The Canadian Dollar is stable against the USD, currently trading at the middle of this week’s range. Recent US data has affected yield spreads and Fed policy, while oil prices are stabilizing the USD/CAD estimate at 1.3970. Next week, Canada will release limited data, including international securities transactions and CPI for March. Bank of Canada Governor Macklem will speak on Thursday at the G7 meeting in Banff.

Technical Analysis

The USD/CAD has resistance at 1.4000 and support around 1.3900. The RSI levels are neutral, signaling a loss of momentum. The 200-day moving average is at 1.4021, an important level to watch. Recent movements have centered around the 61.8% retracement of the rally from September to February. Investors should be aware of risks and uncertainties and should do their own research before making decisions. Currently, the market is stable, with buyers and sellers both hesitant to take charge. The Canadian Dollar has remained steady, influenced more by external factors than domestic events. It’s a slow-moving situation rather than one filled with excitement. Interest rate differences continue to guide market movements. Recent US economic indicators have sparked debate about the Fed’s next actions. Inflation data in the US has shifted expectations, which affects where participants believe interest rates should be. These fluctuations influence the Canadian Dollar’s value, particularly in USD pairs like USD/CAD. Energy markets have also provided stability. Oil prices have stayed consistent, supporting the hold around 1.3970. For Canada, where crude oil exports are vital, this is beneficial. It offers a temporary cushion for the exchange rate, easing downward pressure for now.

Upcoming Data and Trends

Looking ahead, Canadian data is sparse but important. Key releases include March’s international securities flows and April’s CPI. While these may not drastically change the landscape, they will add some context to otherwise quiet domestic conditions. Governor Macklem’s comments at the G7 could spark reactions if he suggests changes to interest rates or inflation targets. His recent message has been cautious, so any shift will be noteworthy. Technically, USD/CAD is in a holding pattern. Resistance at 1.4000 is strong, and support at 1.3900 keeps the market stable for now. The RSI is neutral, indicating the market is neither overbought nor oversold, matching the price movement’s lack of direction. The 200-day moving average at 1.4021 is a clear technical benchmark, and until the price clearly breaks above or below it, momentum is unlikely to shift. The pair is currently near the 61.8% retracement from the significant move between September and February. Such levels often act as pivot points, helping traders gauge where trends may resume or falter. In this environment of stability and limited catalysts, we’ll closely monitor for breakouts but avoid making strong commitments until we have confirmation. Risk-reward setups seem to favor neutral or mean-reversion strategies over directional trends. Unless unexpected news arises—whether from the US or Canadian policies—it’s wise to focus on sentiment around US yields and oil prices. Price watchers and crossover traders should note the first close above 1.4021 or below 1.3900 as a potential trigger, depending on trading volume. Until then, it may be best to maintain a light stance. Create your live VT Markets account and start trading now.

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Raphael Bostic, a policymaker at the Federal Reserve, expects only one interest rate cut this year due to ongoing economic uncertainty. He predicts economic growth will be between 0.5% and 1% and does not foresee a recession. Bostic points out that inflation pressures, particularly from tariffs, may lead to additional actions. He believes that the recent easing of US-China trade tensions slightly changes his outlook.

A Hawkish Stance

Bostic has generally held a hawkish view but is not a voting member this year. Market participants may need to reassess inflation risks and expectations regarding rate cuts. His statement reminds us that, despite many expecting several rate cuts, the central bank is not fully confident that inflation is under control. With expected growth staying below long-term averages and no recession in sight, Bostic keeps the Fed cautious, suggesting that policymakers are closely monitoring price data and may delay further action longer than markets anticipate. The ongoing concern about price pressures from tariffs adds complexity. Even as US-China tensions ease, the impact of earlier measures could still affect inflation. This creates persistent inflation conditions that temporary geopolitical improvements may not resolve.

