Global Economic Fundamentals

Where is the talk of raising rates? Central banks, the major currencies at least, have been focused on lowering rates, as far as I know.



Disclaimer: The views and opinions expressed in this content are solely those of the author and do not necessarily reflect the official policy or position of any other individual, organization, or entity. The information provided is based on personal perspectives and should not be considered as factual or definitive.

to make it more clear what im talking about i made a detailed breakthrough:
While some central banks are focusing on lowering interest rates, the U.S. Federal Reserve remains in a unique position due to ongoing global and domestic challenges. Here’s why the Fed has raised interest rates significantly over the past few years and why the recent rate cuts are most likely a temporary adjustment rather than the start of a long-term easing cycle:

1. Reasons for Increased Interest Rates
The current era of high interest rates didn’t emerge randomly—it was shaped by a series of extraordinary global events:
a) COVID-19 Pandemic

1. The pandemic caused unprecedented economic disruptions worldwide. Governments, including the U.S., responded with massive fiscal stimulus packages, injecting trillions of dollars into the economy to avoid collapse.
2. This surge in spending and liquidity, combined with supply chain disruptions, created significant inflationary pressures.
3. As the economy recovered, demand outpaced supply, driving prices higher and forcing the Federal Reserve to respond by raising interest rates aggressively starting in 2022.

b) War in Ukraine

1. The war in Ukraine in early 2022 caused further economic instability, particularly by disrupting energy and food markets.
2. Energy prices soared as a result of sanctions on Russia, one of the world’s largest energy exporters. This added to inflationary pressures globally, including in the U.S.
3. Rising costs of essential goods like oil, gas, and wheat further pushed the Federal Reserve to tighten monetary policy to combat inflation.

c) Structural U.S. Economic Challenges

1. Persistent deficit spending by the U.S. government and reliance on borrowing to fund it have added to inflationary pressures.
2. A strong labor market with rising wages has further supported consumer demand, keeping inflation from falling to the Fed’s 2% target.

2. Why the Recent Rate Cuts Are Temporary
The Fed’s strategy of raising rates to combat inflation hasn’t fully achieved its objectives yet. Here’s why the recent cuts are likely just a temporary adjustment rather than a long-term policy shift:
a) Inflation Is Still a Threat

1. Although inflation has cooled from its peak of 9.1% in 2022 to 2.9% in late 2024, it’s still above the Fed’s target of 2%. Recent rate cuts could be seen as tactical, but they don’t signal the end of the tightening cycle.
2. Factors like rising energy prices, geopolitical risks, or supply chain disruptions could easily reignite inflation. If that happens, the Fed will likely resume raising rates.

b) “Higher for Longer” Policy

1. The Federal Reserve has repeatedly emphasized its “higher for longer” stance, meaning it intends to keep rates elevated for an extended period to ensure inflation is fully under control. Cutting rates prematurely could undermine this goal.

c) The “Game” Is Not Over Yet

1. The Fed’s battle against inflation is a long-term process, and we are only partway through it. The recent rate cuts are more of a tactical pause, allowing the Fed to assess the economy’s reaction.
2. Given the strong labor market, high deficit spending, and potential for global shocks (e.g., energy price spikes or geopolitical conflicts), the game is not finished. The Fed’s primary goal remains price stability, and it will act if inflationary pressures return.

d) Lessons from the 1970s

1. History has shown that cutting rates too early can cause inflation to return stronger, as seen during the 1970s “stagflation” era. The Fed is cautious to avoid repeating this mistake, which is why any easing is likely temporary and closely monitored.

3. Why Rates May Rise Again

1. Strong Economy: The U.S. economy remains resilient, with a strong labor market and robust consumer spending. These factors provide the Fed with room to raise rates further if needed.
2. Global Uncertainty: Events like the war in Ukraine and energy market disruptions continue to pose inflationary risks. The Fed will act preemptively if these risks materialize.
3. Deficit Pressures: The U.S. government’s reliance on borrowing makes higher rates essential to attract investors to Treasury bonds.

