Core Insights - The inflation report released today is described as "excellent" but highlights two potential issues that need attention [1] Group 1: Inflation Concerns - Analysts expect an acceleration in commodity price increases in May, particularly in June, due to the implementation of "Liberation Day" tariffs [1] - The year-on-year basis for inflation has become less favorable as inflation has already cooled down by mid-2024 [1] - The April core PCE price index recorded a year-on-year rate of 2.5%, marking the lowest level since March 2021 [1]

Core Viewpoint - Gold prices are expected to decline this week due to the strengthening of the US dollar, despite a year-to-date increase of over 22% [1] Group 1: Market Dynamics - The rise of the US dollar as a safe-haven asset is putting pressure on gold prices [1] - Market focus is shifting towards the upcoming Personal Consumption Expenditures (PCE) data, which is a key inflation indicator favored by the Federal Reserve [1] Group 2: Economic Indicators - The PCE report is anticipated to show a slowdown in price increases for the previous month, potentially allowing for a more accommodative monetary policy from the Federal Reserve [1] - A decrease in interest rates typically enhances the appeal of non-yielding assets like gold [1]

Group 1 - The Bank of England's recent policy stance has turned hawkish, significantly reducing expectations for interest rate cuts, with the probability of a June cut dropping from 50% to 4% [1] - Market expectations have shifted towards a greater likelihood of a rate cut in the third quarter, with current bets for an August cut averaging around 16 basis points (64%) [1] - The upcoming inflation reports may influence market expectations, with a potential downward surprise in inflation data possibly shifting sentiment back towards a dovish outlook [1] Group 2 - The short-term impact of the Bank of England's hawkish stance on the British pound is limited, with market focus shifting to the upcoming UK-EU summit, where Prime Minister Starmer aims to promote closer UK-EU relations [1] - The GBP/USD exchange rate has recently fallen below its 50-day exponential moving average (EMA50), indicating a prevailing bearish correction trend despite reaching oversold levels [1] - Any further upward movement in GBP/USD may be capped around 1.3340, with major resistance expected at 1.3405, while current trading is likely to remain within a range of 1.3220 to 1.3320 [2]