Conditional Rate Cut Projection

What’s notable is Bostic’s expectation of just one rate cut in 2024, which is conditional. It depends on upcoming reports and whether current efforts successfully reduce core inflation. This means rates may stay high longer, with policies relying more on actual data than on sentiment. As we look ahead, we should approach rate cut assumptions carefully. Betting on aggressive cuts based solely on past trends exposes us to risk, especially if inflation indicators don’t drop enough or if growth data improves. Markets might need to take things slowly for a while. For example, if job figures remain strong or if consumer spending holds steady, policymakers could be patient, arguing that household demand hasn’t weakened as needed. Strong economic data might quickly undermine expectations for future rate cuts. Although Bostic isn’t voting now, his comments reflect broader central bank thinking, especially since his views contrast sharply with current market expectations. This prompts us to evaluate whether those assumptions are still valid. In the coming weeks, we should avoid making trades based only on hopes for quicker rate cuts. Instead, we should seek clearer confirmation across a range of data, including employment, consumer behavior, and supply metrics. If these indicators all decline simultaneously, central bank support may come sooner. Until then, the focus should be on the data. Create your live VT Markets account and start trading now.

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The Pound Sterling is rising against the US Dollar, reaching around 1.3330 during the European session. This follows weaker-than-expected US Producer Price Index (PPI) data and a small increase in Retail Sales, which caused the US Dollar Index to drop to about 100.50. The US PPI fell due to a slowdown in sectors like hospitality, largely affected by decreased tourism. Retail Sales only grew by 0.1%, a significant drop from last month’s increase of 1.5%, influenced by anticipated tariff changes. These factors have led to a decline in 10-year US Treasury Yields from a peak of 4.55% to roughly 4.40%.

US Federal Reserve Expectations

Despite this, traders still expect steady interest rates from the US Federal Reserve, as indicated by the CME FedWatch tool. Attention now turns to the upcoming US Consumer Sentiment Index and inflation expectations data. In the UK, the Pound Sterling weakened against other currencies after positive GDP data was released, except against the US Dollar. This growth suggests that the Bank of England may hold interest rates steady. Traders are looking forward to the UK CPI data for more insight into inflation and future rate decisions. The technical picture shows the GBP/USD pair is above the 20-day Exponential Moving Average (EMA), with the Relative Strength Index (RSI) between 40 and 60. The pair faces resistance at 1.3445 and has support at the key level of 1.3000. This recent rise in the pound nearing 1.3330 reflects more than just a dip in the dollar’s strength. The disappointing PPI data from the US, primarily due to weak demand in hospitality and retail sectors, has shifted market sentiment. Retail sales growth only reached 0.1%, far from last month’s surprising 1.5% rise, leading to low confidence. These weaker data points suggest that consumers are adapting to expected changes in foreign trade policy, particularly regarding tariffs. As a result, the 10-year Treasury yield has dropped from its recent highs, now around 4.40%. This shift indicates that even with some economic strength, the Fed may not tighten rates further. However, futures markets have not yet factored in any upcoming rate cuts, according to the CME FedWatch tool. The prevailing view remains that rates will stay steady for now.

Sterling and GDP Data

Domestically, the gains in the Pound haven’t been uniform. The recent positive GDP data provided a small boost against other currencies, but its strength against the dollar relies more on dollar weakness than a clear endorsement of UK growth. Still, the improving economy suggests that the Bank of England might not need to act urgently, allowing current interest rates to remain longer than expected. Now, we await the UK CPI data, which is significant. This will show whether inflationary pressure is easing or holding steady, potentially influencing market expectations for interest rates in the coming weeks. Currently, expectations for fast action have lessened; unless the CPI results are surprising, rate guidance is likely to remain stable. On the charts, the GBP/USD pair stays relatively stable above the 20-day EMA. The RSI, between 40 and 60, suggests no major buying or selling pressure, indicating a need for a clearer fundamental catalyst for short-term price movements. Immediate resistance is at 1.3445; without breaking that level, any upward movements may lack momentum. On the flip side, the psychological level of 1.3000 offers solid support for traders to assess reversal or further downside potential. In derivative markets, pricing has become more sensitive to short-term data shocks. With US Consumer Sentiment and inflation expectations data coming soon, we might see some adjustments in rate predictions—possibly even slight downward shifts—that could provide temporary support. Positioning should remain balanced unless there’s a significant change in rate statements or surprises in the upcoming data. Right now, directional confidence is data-sensitive and slightly influenced by the recent dollar weakness rather than inherent strength in Sterling. Create your live VT Markets account and start trading now.