Detailed Breakthrough
To make this clearer, here’s a structured breakdown of why the Federal Reserve’s tightening cycle isn’t over yet and why the recent rate cuts are likely a temporary measure:

1. The Problem Began with COVID-19: Trillions of dollars in stimulus packages flooded the economy, creating a massive surge in demand while supply chains struggled to recover. Inflation surged as a result.
2. The War in Ukraine Amplified Inflation: Energy and food prices soared due to sanctions on Russia, disrupting global trade. This created additional pressure on the Federal Reserve to act.
3. Inflation Is Sticky: Even though inflation has dropped from its peak, it remains above the 2% target. Cutting rates too soon could allow inflation to reaccelerate, which the Fed wants to avoid.
4. The Labor Market Is Too Strong: Low unemployment and rising wages continue to fuel consumer spending, which can sustain inflationary pressures.
5. The “Game” Isn’t Finished: The Federal Reserve’s rate hikes since 2022 have achieved progress but haven’t fully solved the problem. The recent rate cuts are a tactical adjustment, not a sign of policy reversal.

The recent rate cuts are not the end of the tightening cycle—they are a temporary recalibration. Inflationary risks, a resilient economy, and global instability suggest that the Federal Reserve may raise rates again if necessary. The "game" of addressing inflation and stabilizing the economy is still in progress, and the Fed remains prepared to act.

I want to clarify that my news overviews are not focused on predicting short-term movements like today or tomorrow. Instead, I analyze the broader picture to identify the general main trend—where it's heading and what we can expect over time.
During certain periods, there might be corrections or pullbacks, and that's completely normal. However, these are not signs of a trend reversal but rather temporary adjustments within the larger trend. My goal is to understand the bigger picture to navigate the market with a clear perspective.

Personally, I don’t give much attention to what will happen today or tomorrow, nor do I base my trading decisions on what TV or mainstream media say. Their narratives are often designed to calm the public and prevent panic, rather than to truly prepare you or help you make money.
To succeed in this market, you need to think differently from the majority of traders and investors. It’s this alternative perspective that allows you to join the 1-2% of winners instead of the crowd of losers. By focusing on the bigger picture and understanding the deeper trends, you can navigate the market with clarity and make informed decisions that set you apart.
In this context, the news calendar should never be treated as a trading signal. Instead, it should be used to calculate the approximate volatility during upcoming news events. This allows you to adjust your strategy, such as widening your grid step before the data is released.
What matters isn’t whether the market moves up or down during those moments, but how many pips it could potentially move. By preparing for volatility instead of chasing direction, you position yourself to manage the market’s behaviour effectively and profitably.

The market is not closed tomorrow.

US30 closes at 6.00pm GMT

Gold closes at 7.30pm GMT

The impact of Donald Trump's inauguration on XAUUSD (gold against the US dollar) hinges on how markets interpret his policies, rhetoric, and economic vision.

Possible Scenarios
Increased Uncertainty → Gold Prices Rise

1. If Trump’s speech introduces uncertainty around political stability, international relations, or trade policies, investors may flock to gold as a "safe haven."
2. Topics such as tariff imposition, reshoring production, or contentious foreign relations could heighten market fear, supporting gold prices.
3. Ambiguity about the administration's tax reforms, economic stimulus, or regulatory approach could amplify this trend.

Example Impact: A cautious market sentiment may push XAUUSD higher by 1–2% in the short term.
Expectations of Economic Growth → Stronger Dollar, Lower Gold Prices

1. Pro-American economic policies like infrastructure investments, corporate tax cuts, and job creation plans could signal robust economic growth.
2. A strengthened US dollar, due to optimism over economic recovery, could pressure gold prices downward as gold typically moves inversely to the dollar.
3. If his rhetoric is heavily focused on pro-business reforms, gold may see downward momentum.

