Last week, the risk of economic recession and concerns about tariff wars hit the global market. Wall Street suffered a long-awaited correction, while the Chinese stock market continued to rise. The "East rises, West falls" sounded again. The US dollar fluctuated at a low level last week, and gold once broke through $3,000 to witness a new history.

After a sharp drop of more than 3% last week, the US dollar's decline eased, and it fell slightly by 0.06% to close at 103.83 this week, continuing to focus on tariffs and recession themes. The euro and the pound consolidated at high levels after last week's huge gains. The euro once touched above 1.09 and finally closed at 1.0877, closing higher for the second consecutive week. The pound hit a four-month high of 1.2989 this week, climbing for the second consecutive week and finally closing at 1.2932.
Due to the uncertainty of Trump's tariff policy and the high risk aversion in the market, gold hit a new record high last week, breaking through the milestone of $3,000 and finally closing at $2,988, with a weekly increase of $76, or 2.61%, and a surge of nearly 14% so far this year. At the same time, silver also closed higher for the second consecutive week, successfully standing above the $34 mark, with a weekly increase of 4%. US WT crude oil and Brent crude oil rose for the first time in nearly two months.

Review of market performance last week:

Before the weekend, the three major US stock indexes closed higher collectively, recovering some of the sharp declines last week, as investors were relieved from tariff-related news, leading to a general rise in large technology stocks. However, from the overall trend of the whole week, the Dow fell more than 3% last week to 41,488.19, the largest weekly drop since March 2023; the S&P 500 and Nasdaq fell more than 2% to 5,638.94, falling for the fourth consecutive week. The Nasdaq Composite Index closed at 17,754.09, down 442.13, or 2.4%, last week; down 1,556.71, or 8.1% this year.

The gold market ushered in a historic breakthrough before the weekend. U.S. gold futures stood above the psychological mark of $3,000 for the first time, hitting a record high of $3,004.80 per ounce during the session, with a weekly increase of 2.3%, continuing the strong upward trend since 2025. Spot gold simultaneously rose to $3,005, although it fell slightly to $2,985 in the late trading due to some long profit-taking, with a weekly increase of 2.58%. The futures/spot spread narrowed to less than $15, reflecting the dominance of the futures market in liquidity and expected pricing.

Last week, silver prices were driven by gold prices hitting a new record high, reaching the highest level since October last year, around $34.080. As inflation pressures on US consumers and producers ease, it may pave the way for the Federal Reserve to cut interest rates at its June policy meeting, which provides some support for silver.

In terms of market performance, the US dollar's decline eased after a plunge of more than 3% last week. Supported by a strong labor market and easing inflation, the US dollar index rebounded above 104.00 last week. These data provide support for the US dollar and consolidate its recent gains. At the same time, the renewed escalation of trade tensions has increased uncertainty. This may suppress global risk appetite and affect the trend of the US dollar. Last week, it fluctuated in the range of 103-104.

The global foreign exchange market showed significant differentiation last week under the game of multiple factors. The conclusion of the German fiscal agreement has driven a strong rebound in the euro. The temporary easing of the risk of the US government shutdown has supported the resilience of the US dollar. The weak British economic data, the expectation of the Bank of Japan to remain on hold, and the change of Canadian prime ministers have had different impacts on the pound, yen and Canadian dollar. The Australian dollar rebounded slightly against the US dollar, supported by rising commodity prices, but it is still constrained by Trump's tariff policy. The technical patterns and fundamental signals of major currency pairs are intertwined, and the market has entered a key direction decision stage.

Last week, the international crude oil market showed a volatile and stable pattern under a complex and changing background. Before the weekend, Brent crude oil spot was reported at US$70.27/barrel, a cumulative increase of 0.15% during the week; US WTI crude oil spot closed at US$66.90/barrel, a weekly increase of 0.13%. The two benchmark contracts were basically the same as the closing price of the previous Friday. Geopolitical games, oversupply concerns and technical signals are intertwined, and the market's long and short forces continue to seesaw.

