Credit Downgrade Weighs on Markets as Fed Stays Cautious on Rate Cuts

Market Overview

On Monday, the U.S. dollar faced broad pressure following Moody‘s downgrade of the country’s credit outlook. The Dollar Index dropped sharply during the Asian and European sessions, briefly approaching the 100 level before rebounding slightly in U.S. trading hours to close down 0.62% at 100.37. Spot gold surged intraday, testing the $3,250 level multiple times but failed to break through, ending the day up 0.88% at $3,230.40 per ounce. Spot silver rose 0.24% to $32.33 per ounce. Amid signs of a potential breakdown in U.S.-Iran nuclear negotiations, crude oil saw modest gains. WTI crude rebounded in U.S. hours to close 0.3% higher at $62.05 per barrel, while Brent crude edged up 0.05% to $64.93 per barrel.

Key Themes to Watch

● Fed Officials Push Back on Rate Cut Expectations

Fed Vice Chair Philip Jefferson reinforced a cautious stance, indicating that interest rates may stay elevated at least until September. He emphasized the need for patience in monetary adjustments and warned against premature moves that could reignite inflation. Jefferson also noted that Moodys downgrade could negatively impact borrowing costs for U.S. businesses and households.

● Beijing Slams U.S. Over AI Chip Export Rules

Chinas Ministry of Commerce criticized recent U.S. amendments to AI chip export guidelines, stating they still reflect discriminatory practices and distort market principles. Beijing urged Washington to correct its actions and warned of firm countermeasures should U.S. policies continue to harm Chinese interests.

Key Events to Watch

• 22:00 GMT+8: Eurozone May Consumer Confidence Flash

• 01:00 GMT+8 (Next Day): FOMC voter and St. Louis Fed President Musalem speaks on the economic outlook and monetary policy