Group 1: USD Outlook - The USD's performance is influenced by the Federal Reserve's data-dependent stance and recent strong economic data, alongside looming trade tariff risks [1][2] - The upcoming employment and inflation data are crucial for the USD, especially after recent JOLTS and ISM manufacturing index data indicated labor market resilience and potential inflation pressure [2][4] - The Senate's approval of a debt bill is expected to increase significant debt, but the bond market's muted reaction suggests that expectations for early Fed easing are cushioning its impact [2] Group 2: Euro Outlook - The European Central Bank (ECB) officials are maintaining a wait-and-see approach, aligning with their hawkish shift in June, as they await further data [7] - The euro's strength has become a focal point, with comments from ECB Vice President Guindos indicating a tolerance limit for the euro/USD at 1.20, but the euro's movement is primarily driven by the USD [8] - If US non-farm data significantly underperforms expectations, the euro/USD may quickly test the 1.20 level [8] Group 3: GBP Outlook - Political uncertainty in the UK is highlighted by the government's cancellation of welfare cuts, which may increase the likelihood of tax hikes in the fall, posing potential challenges to the economic outlook [9] - The UK bond market has reacted calmly, partly due to the Bank of England's Governor Bailey hinting at a potential slowdown in quantitative tightening, providing some support for the GBP [9] - The lack of significant UK data releases in the short term means that market focus will be on upcoming data performance to assess whether the euro/GBP can sustain a breakthrough above the 0.8600 level [10]

Group 1: Macro Economic Indicators - The US Manufacturing PMI unexpectedly dropped to 48.5 in May, indicating a contraction for the third consecutive month, reflecting ongoing weakness in the manufacturing sector [1][12] - The ISM Non-Manufacturing PMI fell to 49.9 in May, marking the first time it has dipped below the expansion threshold in nearly a year, with the new orders index plummeting to 46.4, indicating a significant decline in demand momentum [1][12] - The Leading Economic Index (LEI) decreased by 1.0% to 99.4 in April, the largest monthly decline since March 2023, signaling a continuous reduction in economic growth momentum [4][63] Group 2: Labor Market Dynamics - The total number of job openings rose to 7.39 million in April, primarily driven by demand in professional services and healthcare, while leisure and hospitality sectors saw significant reductions in job openings [2][27] - The unemployment rate slightly increased to 4.24% in May, with the labor force participation rate dropping to 62.4%, indicating that the stability in unemployment is due to workers exiting the labor market rather than an abundance of job opportunities [2][31] - Non-farm payrolls added 139,000 jobs in May, slightly exceeding expectations, but revisions to previous months' data indicated a downward adjustment of 95,000 jobs [2][29] Group 3: Consumer Confidence and Spending - The Consumer Confidence Index surged from 85.7 in April to 98 in May, reflecting improved market sentiment due to easing trade tensions, although over 30% of consumers still opted to increase savings in light of economic uncertainties [3][34] - Retail sales in April showed a modest increase of 0.1%, but core retail sales, which exclude volatile categories, fell by 0.2%, indicating weak consumer demand for discretionary items [3][41] - Business investment sentiment remains cautious, with durable goods orders declining by 6.3% in April, reflecting companies' conservative outlook amid tariff uncertainties [3][41] Group 4: Inflation and Price Pressures - The Consumer Price Index (CPI) rose by 2.3% year-on-year in April, below market expectations, indicating a further easing of price pressures [49][50] - Core CPI maintained a growth rate of 2.8%, with monthly increases of only 0.2%, suggesting limited inflationary pressures in the economy [49][50] - The Producer Price Index (PPI) fell by 0.5% in April, marking the largest monthly decline in five years, indicating deflationary pressures in the production sector [58][59] Group 5: Investment Strategies - The report suggests focusing on traditional safe-haven assets like gold, which can effectively hedge against market volatility [5][74] - High dividend strategies are highlighted as valuable for investors, providing stable cash flow and benefiting from potential interest rate declines [5][74] - Specific ETFs such as SPDR Gold ETF (GLD.US) and high dividend ETFs are recommended for capturing regional market dividends and risk diversification [5][74]

Group 1 - The chief economist of the Bank of England, Huw Pill, emphasized that reliance on data outcomes should be avoided [1] - Pill's statement suggests a need for a more nuanced approach to economic analysis beyond just data interpretation [1] - The comments reflect ongoing discussions about the limitations of data in guiding monetary policy decisions [1]

