The Michigan Consumer Sentiment Index for the United States was 50.8 in May, below the expected 53.4. This number indicates how confident consumers feel about the economy, which is essential for understanding their spending habits. The EUR/USD currency pair dropped to three-day lows around 1.1130. Even though the U-Mich index fell, the US Dollar strengthened due to rising inflation expectations. GBP/USD fell back to 1.3250 as buying pressure on the US Dollar increased, indicating a stronger dollar. The rise in US consumer inflation expectations, reflected in the U-Mich survey, played a role in this trend.

Gold Prices and US Dollar Movement

Gold prices sharply declined below $3,200 after a recent rally, driven by a recovering US Dollar and reduced geopolitical tensions. The XAU/USD is on track for its largest weekly loss of the year. Ethereum’s price remained steady above $2,500, following a significant rise since April. The adoption of the ETH Pectra upgrade saw a positive market response, with more than 11,000 EIP-7702 authorizations in just a week. President Trump’s recent visit to the Middle East resulted in several key deals aimed at improving US trade relations. This initiative aims to fix trade imbalances and enhance US leadership in defense and technology exports. The lower-than-expected Michigan Consumer Sentiment Index in May, at 50.8 compared to forecasts of 53.4, indicates weaker confidence among households about the economy. Such a low number can lead to more cautious spending habits, impacting retail and service demand in the future. While one might view this drop as a buying opportunity for risk assets, it’s important to understand the inflation expectations also mentioned in the report. These expectations rose even as overall sentiment fell, which quickly shifted trader sentiments towards the dollar. This shift was clearly visible in the EUR/USD and GBP/USD pairs. The euro’s decline to 1.1130, a level it hadn’t seen in three days, might seem surprising given the weak consumer data. However, the bond market was more influenced by inflation expectations than by the sentiment drop. Typically, when inflation expectations rise, traders often buy dollars to hedge across assets, a pattern seen again here. The pound also followed a similar trend, falling to 1.3250 against the dollar due to increased USD buying overall. Concerns about inflation pushed Treasury yields higher this week, drawing investment to dollar-denominated assets. The market adjusted quickly post-survey, reflecting this shift almost immediately.

Gold and Ethereum Price Stability

In the commodities market, gold’s sharp decline below $3,200 marked a shift after weeks of gains. Decreased geopolitical risks, with some easing in regions that usually support safe-haven demand, weakened one of the main drivers for the gold rally. Adding to this was the stronger dollar and short-term technical triggers, resulting in a widespread sell-off. Weekly projections suggest XAU/USD could have its worst performance of the year, as futures traders reduced their risk on long gold positions earlier than expected. Notably, several positions linked to ETF flows reduced exposure in tandem with the stronger dollar. On the other hand, ETH remained stable above $2,500, keeping the gains made since April. The Pectra upgrade, marked by over 11,000 EIP-7702 smart contract authorizations, shows genuine developer confidence. This isn’t just speculative; as network participation grows alongside price, it often leads to medium-term benefits in options open interest. We’re already observing a rise in pre-emptive hedging, with more consistent call spreads being created at higher levels. Shifting to geopolitics, the former administration’s recent Middle East visit is more than just symbolic. The signed agreements are multi-year contracts with built-in delivery timelines. Given the nature of these defense and tech deals, their impact will primarily be seen in industrial stocks and manufacturing indicators over time. From a market perspective, a longer-term view is essential. While these contracts won’t affect next month’s figures, they’re likely to influence second-half positioning, especially in sectors tied to aerospace and advanced computing exports. In the coming weeks, we expect derivatives markets to be driven by events. Traders need to carefully consider short-term setups against macro inputs since the interpretation of recent sentiment data is shifting towards inflation. Timing market entries without monitoring real yields and dollar funding pressures will be challenging. The path may not be straightforward, but the directional signals remain clear when we look beyond daily fluctuations. Create your live VT Markets account and start trading now.

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