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Italy’s final Consumer Price Index (CPI) for April shows a year-on-year increase of 1.9%. This is slightly lower than the initial estimate of 2.0%. Last month also recorded a 1.9% rise. The Harmonised Index of Consumer Prices (HICP) shows a 2.0% increase, down from the preliminary 2.1%, with last month’s figure also at 2.1%. There was a slight delay in the data release by Istat. Core annual inflation has jumped to 2.1%, up from March’s 1.7%. This increase is partly due to a significant rise in services inflation, which went up to 3.0% from 2.5% the previous month. This data suggests that inflation in Italy is not declining as expected. The overall price growth measured by the CPI remained steady compared to March’s figure, despite a small downward revision. Importantly, core inflation is on the rise. When we exclude volatile items like energy and unprocessed food, the underlying price trends show an upward movement. The rise in core inflation to 2.1% from 1.7% is important to note. Much of this increase results from stronger price growth in services, which now stand at 3.0%. In economies dependent on services, this trend often indicates persistent inflation rather than a quick fade. This observation is vital for strategies that consider price trends over the medium term. Higher services inflation may lead to improved wage growth or resilient demand, influencing expectations for changes in monetary policy. Looking at the Harmonised Index of Consumer Prices, the small adjustment from 2.1% to 2.0% may seem minor, but when combined with steady core inflation, it tells a more complicated story. It suggests that while overall inflation may be stabilizing, underlying pressures are building. The difference between total inflation and core measures could create new volatility, especially concerning rate-sensitive assets. Let’s analyze this further. Core metrics are crucial for central banks when setting policies. Rising core growth increases the chances of a more restrictive response. This is important because if core inflation continues to climb, it could misalign market expectations with central bank guidance. Therefore, it’s essential to prepare for changes in sentiment based on improving or worsening core measures, not solely on changes in the headline figure. The delay in Istat’s data release may not have an immediate impact on market reactions but highlights how data lags can distort balance and timing. Markets rely on consistent data, and reporting delays can disrupt that rhythm. While this may not trigger immediate changes, it could influence short-term strategies, especially when the calendar is busy. As we look ahead, these revised numbers suggest firmer inflation expectations unless immediate disinflationary factors emerge. Current assumptions about interest rate paths, especially those based on falling inflation by spring, could be too aggressive. This may leave some future exposures vulnerable unless adjustments are made quickly.

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OPEC is sticking to its prediction that oil demand will rise by 1.3 million barrels per day this year and in the next. However, trade conflicts pose risks to demand, making these forecasts something to approach with caution. Additionally, OPEC has reduced its expectations for oil supply outside the OPEC+ group. This decline is due to lower oil prices, which make it harder for US oil production to grow.

Impact Of Supply Deficit

OPEC warns that this situation may lead to a supply shortage, giving OPEC+ the chance to boost its oil production. Still, there is skepticism about the optimistic outlook for demand. The information includes predictions that come with risks and uncertainties. It shouldn’t be taken as a suggestion to buy or sell assets without careful personal research. There is no guarantee that this information will be accurate or timely, and individuals bear the responsibility for any investment risks, including the possibility of losing everything. Investing in open markets carries significant risk and can cause emotional stress.

