At 2:00 AM Beijing time on Thursday, the US Fed will announce its interest rate decision and the latest Summary of Economic Projections (SEP), followed by a press conference by Fed Chairman Powell at 2:30 AM. The market generally expects the Federal Open Market Committee (FOMC) to maintain interest rates unchanged at 4.25%-4.5%. A recent Reuters survey showed that 103 out of 105 economists surveyed expected rates to remain unchanged, while 2 expected a 25-basis-point interest rate cut. In the same survey, among the 105 economists, 59 predicted that the US Fed would resume interest rate cuts in the next quarter (possibly in September), while 60% of economists expected two interest rate cuts this year, consistent with the median dot plot in March and relatively aligned with money market pricing, which anticipates a 46-basis-point easing by the end of the year. Newsquawk noted in its outlook that, given the ongoing uncertainty about the economic impact of Trump's tariff policies, the US Fed may continue to adopt a "wait-and-see" approach and closely monitor the latest SEP, which will be released alongside the interest rate decision; among which, the 2025 dot plot will be a key focus, currently indicating a 50-basis-point interest rate cut this year. As repeatedly emphasized by the vast majority of committee members this year, the clear message is that there is currently no obvious need for immediate policy adjustments, and adopting a patient approach is the best choice. Future data releases will ultimately bridge the divergent views on inflation and growth/employment. Therefore, as Jefferies Group pointed out, "waiting and seeing" is better than "pre-emptive action." Recent data have shown strong job growth and some easing of inflation, although tariff risks remain a concern, while the market is now also paying extra attention to the potential inflationary impact of the Israel-Iran conflict. Future data releases will be crucial for policy formulation . Policy Statement Officials may no longer say that uncertainty has "further increased," but will simply state that it "remains elevated." Regarding the June FOMC statement, Morgan Stanley believes that, given the high degree of uncertainty and the risks on both sides of the Fed's mandate, the most likely outcome is minimal changes in wording. The statement may still mention the ambiguous impact of net export fluctuations on overall GDP data signals. April's trade data showed a significant reversal in imports due to the reversal of some "front-loading" purchasing behavior. The US Fed will continue to draw signals from final sales to domestic purchasers (GDP minus trade and inventory) and final sales to domestic private purchasers (final sales to domestic purchasers minus government spending). Recently, inflation data have generally fallen short of expectations, which implies that there is a risk for committee members to revise the phrase "inflation remains elevated." In recent months, the YoY change rates for both headline and core inflation have declined slightly, consistent with further inflation declines prior to the tariffs. However, Morgan Stanley believes that the anticipated tariff effects, combined with geopolitical risks in the Middle East and soaring oil prices, may keep the Fed's assessment of inflation unchanged. Morgan Stanley believes that the Fed has not yet reached a consensus on this matter ; if so, the key message in the statement will be that "uncertainty remains high." Summary of Economic Projections The Fed's meeting statement and Powell's remarks at the post-meeting press conference are expected to reiterate a wait-and-see stance, but the latest interest rate dot plot will directly reveal the FOMC's expectations for the number of interest rate cuts this year and beyond. UBS forecasts that Powell may emphasize the uncertainty of the economic outlook at the press conference, and even downplay the guidance role of the interest rate dot plot. However, UBS believes that the tone of this meeting will be relatively hawkish —the robust performance of non-farm payrolls data in May is sufficient to support the Fed in maintaining interest rates unchanged, and the duration of high interest rates may be longer than expected in March. Therefore, UBS expects the median interest rate for 2025 and 2026 to be raised. In addition, the June Summary of Economic Projections will more fully consider the impact of reciprocal tariffs compared to March, which may lead to further increases in inflation and unemployment rate expectations. Citi maintains its previous judgment, believing that the median of the dot plot will still show two interest rate cuts this year (each of 25 basis points). Goldman Sachs' economic model indicates that the effective tariff rate will ultimately rise by 14% , with over 9% coming from tariff measures already in effect and the remainder stemming from anticipated