Rate Cut Expectations Rise, Gold Prices Rebound

Market Overview

On Thursday, dovish signals from the Federal Reserve fueled expectations of interest rate cuts, sending the U.S. Dollar Index lower. The index fell 0.611% to close at 99.29. Treasury yields declined as well. Benefiting from dollar weakness and dip-buying interest, spot gold saw a sharp rebound, reaching a high of $3,367.32 per ounce before settling 1.84% higher at $3,348.73. Spot silver hovered just above the $33 mark and closed marginally higher at $33.59, up 0.02%. In the energy market, crude oil prices edged up amid a complex mix of macroeconomic uncertainty and geopolitical tensions. WTI briefly broke above the $63 level before closing 0.76% higher at $62.62 per barrel. Brent crude rose 0.63% to $65.66 per barrel.

What to Watch

● Labor Market Deterioration Could Accelerate Rate Cuts

If the Trump administration reintroduces aggressive tariff policies, businesses may begin to lay off workers. A notable uptick in unemployment could prompt the Fed to cut rates further and faster. Fed Governor Christopher Waller emphasized that the inflationary effects of tariffs would likely be temporary. His remarks boosted U.S. equities on Thursday. According to the Fed's unofficial communications channel, the key difference between Chair Powell and Waller lies in Wallers willingness to overlook tariff-driven price increases if labor market conditions worsen—something Powell has yet to explicitly acknowledge.

● Weak Demand in 7-Year Treasury Auction Signals Foreign Pullback

The latest 7-year U.S. Treasury auction saw tepid demand, particularly from foreign buyers. Indirect bids, which represent overseas interest, accounted for only 59.3% of total allotment—down from 61.2% in March and the lowest level since December 2021. This marked the second consecutive tail auction for the 7-year tenor. Analysts warn that if foreign demand continues to erode, the Fed may have no choice but to intervene and begin monetizing the debt.

Key Events to Watch (GMT+8)

• 14:00 – UK March Retail Sales (MoM, seasonally adjusted)

• 20:30 – Canada February Retail Sales (MoM)

• 22:00 – U.S. April Final University of Michigan Consumer Sentiment Index

U.S. April Final One-Year Inflation Expectations