Challenges In Forecasts

OPEC’s recent statement remains hopeful regarding oil demand growth, projecting an increase of 1.3 million barrels per day this year and next. This suggests expectations of stable or improving economic activity in some regions. However, ongoing trade tensions complicate this situation. It’s important to understand this is a cautiously optimistic forecast, depending on whether current global economic tensions do not worsen significantly. At the same time, forecasts for oil supply outside OPEC+ are being lowered, particularly for US production. Lower prices are limiting investments in new oil sources, leading companies to scale back on drilling, especially where projects are no longer profitable. Major US manufacturers are even reducing their previously robust output. This combination points to a potential tightening in supply soon. A decrease in production outside the OPEC+ group, along with steady or slightly rising demand, could lead to temporary undersupply in the markets. This scenario might prompt OPEC+ to modify its production limits to stabilize prices or maintain market share. But doubts remain about whether the demand estimates are too high, possibly overlooking factors like rising global interest rates, slower economic growth in China, and uncertainties regarding energy transition goals. For those trading in energy futures and options, relying too much on high demand figures creates a skewed risk profile. This means that what seems like a safe bet on rising prices could be disrupted by unexpected drops in demand. These risks have real financial implications, impacting capital flows and pricing pressures as market positions adjust. We’ve also seen greater price volatility in long-term oil options, especially with Brent contracts. This signals a disconnect between demand-supply forecasts and actual economic data. The increasing implied volatility shows that traders are becoming more defensive. Mixed signals are appearing across commodity-related stocks. Some major energy companies are reducing their capital spending forecasts, while others continue to invest in anticipation of a stronger price floor later this year. Such differences indicate a lack of consensus, making it challenging for traders to maintain directional positions without hedging against potential downturns. Our focus isn’t just on predicting whether oil prices will rise or fall; it’s about adjusting our probability assessments carefully in the coming weeks. Slow changes in these probabilities can become liabilities. This is a moment of low conviction, where being wrong can be costly. Careful position sizing is essential, as being overly confident, whether bullish or bearish, risks increasing volatility drawdowns. Even if OPEC decides to raise its output, timing will be crucial. Delays or miscommunication could lead to sudden price changes. This has happened in the past, where order fulfillment and compliance do not always align. Current attention should shift to inventory levels, shipping data, and drilling counts from non-OPEC+ suppliers. These concrete indicators will shape expectations more effectively than verbal statements and will serve as early warnings for shifts in supply. We expect that major players are already increasing their hedging ratios, particularly in sectors vulnerable to these changes. Notably, it’s the first time in several quarters that realized volatility in energy commodities has started to exceed implied volatility, albeit slightly. This calls for close monitoring, as it indicates that the actual market movements are outpacing expectations. This gap will likely influence the timing of rehedging and affect spreads across energy options. Clear discrepancies are rare, but a mismatch between predicted outcomes and actual production or consumption—especially from major importing countries—will lead to adjustments in the derivatives market. Those able to adapt to these discrepancies will have the advantage over those fixed on headline projections alone. Create your live VT Markets account and start trading now.

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State-owned media believes that 90 days may not be enough time to achieve significant results. They emphasize the need for ongoing collaboration beyond this timeframe and express hope that the outcomes of recent talks will prompt the US to compromise more with China. The proposed 90-day period seems to be more of a guideline than a fixed deadline. It allows for extensions if talks are making headway. Any extension will depend on the patience of the US, especially if President Trump remains understanding towards China.

Beijing’s Negotiation Strategy

Experts think that Beijing may take its time before revealing how it plans to meet its commitments. There might be little clarity regarding non-tariff barriers as both nations continue their discussions. Even if purchase agreements are reached, they might not indicate real progress. There is concern that history may repeat itself with the unmet promises from the previous Phase One trade deal. This article looks at the likelihood of progress in US-China discussions, focusing primarily on trade relations. It suggests that the 90-day talk period should be seen as a flexible checkpoint rather than a strict deadline, providing room for delays if negotiations appear productive. This reflects a sense of realism rather than optimism, as it acknowledges that such discussions don’t adhere to exact timeframes. Commentators from state-linked media believe more time is necessary to achieve useful results, resulting in a more cautious outlook. Implicitly, there’s a recognition that major outcomes may not emerge as grand agreements or immediate actions. Instead, the focus is on small gestures and intentions, which complicates understanding the timeline.