industry-specific or key imported goods tariffs to be implemented subsequently. Based on this assumption, and combined with the current limited policy transmission data, Goldman Sachs forecasts that core Personal Consumption Expenditures (PCE) inflation will rebound to a peak of 3.4%. More severely, reciprocal tariffs may lead to a nearly 1% decline in GDP growth this year by suppressing consumer spending and exacerbating uncertainty in corporate investment. If combined with the chain reactions of fiscal and immigration policy adjustments, the YoY GDP growth rate in Q4 2025 may slow down to 1.25% (below potential levels), with the unemployment rate rising by 0.2 percentage points to 4.4%. Therefore, Goldman Sachs expects the US Fed to slightly lower its GDP growth forecast for 2025 to 1.5%, while raising its unemployment rate forecast for the same year to 4.5%. On inflation, the overall and core PCE inflation rates for 2025 may be revised to 3.0% and 2.3%, respectively. These adjustments reflect that, despite the moderate performance of recent economic growth, labour market, and inflation data, the upward pressure on tariff rates has significantly widened compared to the March meeting. Dot Plot Goldman Sachs anticipates that the US Fed will adopt a conservative stance on the dot plot. Although the median dot may indicate two interest rate cuts to 3.875% in 2025 and another two cuts to 3.375% in 2026, the voting distribution for 2025 is expected to be extremely tight —10 officials support two rate cuts, while the other nine lean towards only one cut or no cut at all. The bank also forecasts that the average interest rate expectations for 2025 and 2026 will be slightly revised upwards, as some officials may delay or cancel their interest rate cut plans for this year. Michael Feroli of JPMorgan Chase pointed out that, since the release of the March Summary of Economic Projections (SEP), changes in trade policy have forced the US Fed to significantly adjust its economic outlook, as evidenced by the subtle changes in the wording of the May FOMC statement. JPMorgan Chase expects that, while the "stagflationary adjustment" does not explicitly guide the direction of the dot plot, the bank still believes that the overall tone will lean towards hawkishness —especially after Powell emphasized the priority of price stability at the May press conference, most members of the Committee may have shifted in tandem. JPMorgan Chase forecasts that interest rates will approach neutral levels by the end of 2027, while the median long-term neutral interest rate may be revised upwards by 0.125% to 3.125%. First Interest Rate Cut: December as the Last Line of Defense? Despite widespread market bets on an interest rate cut starting in September, Goldman Sachs maintains that the FOMC will conduct its first interest rate cut in December, followed by two more cuts in 2026 to a terminal rate of 3.5%-3.75%. Its rationale is that, apart from tariffs, recent inflation data have actually been weak—expected wage growth from surveys has fallen to 3.0%, and alternative indicators such as the increase in rents for new tenants have also pulled back to 2.0%, all suggesting that core PCE inflation may fall below 2.0%. However, the peak impact of summer tariffs on inflation coincides with the Fed's decision-making window, making action before December unlikely. It is worth noting that Goldman Sachs recently lowered its probability of a recession within 12 months from a brief spike of 50% in early April to 30%, which is still double the historical average. After risk adjustment, the bank's probability-weighted interest rate forecast is broadly in line with market pricing, suggesting that current interest rate cut expectations have already fully priced in the potential risks of economic deterioration. Technical Analysis of Gold FXStreet analyst Dhwani Mehta stated that from a technical perspective, the bullish bias in gold prices remains intact as the 14-day Relative Strength Index (RSI) stays above the 50 midline, currently near 55. Gold prices have also successfully held above the previous strong resistance level (now turned support) of $3,377, which is the 23.6% Fibonacci retracement level of the record-breaking rally in April. If the outcome of the US Fed meeting is interpreted as hawkish, gold prices will need to find a firm foothold below the aforementioned support level. Once 3,350 , the psychological resistance level in US dollars, is breached, the next downside cushion will point to the 21-day Simple Moving Average (SMA) at 3,341 US dollars. Further downside will test the 50-day SMA at 3,308 US dollars. To sustain a higher move, gold prices must effectively break through the static resistance level at 3,440 US dollars. The next upside target is at the two-month high of 3,453 US dollars, and a break above this could challenge the all-time high of 3,500 US dollars.

