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Date: 13th May 2025.


US-China Deal Eases Recession Fears, Goldman Raises 2025 Targets.



Trading Leveraged products is Risky


Investors continue to focus on the weekend's trade deal between the US and China which continues to prompt vital trends. The agreement between the two largest economies changes the outlook for almost all assets. Although investors will also start to turn their focus to a pending trade agreement with the EU and this week’s inflation data.


Global Stocks Rebound Aiming To Fully Regain Previous Losses


The global stock market rose significantly after the announcement of a trade deal with China to lower tariffs. You can find the details of the agreement in yesterday’s article. The SNP500 rose 3.26% and has regained 79% of the stock market crash from March-April. Of the most influential components (stocks within the SNP500) 82% rose in value with mainly defensive stocks declining. Defensive stocks include Philip Morris, Johnson & Johnson and Coca-Cola.


Due to the trade agreement most economies have lowered their projections for a recession in 2025. Previously economists were advising a 30-50% chance of a recession in the second half of the year. However, these projections have now significantly fallen and will do further if the US and EU also sign a trade agreement.


In today’s early hours Goldman Sachs advised it is increasing its target within the stock market. Goldman Sachs strategists, such as David Kostin, now project the SNP500 to potentially rise to $6,500 within the next 12 months. Previously the estimate was between $6,100-6,200. However, analysts also note that the US-China agreement is still temporary and will expire in 89 days.



SNP500 Daily Chart


In the short-term, investors will be laser focused on the Consumer Price Index (inflation). The CPI is due to be made public at 12:30 GMT. Analysts expect the US inflation rate to remain at 2.4%. If the rate reads as expected or lower, the stock market potentially can further rise as economists will expect a Federal Reserve rate cut.


GBPUSD - The Pound Struggles Despite Positive Employment Data


The US Dollar has been the best performing currency of the week as investors return to the Greenback. This is largely due to the trade agreement with China and investors correcting previous market pricings. However, the USD is retracing lower on Tuesday giving back some od this week’s gains.


The Great British Pound on the other hand is also supported by the latest employment data from this morning. Although this has not been mirrored on the price. The UK Claimant Count Change fell to +5,200 and the Average Earnings Index read 5.5%. Both announcements were better than previous expectations. However, the GBP still remains the worst performing currency of the day so far after the USD.


Yesterday, Bank of England Monetary Policy Director Megan Green stated that while wage and consumer price growth continues to slow, the figures remain meaningful. However, she also noted a rise in medium-term inflation expectations among the public.


Gold Forms a Retracement Pattern and Obtains A Divergence Indication


The price of Gold rose 0.88% on Tuesday almost fully correcting the bearish price action from Monday, bar the bearish price gap. Currently, the metal is finding support at the $3,201.00 support level from April 12th and May 1st. However, the upward price movement of the day is forming a similar pattern to previous retracements. Therefore, it is vital for Gold traders to note that the price movement could either be a retracement or change in trend.



Gold 2-Hour Chart


Currently, in terms of fundamentals, the data is indicating a bearish bias, although some positive factors remain. For example, if the Federal Reserve starts to take a more dovish tone due to the trade deal, Gold may continue to be used as a hedge against inflation. However, if countries continue signing trade deals and Ukraine and Russia reach an agreement in Thursday’s negotiations, renewed bearish momentum might hit Gold.


According to the White House, President Trump may possibly attend the negotiations on Thursday between Ukraine and Russia.


Key Takeaway Points:


* The weekend trade agreement between the US and China has boosted investor confidence and shifted the outlook across global assets, reducing recession fears for 2025.
* Global stock markets surged, with the S&P 500 up 3.26%. Defensive stocks underperformed, while 82% of components posted gains.
* Investor attention now turns to today’s US CPI data and the potential US-EU trade agreement. A softer inflation reading could trigger Fed rate cut expectations.
* The US Dollar leads among currencies but is slightly retracing. The Pound is supported by strong UK jobs data but remains one of the day’s weaker performers.
* Gold rose 0.88% Tuesday but remains at risk of renewed bearish pressure if global trade deals continue and Ukraine-Russia negotiations succeed.


Always trade with strict risk management. Your capital is the single most important aspect of your trading business.


Please note that times displayed based on local time zone and are from time of writing this report.


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Michalis Efthymiou
HFMarkets


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