Hawkish Fed Remarks Boost the Dollar, Weigh on Gold

Market Overview

High-level trade talks between China and the U.S. resumed yesterday, boosting market risk appetite and reducing safe-haven demand. Meanwhile, the Federal Reserve held rates steady as expected, but Chair Jerome Powell struck a hawkish tone, sending the U.S. Dollar Index to its largest one-day gain in nearly two weeks. As a result, gold prices came under pressure. In early Asian trading on Thursday (May 8), spot gold saw a mild rebound, hovering near $3,380.

Going forward, markets will closely watch the outcome of U.S.-China negotiations and any shifts in U.S. policy. Notably, in the final minutes of U.S. trading, reports emerged that the Trump administration may lift restrictions on AI chip exports imposed under President Biden. This news sparked a late-session rally, helping the S&P 500 snap a two-day losing streak.

Key Highlights

● Fed Signals Mixed Economic Outlook

While the Fed maintained its view of a “solid expansion,” underlying statements revealed internal divisions about the outlook. First-quarter GDP weakness was attributed to front-loaded inventory accumulation by businesses and households, signaling the disruptive impact of trade tariffs. Though the Fed reiterated that the labor market remains strong and inflation elevated, it notably flagged simultaneous risks of rising inflation and unemployment—a rare dual concern that underscores policy uncertainty.

Powell emphasized there is “no need to rush,” but with inflationary pressures persisting alongside weakening manufacturing, markets are picking up on potential shifts in the Feds policy stance.

● Biggest Stock Buyback Wave in U.S. History

U.S. corporations are ramping up stock buybacks in response to heightened uncertainty under the Trump administration. According to Deutsche Bank, S&P 500 companies are expected to repurchase a staggering $192 billion worth of shares in the coming months—the highest weekly pace since 1995. With trade and tariff risks looming, firms appear to be favoring buybacks as a strategic use of their cash reserves.

Key Data to Watch (GMT+8)

• 20:30 – U.S. Initial Jobless Claims (week ending May 3)

• 22:00 – U.S. March Wholesale Sales (MoM)

• 23:00 – U.S. NY Fed 1-Year Inflation Expectations (April)