Market Behavior Implications

There’s still uncertainty about how policy pledges will be implemented, especially regarding non-tariff barriers. These barriers often present more challenges than tariffs, as they involve regulations and standards that are difficult to measure. Both sides appear reserved, reluctant to reveal their complete stances early on. Market participants should expect some ambiguity in the near future. Previous unfulfilled promises, especially related to the earlier Phase One deal, are crucial to highlight. There’s a risk that initial signs of agreement, like lowered tariffs or bulk orders, might be misinterpreted as resolutions. Such cues have misled markets before, so a more cautious interpretation of news is reasonable this time. What’s more important for us is not just confirming agreements, but recognizing what remains unspoken. Delays in sharing specifics, particularly regarding non-tariff policies or enforcement, can cause fluctuating prices and changes in implied volatility. We should closely monitor short-term implied volatility in key currency pairs and commodities, especially those dependent on sentiment rather than substance. Situations where sentiment drives market positioning can increase the risk for structured products and calendar spreads. However, we should avoid overreacting based on expected goodwill. The situation indicates that any pause or slowdown in new negotiations could happen quickly, especially if political pressures grow elsewhere. In such cases, short positions might become riskier than they seem. Reviewing correlated positions, particularly those influenced by sentiment, could minimize unforeseen challenges tied to abrupt shifts in narrative. Additionally, no new compliance or verification protocols have been agreed upon. Without these, any future agreements remain mostly verbal. This uncertainty may not show up immediately in macro indicators but is vital when pricing quarterly volatility or structuring options like iron condors or risk reversals. Often, quieter periods with less concrete news but softer postures provide the best opportunities for adjusting risk rebalancing. Revisiting the overall message, a reluctance to commit to a concrete timeline remains evident. If this hesitation continues, it could delay improvements in bilateral trade flows or licensing changes. This affects trade volumes and impacts operational confidence for firms linked to cross-listed stock or sector ETFs. Those invested through American Depository Receipts (ADRs) or related to manufacturing or base materials may want to reevaluate their timing strategies in light of potential regulatory issues. While we keep an eye on public reactions, it’s important to note that lengthy discussions without substance typically cool implied rates rather than directly influence underlying exposure. This could lead to flatter long-term spreads, despite short-term implied volatility remaining constrained. We believe this is a scenario worth preparing for, if not actively positioning against already. Rapid changes in sentiment can be disruptive, while slow progress accompanied by optimistic language requires just as much discipline. Create your live VT Markets account and start trading now.

