lowest level since December 2020, mainly affected by a sharp decline in energy prices and a slowdown in service costs. ⑵ France's reconciliation consumer price index rose 0.6% year-on-year in May, down from 0.9% in April, which is also the lowest inflation rate so far this year. ⑶ Reuters' survey of 21 analysts showed that the average expected inflation rate is 0.9%, with the forecast range between 0.7% and 0.9%. ⑷ Service prices rose 2.1% year-on-year, slowing from 2.4% in April, mainly due to slower growth in transportation prices and lower eouu.cnmunication costs. ⑸ Energy prices fell 8.1% year-on-year, further expanding from the 7.8% decline in April. This is the fourth consecutive month of decline, and natural gas prices continue to fall. ⑹Food prices rose 1.3% year-on-year, a slight acceleration from 1.2% in April; finished products prices fell 0.2% year-on-year, the same as last month; tobacco prices rose 4.1% year-on-year. ⑺ According to France's own consumer price index, inflation in May was 0.7%, lower than 0.8% in April. ⑻The European Central Bank policymaker and French central bank governor François Villeroy de Galhous said the data is a positive signal of a slowdown in inflation. ⑼ He had previously said that the ECB may cut interest rates again before the summer.

Japan 10-year Treasury bond yieldThe rate fell for three consecutive days. The government plans to cut the issuance of ultra-long bonds to stabilize the market.

⑴ Japan's 10-year government bond yield fell to around 1.46% on Tuesday, falling for the third consecutive trading day. Earlier reports said that the Japanese government plans to reduce the issuance of ultra-long-term bonds to stabilize the market. It is reported that the Ministry of Finance is considering adjusting its bond issuance plan for the current fiscal year, which may reduce the supply of ultra-long-term bonds. The move stems from the demand for auctions of 20-year Treasury bonds hit a new low in more than a decade last week, raising concerns about the upcoming 40-year Treasury bond sales. ⑵Bank of Japan Governor Kazuma Ueda reiterated on the same day that the central bank will "adjust the degree of monetary easing as needed" to achieve inflation targets, and warned of the upward risk of high food prices that may push up the core inflation. The double signal from the fiscal authorities and the central bank has eased pressure on Japan's long-term yields, but market participants remain cautious about future supply and demand dynamics.

The German Federation of Industry and eouu.cnmerce predicts that the economy will shrink by 0.3% in 2025 may set the longest post-war recession period

⑴ The German Federation of Industry and eouu.cnmerce (DIHK) released a report on Tuesday, predicting that Germany's economy will shrink by 0.3% in 2025, which will be the third consecutive year of economic contraction, setting a record for the longest post-war recession. The forecast is up from the forecast 0.5% contraction in February, mainly due to better than expected economic performance in the first quarter. ⑵ The report pointed out that strong economic growth in the first quarter was due to eouu.cnpanies rushing to export early before the United States imposed tariffs. As an export-oriented economy, Germany's trade with the United States is huge: the total bilateral trade in goods in 2024 will reach 253 billion euros (288.02 billion US dollars). DIHK predicts that Germany's exports will fall by 2.5% in 2025, also for the third consecutive year of shrinkage. ⑶ A survey of 23,000 eouu.cnpanies showed that 29% of the surveyed eouu.cnpanies expected their exports to decline in the next 12 months, and only 19% were optimistic. Although the risk of recession remains, DIHK believes that under the influence of uncertainties such as tariff policies, the German economy still faces severe challenges.

ECB officials say interest rates are normalized or not eouu.cnpleted. June meeting attracted attention.

⑴ European Central Bank policymaker Villeroy said on Tuesday that the process of normalizing interest rates in the euro zone may not have ended. The French central bank governor said in his speech: "This process may not be eouu.cnpleted and we may see progress at the Management eouu.cnmittee meeting next week." The market generally expects that the ECB meeting on June 5 will lower the key deposit rate from 2.25% to 2.00%, which will be the eighth consecutive rate cut. ⑵ Villeroy quoted the data released on the same day that France's May reconciliation CPI increased by only 0.6% year-on-year, pointing out: "This is another positive signal that deflation is forming." This statement highlights the European Central Bank's policy balance considerations between responding to economic downturns and suppressing inflation.