On Sunday, Eastern Time, US President Donald Trump stated that the US would still maintain control over US Steel as part of its cooperation with Japan's Nippon Steel Corporation in the latter's acquisition plan. Last Friday, Trump suddenly made a public statement in support of Nippon Steel's $14.9 billion deal to acquire US Steel. This immediately ignited enthusiasm in the capital markets. US Steel's stock price surged by 21% last Friday, and after the Tokyo stock market opened on Monday, Nippon Steel's stock price also soared by 5% at one point, reaching 3,030 yen per share, becoming one of the biggest gainers among the Nikkei 225 Index components. However, on Sunday, Eastern Time, when asked about more details of the agreement, Trump added and emphasized: "It (US Steel) will be controlled by the US, otherwise I wouldn't have agreed to the deal." As part of the deal announced last Friday, Nippon Steel plans to invest $14 billion in US Steel's operations, including up to $4 billion in a new steel mill. Trump had stated last Friday that the merger would create 70,000 jobs. Trump made this statement to reporters while traveling from New Jersey to Washington over the weekend. He revealed that relevant members of Congress had previously urged him to reach an agreement. "This is an investment, about partial ownership (of US Steel), but it will still be controlled by the US," he emphasized. Nippon Steel is currently the world's fourth-largest steel producer. Data from the World Steel Association shows that, in terms of production, this merger will create the world's third-largest steel producer, second only to China's Baowu Steel Group and Luxembourg-based ArcelorMittal. Although details of the acquisition agreement have not yet been disclosed, investors have expressed confidence that the terms of the agreement will be similar to those reached in 2023. Investors expect that US Steel will eventually be delisted, and its shareholders will receive cash payments. This deal has been one of the most anticipated on Wall Street. Previously, due to concerns that a foreign acquisition would mean a reduction in jobs in Pennsylvania, where US Steel's headquarters is located, the deal had been controversial in US political circles. It is worth noting that despite Trump's public endorsement, the deal still needs to pass the national security review by the Committee on Foreign Investment in the United States (CFIUS).

Following Moody's recent downgrade of the US sovereign credit rating, the narrative of "dumping the US" has resurfaced. Wall Street investment banks are once again turning their attention to emerging markets. Bank of America recently predicted that emerging markets will usher in a "new bull market" . In a report, a team of Bank of America strategists led by Michael Hartnett pointed out, "With a weaker US dollar, US bond yields peaking, and China's economic recovery... nothing looks better than the prospects for emerging market equities." Additionally, JPMorgan Chase upgraded its rating for emerging market stocks from "neutral" to "overweight" on Monday, citing the easing of US-China trade tensions and the attractive valuations of emerging market stocks . Malcolm Dorson, head of emerging markets strategy at Global X ETFs, said in a recent media interview that recent events have strengthened the demand for more diversified geographical exposure. He stated, " After underperforming the S&P index over the past decade, emerging market stocks are in a unique position to outperform the S&P in the next cycle ." "This potential perfect storm stems from a potentially weaker US dollar, extremely low investor positioning, and undervalued excess growth," he said. According to data provided by Dorson, in terms of allocation, many US investors have only allocated 3% to 5% of their portfolios to emerging markets, while allocating as much as 10.5% to the MSCI World Index (which tracks the performance of large and mid-cap companies across 23 developed markets). Mohit Mirpuri, equity fund manager at SGMC Capital, said, "We may be at the beginning of a new rotation." He pointed out, " After years of outperformance by US stocks, global investors are starting to look elsewhere for diversification and long-term returns, with emerging markets once again coming into focus ." The "dumping the US" narrative resurfaces A sharp drop in market confidence in US assets has fueled bullish sentiment towards emerging markets. Last month, amid concerns over global trade tensions, market pessimism towards US assets reached a peak, with US bonds, stocks, and the US dollar all experiencing heavy selling. Subsequently, as trade tensions eased, pessimism towards US assets abated somewhat. However, Moody's downgrade of US sovereign debt has brought the "sell the US" narrative back to the forefront. Max Gokhman, deputy chief investment officer at Franklin Templeton Investment Solutions, said that as major investors begin to gradually shift their