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Warren Buffett’s Berkshire Hathaway has shared its 13F filing for Q1 2025, revealing trends in stock management. The company is reducing its financial stock holdings, increasing investments in consumer businesses, and remaining cautious with its cash reserves. While no new stocks were added, Berkshire raised its stakes in Pool Corporation and Constellation Brands. The firm completely exited Citigroup and Nu Holdings, and reduced its positions in banks like Bank of America and Capital One. Berkshire maintained its largest holding, Apple, for the second quarter, valued at $66.6 billion. This confirms Apple’s status as the biggest asset in the portfolio. A confidential filing with the SEC indicates a new investment in the commercial or industrial sector worth between $1 billion and $2 billion, following Berkshire’s trend of quietly building its stakes. Berkshire’s cash reserves and Treasury holdings hit a record high of $348 billion. This amount earns passive income while waiting for the right investment opportunities. The firm increased its investments in Pool Corporation and Constellation Brands, focusing on consumer and housing-related sectors with strong demand. Berkshire continues to be cautious with financial stocks, reducing its banking investments due to perceived risks. The recent 13F disclosure provides insight into Berkshire’s current investment strategies. Financial stocks, which have been a significant part of the portfolio, are now being reduced. The cuts in large banks like Bank of America and Capital One appear to reflect a broader view on the sector’s risk due to tighter credit conditions and earnings pressures. Berkshire no longer holds Citigroup and Nu Holdings, showing no interest in those models amid potential challenges. Instead, the focus is shifting to areas with more stable demand. Investments in Pool Corporation and Constellation Brands highlight a strategy emphasizing companies with pricing power and consistent cash flows. It’s important to note that no new public equity positions have been created, suggesting that Berkshire is being patient. With $348 billion in cash and Treasuries, this reserve is the highest it has ever been. Income from these assets adds stability, indicating that Berkshire values flexibility over urgency. After years of building reserves, the firm is cautious about new expenditures. Apple’s unchanged position, still the largest holding, should not be seen as favoritism. Instead, it shows confidence in its strong earnings and long-term relevance. The valuation concerns don’t diminish Apple’s importance as a core asset in the larger portfolio. The confidential filing hints at future activity. Berkshire might be planning an investment worth $1 billion to $2 billion in a commercial or industrial company, as filed under confidentiality with the SEC. This suggests we may see a new position announced in the upcoming quarter due to a careful accumulation strategy. High cash levels, no interest in new financial stocks, and targeted investments in defensive consumer products suggest a selective investment environment. There is no overall retreat, but also no aggressive risk-taking. For those involved in derivatives, this indicates that stocks tied to large-cap financials and housing could require more scrutiny. We could see a shift in options volume towards consumer stocks where Berkshire is increasing its holdings, while banks might experience less activity as major long positions step back. Short-term trading should not be mistaken for long-term commitment. Portfolio managers appear to be fine-tuning their positions while allowing a few key themes to persist. It would be unwise to assume this strategy applies broadly, especially given the cash reserves, which show that selectivity is not just preferred but necessary.

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Bitcoin futures analysis indicates a bullish outlook above 103,920 and a bearish view below 103,450. Over the past 3.5 days, Bitcoin has stayed within a tight range, suggesting a temporary balance. This analysis uses tradeCompass methodology to help traders spot key levels. As of May 16, 2025, Bitcoin futures are in a four-day consolidation phase. The value area high (VAH) is 104,360, while the value area low (VAL) is 103,550. The volume-weighted average price (VWAP) from May 15 is noted at 103,920, and the point of control (POC) is just below the VWAP, highlighting important price points for Bitcoin today. The 103,920 level is crucial for market sentiment; crossing it suggests bullishness, while dropping below 103,450 signals bearishness. The bullish range spans from 103,920 to 103,950, and the bearish trigger is below 103,450. Bullish targets include 104,590, 105,000, and 106,165, aiming for new all-time highs. Bearish targets are set at 103,185, 102,700, and the notable 100,000 mark. Traders should exercise caution in a high-inertia market and manage risks, especially with CME Bitcoin futures over the weekend. TradeCompass helps traders make decisions by identifying thresholds based on volume profile and order flow data. It’s essential to understand the market to improve trade execution, particularly around the 103,920 pivot zone. The price activity has been tight, indicating the market is hesitating. When Bitcoin futures stay within a narrow band, it often means liquidity is building up for a stronger move. Acting too soon could lead to higher risks with lower rewards. The range between 103,920 and 103,450 holds significance—not for its lack of movement but for its potential impact. The period from Wednesday to Friday shows textbook compression. The price’s repeated rejection of levels above 104,360 or below 103,550 suggests the market sees fair value between these points, with VWAP currently acting as a reference anchor. The VWAP figure of 103,920 isn’t just a number; it’s a critical dividing line for potential price movement. We use consolidation periods to prepare rather than wait idly. With restricted movement and tight volume data, we focus on aligning risks—tighten stops, scale entries, and be cautious of aggressive trades without a solid structure. This is especially true when futures roll over or major exchanges are closing for the weekend. We rely on volume-profile distinctions to gauge confidence in being on the right side of market zones rather than predicting future moves. Above 103,920, buyers have a clearer action plan. The projected levels from 104,590 to just over 106,000 are based on earlier absorption zones and lack of strong resistance once the initial ceiling is cleared. Rapid moves towards these levels can occur, especially if market makers adjust offers in low liquidity areas. Sustained closes above 103,950, supported by expanding volume and controllable delta, are key indicators. Below 103,450, the market changes direction. The levels around 103,185 and 102,700 show earlier signs of mispricing and failed support attempts. These are where weak long positions typically exit, causing unhedged positions to unwind. If the price drops into this range quickly, the psychological barrier of 100,000 should not be ignored—planning for this scenario is essential. Factors like the point of control sitting slightly below the VWAP help define our approach. Most of the traded volume hasn’t caught up to the current activity midpoint, meaning rotational behavior is still dominant. So far, no single side has overpowered the auction, leading to rare, fast, impulsive moves. In situations like this, we don’t chase constant action. Instead, we analyze volume distributions, monitor where large orders cluster, and prepare for imbalances. When either side takes charge, moves can happen quickly. At that point, it’s not about understanding—it’s about acting on what you already know.