Core Insights - The Federal Reserve has decided to maintain the federal funds rate in the range of 4.25%-4.50%, marking the third pause in rate hikes this year, reflecting a cautious assessment of the current economic situation [1] - The Fed's "silence" is an active response to multiple challenges, including the potential impact of tariff policies, inflation structure divergence, and regional economic imbalances [1] Inflation Dynamics - The overall inflation rate in the U.S. has dropped to 2.3% year-on-year, the lowest since 2021, primarily driven by falling food prices; however, the core CPI remains stubbornly at 2.8%, exceeding the Fed's 2% target [3] - The persistent high service prices, such as housing and healthcare, versus the cyclical decline in goods prices illustrate a complex inflation landscape [3] Regional Economic Disparities - A Fed internal survey reveals a "dual mirror" of the U.S. economy, with tourism-heavy areas like Las Vegas facing significant declines in hotel occupancy and gaming revenue, while resource-rich regions like Utah and Alaska benefit from high commodity prices [4] - This regional economic imbalance poses significant challenges for Fed policy-making, as traditional reliance on national data may fail to capture local economic conditions [4] Policy Signals and Divergence - There is a notable divide within the Fed regarding economic outlook; some officials emphasize a strong labor market and robust consumer spending, while others warn of declining business confidence and potential "second inflation" due to tariff policies [4] - This contradictory stance reflects the Fed's struggle to balance "data dependence" with "forward guidance" amid evolving economic conditions [4] Market Expectations - Despite the Fed's emphasis on data-driven policy, the market anticipates a greater than 60% probability of a rate cut in September, reflecting historical memories of the Fed's delayed responses [6] - The Fed must be cautious of repeating past mistakes by prematurely easing policies, which could reignite inflation expectations or excessively delaying could tighten financial conditions and trigger a recession [6] The Fed's Dilemma - The Fed faces a "trilemma" involving three constraints: maintaining a tight policy stance due to core inflation, allowing flexibility in response to regional economic disparities and tariff impacts, and ensuring financial stability amid high interest rates [7] - The Fed is likely to continue a "data-driven" strategy, balancing between quantitative tightening and interest rate adjustments to manage inflation and risk [7] Conclusion - The Fed's current inaction is not an endpoint but the beginning of a new policy negotiation phase, emphasizing the need for a dynamic market perspective amid uncertainties in inflation, growth, and policy [8]

Core Viewpoint - The GBP/USD exchange rate is experiencing a volatile pattern, currently at 1.3278 with a daily increase of 0.16%, as market focus shifts to significant economic data releases from the UK and the US, along with remarks from Federal Reserve Chairman Jerome Powell, which may catalyze a breakout from the current consolidation range [1][3]. Economic Data Summary - The UK is set to release its Q1 GDP preliminary value, with market consensus expecting a rebound in quarter-on-quarter growth from 0.1% to 0.6%, while year-on-year growth may slow from 1.5% to 1.2%, indicating uneven domestic demand recovery [3]. - In the US, the focus will be on the April retail sales data and PPI inflation report, with expectations for core PPI year-on-year growth to decline from 3.3% to 3.1%, amid concerns over the impact of tariff policies on imported inflation [3]. Technical Analysis Summary - The GBP/USD is forming a new balance range around the 1.3300 level, with the 50-day EMA acting as a critical support line near 1.3100. The MACD indicator shows a bearish divergence, while the RSI remains above the neutral level of 50, suggesting no clear bias between bulls and bears [4]. - A breakout above the 1.3300-1.3320 resistance zone could lead to a renewed upward trend towards the 1.3400 level, whereas a drop below the 1.3200 support could trigger technical selling, targeting the 1.3100 area [4]. - Market participants are cautiously weighing the differing policy paths of the two economies, with the Bank of England maintaining a restrictive stance but facing rising rate cut expectations due to slowing wage growth and declining service sector inflation [4].

Core Viewpoint - Kevin Warsh, a leading candidate to succeed Jerome Powell as Fed Chair, criticized the Federal Reserve's approach, advocating for a return to a more traditional, low-profile stance in monetary policy and less public communication [1][2] Group 1: Criticism of the Federal Reserve - Warsh argued that the Fed has been too vocal and involved in social issues, failing to hold lawmakers accountable for excessive spending [1] - He emphasized that the Fed should not rely heavily on economic data for decision-making, as such data is often lagging and subject to revisions [1][2] - Warsh suggested that the Fed should operate without the expectation of public applause or scrutiny, indicating a need for a strategic reset to restore credibility [2] Group 2: Historical Context and Comparisons - Warsh referenced a historical Fed motto of "never explain, never apologize," highlighting a time when the Fed maintained a more reserved public presence [2] - He noted that past Fed leaders, like Paul Volcker, often avoided public discussions about the economy, contrasting with the current Fed's more open communication style initiated by Ben Bernanke [2] Group 3: Political Context and Future Implications - Warsh's potential nomination as Fed Chair has been a topic of speculation, especially following Trump's recent comments about Powell's performance and the independence of the Fed [3] - He affirmed the importance of the Fed's operational independence from political pressures while also stating that the Fed should be open to serious questioning when monetary policy outcomes are poor [3]

Monetary Policy Insights - The Federal Reserve maintained the federal funds rate target range at 4.25%-4.50%, aligning with market expectations[5] - The pace of balance sheet reduction (QT Taper) will slow from $25 billion to $5 billion per month starting April 1, while MBS reduction remains at $35 billion per month[5] - The median GDP growth forecast for 2025 was downgraded from 2.1% to 1.7%, and the unemployment rate forecast was adjusted from 4.3% to 4.4%[5] Inflation and Economic Outlook - The PCE inflation forecast for 2025 was revised up from 2.5% to 2.7%, with core PCE inflation rising from 2.5% to 2.8% due to tariff impacts[5] - The Fed's approach has shifted from preemptive rate cuts to a data-dependent strategy, indicating potential delays in response to economic downturns[11] - Current economic indicators, such as a stable unemployment rate at 4.1%, suggest that the economy remains in reasonable condition despite inflation concerns[10] Global Economic Context - The U.S. liquidity situation is tight, with the Fed's total assets reduced to $6.7 trillion, returning to pre-pandemic levels[7] - China's economic challenges are characterized by deflation rather than inflation, with net exports contributing 30% to GDP in 2024, the highest since the 2008 financial crisis[12] - The need for proactive monetary policy adjustments in China is emphasized, particularly in light of potential U.S. economic downturns and tariff impacts[13]