US Treasury holdings into other safe-haven assets, the US's debt servicing costs will continue to climb, potentially leading to a steeper bearish spiral in US Treasury yields, further downward pressure on the US dollar, and reduced attractiveness of the US stock market. On Wednesday, the US market once again experienced a "triple whammy" in stocks, bonds, and currency, as the auction of 20-year US Treasury bonds by the US Treasury Department met with a lukewarm response. All three major US stock indices recorded their largest one-day declines in a month, following a six-day winning streak that ended the previous day. Long-term Treasury bonds were the hardest hit by selling. The yield on 20-year US Treasury bonds surged 13 basis points to 5.12% during the day, while the yield on 30-year US Treasury bonds rose to 5.09%. Meanwhile, the US dollar index experienced a sharp drop of nearly 50 points in a single day. The MSCI Emerging Markets Index, which tracks large- and mid-cap stocks in 24 emerging market countries, has risen 8.55% year-to-date. In contrast, the S&P 500 Index has only risen 1% over the same period. Notably, the gap between these two indicators widened even further after April 2, when US President Trump announced the imposition of "reciprocal tariffs" globally. Although most global stock indices fell in the days following April 2, the trends in emerging market and US stock markets diverged in the subsequent week. From April 9 to 21, the S&P 500 Index fell more than 5%, while the MSCI Emerging Markets Index rose 7%.

As trade conflicts between the US and the UK, as well as China, have eased somewhat, Wall Street investors' concerns about Trump's tariffs have diminished recently, with US stocks rising for five consecutive days last week and approaching record highs again. However, just as one wave subsides, another arises. This week, a new obstacle has emerged for US stock investors—this time, it's not about tariffs, but about the US debt outlook. Moody's Downgrades US Credit Rating On Friday evening last week, US Eastern Time, Moody's Investors Service announced that it had downgraded the US government's top credit rating from Aaa to Aa1, blaming successive US presidents and members of Congress for the ballooning budget deficit. Moody's stated that there are few signs of the US budget deficit shrinking. As a result, on Monday morning this week, medium and long-term US Treasuries, US stock index futures, and the US dollar all fell, reflecting investors' growing concerns about the US economic outlook. Currently, the US Congress is discussing more unfunded tax cuts. However, since US President Trump took office, he has been wielding the "tariff stick" indiscriminately and attempting to overturn the long-standing commercial partnerships the US has established with European countries and Canada, making the US economic outlook appear increasingly bleak. On Monday this week, the yield on 10-year US Treasuries, after climbing at the end of last Friday, remained largely around 4.5%, reaching 4.515% as of press time, up 7.6 basis points. The yield on 30-year Treasuries rose by 10 basis points, pushing it above 5% to its highest level since November 2023 and close to its historical peak in mid-2007. As of press time, the S&P 500 futures were down 1.08%, and the Nasdaq 100 futures were down 1.35%. US Asset Attractiveness May Weaken Max Gokhman, Deputy Chief Investment Officer at Franklin Templeton Investment Solutions, said, "Given the accelerating pace of unfunded fiscal relief measures, it's not surprising that the US Treasury rating has been downgraded." "(The US') debt servicing costs will continue to climb as major investors (including sovereign and institutional investors) gradually shift from US Treasuries to other safe-haven assets... Unfortunately, this could trigger a steeper bearish spiral in US Treasury yields, exert further downward pressure on the US dollar, and reduce the attractiveness of the US stock market." In an earlier report, Wells Fargo strategists Michael Schumacher and Angelo Manolatos told clients that they expected "10-year and 30-year US Treasury yields to rise by an additional 5-10 basis points due to Moody's downgrade." Although a rise in government bond yields typically boosts a country's currency, for the current US, market concerns about US debt may exacerbate doubts about the US dollar. Currently, the US dollar index has seen a slight decline in the morning session, currently standing at 100.85, down 0.24%. Meanwhile, media data shows that the sentiment among options traders has reached its most pessimistic level in five years. In a report to clients, Subadra Rajappa, a strategist at Société Générale, wrote, "Higher long-term bond yields will increase the (US) government's net interest costs and deficit... In the long run, the erosion of the safe-haven status of US Treasuries will affect the US dollar and foreign demand for US Treasuries and other US assets."