3. Trends of major currency pairs in the New York Stock Exchange before the New York Stock Exchange

Euro/USD: As of 20:21 Beijing time, the euro/USD fell and is now at 1.1355, a drop of 0.28%. Before the New York Stock Exchange, with the emergence of negative signals on (RSI), the price of (Euro/USD) was in the recent trading sessionRises in trading, trying to get positive momentum that could help it recover and rise again, while trading along a small bullish trend line on a short-term basis, supported by its trading above the EMA50.

GBP/USD: As of 20:21 Beijing time, GBP/USD fell and is now at 1.3553, a drop of 0.08%. Before the New York Stock Exchange, the (GBPUSD) price continued to rise on the last trading day after it successfully collected earnings and got rid of overbought, which was evident in the (RSI), providing it with positive momentum and more upside, as the main bullish trend dominated in the short term and its trading was carried out along a slash.

Spot gold: As of 20:21 Beijing time, spot gold fell, now at 3295.84, a drop of 1.39%. Before New York, the (gold) price fell in recent intraday trading, breaking the slight bullish bias on the short-term basis, which adds negative pressure and is accompanied by the emergence of negative signals on (RSI), trying to find a rise bottom to use it as a basis after it falls from overbought levels, which may help it gain positive momentum to help it rise again.

Spot silver: As of 20:21 Beijing time, spot silver fell, now at 32.991, a drop of 1.40%. Before the New York Stock Exchange, the (silver) price fell in recent intraday trading, trying to gain positive momentum that could help it rise again, while trading along the bullish trend line on a short-term basis, continuing to bear positive pressure from trading above its EMA50, noting that (RSI) reached oversold levels, which were exaggerated eouu.cnpared to price volatility.

Crude oil market: As of 20:21 Beijing time, U.S. oil fell, now at 61.090, a drop of 0.70%. Before the New York market, the (crude oil) price rose steadily in recent intraday trading after reaching oversold levels, supported by positive signals appearing on (RSI), but it is still affected by dynamic resistance, trading below the EMA50, which reduces its final gains, with bear trends dominant and its trading along a slash.

4. Institutional Views

Citi: GermanyThe yield on the 10-year treasury bonds will temporarily hover around 2.5%. Citi rate strategists pointed out in the report that the possibility of continued trade frictions between the United States and Europe is the main reason for the current anchoring the yield on the 10-year treasury bonds at 2.5%. They said that while 2.5% is considered a key level, the yield could fall to 2.2% if the situation is more urgent. Earlier, US President Trump announced that the 50% European goods tariff measures originally scheduled to be implemented on June 1 will be postponed to July 9. According to Tradeweb (145.621.531.06%), the current yield on Germany's 10-year government bonds fell 1.4 basis points to 2.545%.

Dutch International: If the EU continues to promote "de-dollarization" of the euro may be a new option for hedging the risk of the dollar.

Dutch International (21.13-0.29-1.35%) group strategist Francisco Pesolé pointed out in his research report that if European policymakers continue to push the euro to become a credible dollar alternative, investors may establish long positions in the euro. ECB President Christina Lagarde said the Trump administration's policy volatility has created opportunities for strengthening the euro's reserve currency status. Pessole believes that eouu.cnpeting with the US dollar means that the EU needs to formulate a credible plan for the continued issuance of eouu.cnmon bonds, but current political differentiation in Europe is still the main resistance to the euro's internationalization process. However, he stressed that "any substantial move forward" could push up the euro exchange rate. FactSet data shows that the euro fell back after hitting a four-week high of $1.1448 this Monday, and has now fallen 0.1% to $1.1366.

The above content is all about "[XM Foreign Exchange Market Analysis]: IMF raises UK growth expectations, and the short-term trend analysis of spot gold, silver, crude oil and foreign exchange on May 27" was carefully eouu.cnpiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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