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Gold prices are under pressure, with recent drops not attracting many buyers. The easing of tariffs between the USA and China has reduced Gold’s appeal as a safe haven, which had been strong during previous trade tensions. The premium for Gold’s safe-haven status is diminishing, and market players are lowering their expectations for US interest rate cuts. This shift stems from reduced recession fears following the US-China trade agreement.

Gold Price Decline Analysis

Current trends suggest that Gold prices might decline further. Unlike previous price drops, there hasn’t been a significant increase in buying interest. As the urgency for defensive assets like Gold fades, investors are moving towards options that offer better immediate returns. With lower expectations for quick US policy changes, the desire to hold non-yielding assets like Gold is decreasing. The allure of Gold as a safe haven is fading, and unless unexpected events arise, its price could continue to drop. Fed Chair Powell’s recent comments and stable inflation data have contributed to this shift. Confidence is growing that a steady approach is being maintained, contrasting with the uncertainty that once benefited Gold. The overall economic outlook looks strong, especially regarding employment and consumer demand.

Monitoring Implied Volatility Changes

Options traders should keep a close eye on changes in implied volatility. Lower tail risk is being priced into macro conditions, and the futures curve shows decreased anxiety. Demand for defensive derivatives seems low. Strategies that relied on aggressive Fed easing may now need adjustments if current economic signals persist. Meanwhile, in Asia, improved relations between Beijing and Washington have reduced geopolitical risks, making long positions in Gold less attractive. There’s currently little sign of catch-up buying during price dips, which has historically provided support. This lack of activity is noteworthy. Technically, the failure to initiate a strong rally after recent price retracements indicates weakened interest. We are observing support zones that previously held steady beginning to weaken. Unless there is a significant change globally, new long positions are unlikely to drive prices higher. In volatility markets, the skew in metals is flattening, indicating reduced demand for upside protection. We have also seen a decline in open interest for longer-dated Gold contracts, which may suggest traders lack conviction in a short-term price bounce and prefer to invest their capital elsewhere, where risks may be more favorable. Equity flows are slowly shifting back into cyclical and tech-heavy sectors, indicating a selective rebuilding of positions in risk-on assets. This trend typically coincides with a decline in safe-haven demand. Unless new risks emerge—such as unrest in the Middle East, mistakes from central banks, or unexpected data releases—the environment is likely to remain unfavorable for Gold price increases. For those focusing on directional strategies, it may now be wise to reduce delta exposure and consider shorter-dated instruments that reflect the current low volatility. The potential for a sharp recovery in Gold prices appears limited while interest rate expectations stay stable, and with the carry not favoring long commodity positions. Create your live VT Markets account and start trading now.