Bitcoin stagnated after rebounding to around $82,500 last week. U.S. President Trump threatened to impose a 200% tariff on European alcohol, escalating trade war tensions, and stressed that he would not change the reciprocal tariff plan that took effect on April 2. U.S. media revealed that Trump intends to take a stake in Binance US exchange, suggesting a conflict of interest.

The U.S. 10-year Treasury yield fell to a two-month low of nearly 4.33% before the weekend, after selling $70 billion of five-year Treasury bonds amid strong demand for two-year floating Treasury sales. The 200-day moving average is close to 4.25%. The 10-year Treasury yield peaked at 4.80% in mid-January.

Market Outlook This Week:

U.S. President Trump's tariff threats continue to dominate market sentiment, and investors are increasingly worried about the U.S. economy falling into a recession. When Trump first won the election, investors expected his pro-business policies (including tax cuts and deregulation) to promote economic growth, and basically ignored the harm of his radical trade policies. Until recently, the market has realized that Trump is not just using tariffs as a bargaining chip, but is serious about it.

This week is the "Super Central Bank Week", and many central banks will announce interest rate decisions. The most concerned by the market is naturally the Federal Reserve. In addition to the Federal Reserve, central banks in Japan, the United Kingdom and Switzerland will also announce interest rate decisions next week.

The Federal Reserve will announce its interest rate decision and the latest interest rate dot plot at 2 a.m. Beijing time next Thursday, and Federal Reserve Chairman Powell will hold a press conference half an hour after the announcement of the decision. This week, the market will usher in the Federal Reserve's interest rate meeting (March 19), which is another important decision made by the Federal Reserve after it did not move in January. Subsequently, the Bank of England will also announce its latest interest rate decision on March 20, and on the same day, the Bank of Japan will further explain its monetary policy. With the recent intensification of global market volatility, traders are closely watching the guidance of major central banks on interest rate policies and whether economic data from various countries can provide new clues. The intensive dynamics of central banks this week provide a very critical fundamental environment for the financial market.

1. Federal Reserve Board

At the January meeting, the Federal Reserve kept interest rates unchanged without causing too many surprises. Since September last year, the Federal Reserve has cut interest rates by 100 basis points in total in an effort to respond to inflation more promptly. However, recent U.S. inflation remains sticky, especially since it hit a low of 2.4% in October last year, inflation has shown signs of rebounding again.

For the Fed's interest rate meeting on March 19, many officials have recently said that they will not cut interest rates further in March. Chairman Powell also believes that there is no need to consider new interest rate changes for the time being. Analysts believe that if there is momentum for interest rate cuts in the future, it is more likely to appear later this year rather than this month.

2. Bank of England

Although the Bank of England is not under pressure from "Trump tariffs", it faces an embarrassing situation in fiscal policy: the budget promoted by Chancellor of the Exchequer Reeves is accused of making the British business environment worse, causing the British economy to decline sharply, and also leaving the UK with little fiscal space. At present, British inflation is still stubborn, with an overall inflation level of 3% and a core CPI of 3.7% showing no obvious slowdown. Against the backdrop of an already sluggish economy, how to choose monetary policy has become a difficult problem.

In a previous meeting, the Bank of England voted 7-2 to cut interest rates by 25 basis points. However, Andrew Bailey, governor of the Bank of England, is currently leaning towards a "small step rate cut" stance, worried that inflation is still not safe. The market believes that the probability of the Bank of England cutting interest rates again at the March 20 meeting still exists, but the magnitude may be difficult to stride forward unless there is more solid evidence of economic downside risks.

3. Bank of Japan

In stark contrast to the US and British central banks focusing on "whether to cut interest rates", the Bank of Japan is reversing its years of low or negative interest rate policies. In the last meeting, the Bank of Japan raised interest rates to "0.5%", a relatively high level that Japan has not seen since 17 years ago. In addition to the first rate hike in July last year, this is the second time Japan has raised interest rates in many years. The Bank of Japan hinted at further rate hikes at its January meeting. In response, its inflation expectations for 2025 and 2026 have also been raised to 2.5% and 2%. However, at the meeting held on March 19, the market generally expects that a new interest rate hike may not be launched immediately, and more attention will be paid to the implementation effect of the new policy after the increase, as well as the attitude and statement of the decision-makers on the recent sharp fluctuations in the global market.