【SMM Aluminum Morning Meeting Summary: US Wields Tariff Stick Again, Domestic Inventory Destocking Accelerates, SHFE Aluminum Consolidates Within Range】 Macro front, yesterday the US White House imposed a 245% tariff hike on certain Chinese goods, to which China responded with indifference. Although the market expressed concerns, no panic sentiment was observed. Recently, due to the tariff issue, both US inflation and unemployment rates have risen. Under this dual pressure, Fed Chairman Powell stated the need to wait for clearer data before considering the next interest rate cut, leaving the monetary policy outlook uncertain. Supply side, although the operating capacity of aluminum increased in April, the domestic capacity ceiling limited significant growth. Weekly aluminum ingot inventory dropped sharply by 35,000 mt, and the accelerated destocking continues to provide strong support for the bottom of aluminum prices. Demand side, the market showed a wait-and-see attitude under the tariff impact, but after the aluminum price drop, new orders from end-users increased slightly, and the purchasing power of processing enterprises rebounded, with aluminum outflows from warehouses performing impressively. Overall, the rebound in non-ferrous metals was supported by eased macro sentiment, and the continuous destocking of aluminum inventory underpinned aluminum prices. In the short term, aluminum prices maintained a fluctuating trend, and future attention should be paid to tariff policy adjustments and the export situation of aluminum semis and end-users.

As global capital continues to flee US dollar assets, where have investors turned in panic? The most obvious winners in the global capital markets on Friday provide the answer: the euro, Swiss franc, Japanese yen, gold... During the Asian session on Friday, as the US dollar index fell further after breaching the 100 mark, the frenzied sell-off of US Treasuries continued to escalate in a week marked by the brutal conclusion of global tit-for-tat tariff policies. These policies have heightened fears of a deep economic recession and significantly shaken investor confidence in US assets. Currently, the yield on the 10-year US Treasury has once again risen to the high of 4.45% touched on Wednesday, with a weekly increase of about 45 basis points, the largest since 2001. The rapid rise in US Treasury yields has been attributed by many analysts to large-scale asset sell-offs, as hedge funds and other asset management companies offloaded bonds due to margin calls and losses. There is even market speculation that foreign investors may be selling US Treasuries. An increasing number of analysts and investors have also pointed out that the significant sell-off of US Treasuries and the weakness of the US dollar this week indicate a loss of confidence in the US, the world's largest economy. "Clearly, US assets are flowing out. Simultaneous declines in the currency and bond markets are never a good sign," said Kyle Rodda, senior financial market analyst at Capital.com. "This goes beyond the impact of slowing economic growth and trade uncertainty." Chris Weston, head of research at Pepperstone, also noted, "A clear 'sell America' sentiment has spread across the market, with traditional safe-haven assets being favored, and the US dollar losing its safe-haven appeal." Nomura strategist Naka Matsuzawa pointed out, "Investors now lack confidence in the US, which deeply concerns me—this is not only a vote of no confidence from US stock investors but also from US Treasury market participants in the Trump administration and its policies." "The Strongest" Euro From the perspective of the foreign exchange market, it is not surprising that investors have turned to the Swiss franc and the Japanese yen, two major safe-haven currencies, as the US dollar weakened significantly in a risk-off environment—especially the Swiss franc. During Friday's session, the US dollar fell to a 10-year low of 0.8141 against the Swiss franc, while the US dollar fell to a six-month low of 142.87 against the Japanese yen. Renowned economist Peter Schiff couldn't help but lament, "I have never seen such a large-scale sell-off of US assets. The US dollar, bonds, and stocks have all been hit hard. I don't remember the US dollar ever falling 3.5% against the Swiss franc in a single day. The US's ride on the global tailwind is about to come to an abrupt halt. Buckle up." But in fact, in the foreign exchange market, the currency that dealt the most severe blow to the US dollar on Friday, or benefited the most from this round of US dollar capital outflows, was not these two safe-haven currencies—it was the euro. Historical