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US-China tariffs have been temporarily lowered, leading to a rush for orders during a 90-day period. This situation mirrors the post-lockdown booms seen in late 2020 when global supply chains struggled to keep up with a sharp rise in shipments. The Global Supply Chain Pressure Index shows these pressures, and their effects may become clearer later in the year. However, this is uncertain due to ongoing negotiations between the US and China, which may continue beyond the initial 90 days.

Supply Chain Inflexibility

Supply chains are less flexible than tariff policies. Changes in tariffs do not immediately fix supply chain issues. This week, ocean freight bookings from China to the US soared by 275% compared to last week, signaling increased pressures. There is concern that easing tariffs could lead to higher prices and inflation, similar to what we witnessed in 2021 and 2022. Central banks previously called these pressures “temporary,” but the timeline is still unclear. It’s crucial to monitor data like the Global Supply Chain Pressure Index to understand how current changes impact supply chains and the economy. We’ve experienced this before. When tariffs are reduced, even briefly, people rush to place orders before the chance ends. The current 90-day relief period has sparked a frenzy reminiscent of the lifting of restrictions in late 2020. Back then, exporters rushed to fill ports with goods amid uncertainty about future policies. This led to backlogs, fluctuating prices, shortages in some areas, and overstocking in others. While the chain didn’t collapse, it did strain. This week’s 275% increase in ocean freight bookings from China isn’t just a minor statistic; it’s an early warning sign. A sudden shift in a single trade route often indicates broader adjustments downstream. Spot rates for shipping are likely to fluctuate, rising sharply on stressed routes, spilling into short-term contracts, and increasing domestic logistics costs as warehouses fill erratically. Powell and his colleagues previously framed supply-driven price pressures as temporary, but we spent months trying to identify when inflation would stabilize. Although the Fed’s language may now be more cautious, the market reactions are quicker and harder to overlook. When importers aggressively stock up during a tariff lull, they often front-load their inventories. If these orders coincide with existing restocking cycles, it can lead to a surge in freight demand while available capacity falls short. Consequently, price increases may resemble disruptions rather than recoveries.

Understanding The Implications

We shouldn’t only focus on headline trade data; the Global Supply Chain Pressure Index provides a clearer picture of logistics and manufacturing tightness. In a context where production schedules are influenced by policy windows rather than actual demand, predicting input costs and shipping prices becomes challenging. The US-China negotiation process will likely extend beyond the 90-day period. However, traders should act on the current situation rather than what may happen in the future. Until a formal agreement is reached, market participants will likely operate as if the tariff window won’t be extended. Practically, this means more consortium bookings, early fulfillment requests, and rising premium freight rates compared to standard schedules. Yellen and her team have always emphasized that core inflation readings rely on forward-looking metrics. In this scenario, weekly freight bookings, snapshots of port congestion, and average lead times carry more significance. Inflation isn’t just about rates; it’s also about how efficiently goods move. If this mobility is strained, price pressures escalate quickly. For those interpreting signals from these disruptions, the focus isn’t merely on the direction of tariffs but on the mismatch between suppliers’ capabilities and importers’ demands. When these diverge too much, hedging activity increases—first in rates tied to shipping capacity, and then affecting energy costs and currency movements. Remember: supply adjustments don’t always keep pace with demand; they often lag. While the initial response may appear strong—high bookings and increased order volumes—we should be cautious about how that strength evolves. Excess inventory in the later quarters can quickly decrease profit margins. We will continue to monitor short-term rates for containerized freight along with regional warehouse capacity indexes. These indicators provide better insights than traditional inflation reports, which often overlook the very fluctuations that can inform trade strategies. Create your live VT Markets account and start trading now.

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