The past week became one of the most important macroeconomic periods of May and largely confirmed the market expectations surrounding US inflation, Federal Reserve policy, and the sensitivity of global assets to American economic data.
The dominant theme remained inflation and its impact on future Fed policy decisions. Markets entered the week expecting Core PCE data and business activity indicators to determine the direction of the US dollar, equities, gold, and crypto markets. This scenario ultimately played out almost exactly as anticipated.
🇺🇸 United States — Inflation and Core PCE Confirmed the Hawkish Scenario
The main expectation of the week was that strong inflation data would reinforce projections for higher interest rates for longer. Following the data releases, this scenario proved accurate.
Core PCE remained elevated, confirming persistent inflationary pressure within the US economy. Additional pressure came from elevated energy prices, rising service-sector costs, and resilient consumer demand.
Federal Reserve minutes also supported the hawkish market narrative. Policymakers maintained a cautious tone regarding future rate cuts and emphasized continued dependence on inflation data.
Meanwhile, stronger-than-expected US manufacturing PMI data supported Treasury yields and strengthened the US dollar, exactly as projected in the original weekly outlook.
🇪🇺 Europe — Economic Weakness Continued Pressuring the Euro
The expectation of continued weakness across the European economy was also confirmed. Eurozone PMI data and industrial activity continued signaling slowing business momentum.
Persistently elevated inflation in several European economies complicated the ECB’s policy outlook. Markets cautiously increased expectations for a more hawkish ECB stance due to ongoing energy risks and unstable inflation conditions.
Throughout the week, the euro remained under pressure against the US dollar while European equity markets underperformed relative to US stocks.
🇨🇳 China and Asia — Slowdown Signals Persisted
The weekly outlook also warned that weakness in the Chinese economy could pressure global risk sentiment and commodity-linked assets. This expectation was confirmed as well.
Chinese economic data showed weaker industrial production and disappointing retail sales, increasing concerns about global demand and the pace of international trade recovery.
At the same time, stronger-than-expected Japanese GDP data helped stabilize sentiment across parts of Asia.
📈 What Happened Across Markets
In Forex markets, the US dollar maintained dominance due to strong US data and rising Treasury yields. The projected USD strength scenario fully materialized.
Equity markets spent most of the week under pressure from elevated interest rates and inflation concerns. However, some recovery emerged late in the week following easing geopolitical tensions and falling oil prices.
Crypto markets once again showed high sensitivity to liquidity conditions and macroeconomic developments. Bitcoin remained highly reactive to US dollar movements and Fed rate expectations, as previously forecast.
Gold retained its role as a safe-haven asset, although rising bond yields limited stronger upside momentum in XAU/USD.
📊 Main Conclusion of the Week
The central forecast of the week proved correct: global financial markets remain critically dependent on US inflation data and Federal Reserve policy.
Investors continue waiting for new interest rate signals, while the US dollar and Treasury market remain the primary sources of global volatility. Expectations for rapid Fed easing still appear unlikely, maintaining pressure on risk assets heading into June.
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