statistics show that since the euro's inception at the end of the last century, the euro has rarely been this strong against the US dollar... (The euro's intraday gain against the US dollar ranked first among major currency pairs) Market data shows that the euro rose to a high of 1.1386 against the US dollar during the session, and has surged by more than 300 points since Thursday. Similar sustained gains may have only occurred during the 2008 global financial crisis. At the same time, for the euro, the shift in strength may no longer be confined to the level of foreign exchange speculation. In the bond market, a phenomenon that has never occurred since the euro's inception is that—the extent to which German bonds have outperformed US bonds over the past five trading days has never been so large, with the premium of the 10-year US Treasury yield over German bond yields continuously widening. In fact, in the recent global bond market sell-off triggered by the plunge in US Treasuries, European first-tier national bonds represented by German and French bonds have remained relatively resilient. This is clearly related to their strong historical safe-haven appeal. When investors believe that US Treasuries may face risks due to basis trade blow-ups, German bonds, the common "second safe-haven" in the bond market, naturally become a substitute option for many. An interesting point is that, from the perspective of the interest rate differential commonly seen in the foreign exchange market, the widening of the yield spread between US Treasuries and German bonds should itself be unfavorable to the euro. However, when capital flees the US en masse for Europe due to panic over Trump's policies, the traditional interest rate differential logic seems not difficult to break. Considering that European stocks have been one of the leading performers in the global stock market this year, the recent outperformance of European stock, bond, and currency markets over the US market undoubtedly means that European assets have "feasted" while US assets have "fallen"... This also raises a future question: Can the euro, with Trump's "recklessness," completely reverse its fate and shake off the slump of the past decade? Nomura strategist Dominic Bunning recently stated, "The euro may be the primary beneficiary of a slowdown or reversal in US market capital inflows, as these inflows mainly come from eurozone investors," adding that the eurozone may undergo "structural restructuring," supporting the euro's appreciation. "The Strongest" Gold Of course, while the foreign exchange market is "abandoning the US for Europe," a theme that has remained unchanged in the global market over the past few years still holds: buy gold. Driven by safe-haven inflows, spot gold hit a new all-time high during the Asian session on Friday, reaching a high of $3,220 per ounce. On Wednesday and Thursday, gold prices had just experienced their largest two-day gains since the COVID-19 lockdowns. Joseph Brusuelas, chief economist at tax consulting firm RSM, said, "The root of the global market shock lies in Trump's trade policies. Confidence in the credibility of the US system has been lost, and the behavior of the entire financial market reflects this." Liu Yuxuan, a precious metals researcher at Guotai Junan Futures, pointed out, "Gold is currently the best investment in the market. Unprecedented trade tensions have deepened distrust in the US dollar, thereby increasing demand for other safe assets." Valerie Noel, head of trading at Swiss private bank Bank Syz, had said before the suspension of Trump's tariffs, "I think some countries are closely watching (US tariff policies) and may accelerate the diversification of investments away from US assets." Looking at the reserve situation of various central banks recently, increasing gold reserves has been a major trend for central banks to achieve asset diversification. Trump's tariff policies and the recent turmoil in the US Treasury market are likely to further accelerate this shift in asset allocation. Data updated earlier this week by the PBOC shows that as of the end of March 2025, China's gold reserves stood at 73.7 million ounces, an increase of 90,000 ounces from the previous month. This is the fifth consecutive month of gold reserve increases by the PBOC since last November. Renowned economist Peter Schiff had also expressed strong support for gold's prospects on Thursday. He pointed out, "The deteriorating US economic conditions and stagflation prospects have created an attractive environment for gold investment. Given the strength of gold prices and the decline in oil prices, gold mining companies may also benefit."