The US dollar index is currently affected by the Fed's policy outlook and market risk aversion, and may fluctuate repeatedly in the short term. If economic data continues to weaken and inflation remains unchanged, the Fed's dilemma will inevitably make the short-term trend of the US dollar more uncertain. At the same time, the pound and the yen still have independent driving factors: the former is affected by the Bank of England's policy and the degree of British economic recession, and the latter mainly depends on whether the Bank of Japan will continue to raise interest rates within the year. For other non-US currencies such as the euro against the US dollar and the Australian dollar, it is necessary to pay attention to the indirect feedback of the eurozone data and the US dollar index.

From a longer-term perspective, if the expectation of US interest rate cuts rises again in the second half of the year, the US dollar may have a phased correction risk; and if global risk sentiment is poor, the US dollar will remain resilient driven by risk aversion demand, forming a typical "first fall and then rise" or "first rise and then fall" band conversion.

After gold broke through $3,000, the market is undergoing a cognitive reconstruction: Is this the starting point of trend acceleration, or the end of the bull carnival? The current market presents three major contradictory phenomena: the divergence between data and sentiment: despite the cooling of US CPI/PPI inflation, safe-haven funds are still pouring into gold; the mismatch between positions and prices: futures net longs hit a record high, but the spot basis showed signs of fatigue; the game between short-term and long-term: technical indicators frequently issued overbought alarms, but the central bank's gold purchases continued to rise. In addition, it should be taken into account that the recent sharp rise in gold prices has been largely affected by the weakening of the US dollar. If the US dollar regains its upward momentum, it may trigger a correction in gold prices, even if it is only a short-term correction.

The core contradiction in the crude oil market in recent weeks is the game between the increase in supply and the weakness in demand. OPEC+ announced an increase in production from April, which is the first shift in production policy since 2022. Coupled with the persistence of Russia's restricted energy exports, market concerns about oversupply have intensified. However, the expected easing of the situation between Russia and Ukraine and the boost in demand as the summer driving season approaches provide bottom support for oil prices.

Conclusion:

The G7 Foreign Ministers' Meeting in La Malbaie, Canada, which focused on tariffs and the Ukrainian crisis, may have a short-term volatility impact on gold prices. First, the tariff dispute between the United States and its allies has exacerbated global economic uncertainty. Second, the uncertainty of the situation in Ukraine and Russia's ambiguous statements have further increased geopolitical risks, which may also boost the safe-haven demand for gold. However, if the G7 meeting finally reaches a consensus, market sentiment may stabilize and the momentum for gold prices to rise may weaken. Overall, gold prices may strengthen in the short term due to rising risk aversion, but the medium- and long-term trend still needs to pay attention to the further development of the global economy and geopolitical situation.

On the other hand, Powell's speech at the press conference next week is crucial. In the past few weeks, the market's expectations for the Fed have been repriced. If Powell strongly refutes the market's expectations of a rate cut, it may have an adverse impact on the market.

Overview of important overseas economic events and matters this week:

Monday (March 17): US February retail sales monthly rate, US March New York Fed manufacturing index, Nvidia holds GTC conference until March 21

Tuesday (March 18): Germany/Eurozone March ZEW economic sentiment index, Eurozone January seasonally adjusted trade account, Canada February CPI data, US February import price index monthly rate

Wednesday (March 19): Eurozone February CPI final value, Bank of Japan announces interest rate decision, Bank of Japan Governor Kazuo Ueda holds monetary policy press conference

Thursday (March 20): Federal Reserve FOMC announces interest rate decision and economic forecast summary, Federal Reserve Chairman Powell holds monetary policy press conference, Brazilian Central Bank announces interest rate decision, Swiss National Bank announces interest rate decision, Bank of England announces interest rate decision, Swedish Central Bank announces interest rate decision
Friday (March 21): Japan February CPI data, UK March Gfk consumer confidence index, Eurozone March consumer confidence index preliminary value, Eurozone January seasonally adjusted current account

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