Example Impact: XAUUSD could retreat toward recent lows as the USD gains traction.
Geopolitical Instability Risks → Higher Gold Demand

1. Bold or controversial statements on foreign policy (e.g., tensions with China, sanctions on Russia, or nuclear policy regarding Iran) could elevate global geopolitical risks.
2. These risks often drive investors toward safe-haven assets like gold.

Example Impact: Escalating geopolitical tensions may push gold $30–$50 higher per ounce over a short period.
Impact on Federal Reserve Rate Expectations

1. If the speech casts doubt on US economic resilience or highlights instability, it may lower market expectations for the Federal Reserve’s rate hikes.
2. Lower rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors.

Example Impact: Slower Fed actions could support gold’s rally above resistance levels.
Key Influencing Factors for Gold Pricing

1. Trade Wars or Tariff Talks: Uncertainty here will spike demand for gold.
2. USD Strength: Direct inverse correlation with gold prices.
3. Inflation Expectations: Any significant fiscal spending promises could drive inflationary fears, supporting gold.
4. Global Bond Markets: If yields rise alongside uncertainty, gold's appeal as a hedge increases.

Navigating 2025’s Economic Shake-Up: Trade Wars, Inflation, and Global Power Plays
The year 2025 is shaping up to be a volatile time for the global economy, with major shifts in trade policies, geopolitical strategies, and economic priorities creating both challenges and opportunities. Below are the key takeaways from the recent developments, with a focus on inflation, trade wars, and asset implications.

Inflation Dynamics: Sticky and Rising
The latest U.S. CPI report highlights stubborn inflation, with headline inflation trending upward, driven by energy and food costs. Core inflation dipped slightly, prompting a short-lived market rally. However, fundamentals remain unchanged:

1. Energy Costs: Rising oil prices, exacerbated by sanctions on Russian oil, are keeping inflation elevated despite easing tensions in the Middle East.
2. Consumer Strain: With nearly 70% of U.S. GDP reliant on consumer spending, rising costs threaten economic stability.
3. Market Expectations vs. Reality: Investors are betting on rate cuts, but the Federal Reserve may face challenges in justifying cuts if inflation remains high.

Trump’s Trade War and Its Ripple Effects
Former President Trump’s proposed universal tariff plan (10% on all imports and 60% on Chinese goods) could drastically reshape global trade. Immediate implications include:

1. Global Retaliation: Canada threatens oil embargoes; the EU explores trade deals with Mexico and alternative energy strategies.
2. Domestic Winners and Losers: While U.S. industries like energy and manufacturing might benefit, higher import costs could spike inflation, straining consumers further.
3. Supply Chain Challenges: Energy and critical minerals for U.S. industries are heavily reliant on imports, complicating efforts to reshore production.

China’s Balancing Act
China faces a dual narrative: accusations of an economic downturn vs. evidence of steady growth (5% GDP in 2024). Beijing’s aggressive stimulus efforts focus on domestic consumption, positioning China for long-term resilience despite trade challenges.

1. Stimulus Success: Programs to boost consumer spending are already yielding results, with policies like subsidies for trading old goods for new.
2. Global Influence: China’s capacity to counter U.S. tariffs with domestic and regional strategies could reshape global economic power balances.

Energy and Geopolitical Tensions
Energy remains a critical pressure point. The U.S. and EU face diverging strategies in securing affordable energy:

1. U.S. Energy Boom: Trump’s focus on deregulation and increasing domestic energy production benefits big oil, but sanctions and trade wars could still push prices higher.
2. EU’s Energy Crisis: Dependence on Russian LNG and lack of nuclear alternatives leave Europe vulnerable to U.S. tariffs and global energy shifts.

Gold and Safe Haven Investments
Gold is currently trading at $2,708/oz, and the expectation is for further upside. Key factors influencing gold’s bullish trajectory include:

1. Deficit-Driven Demand: As U.S. deficit spending surges, inflation fears bolster gold’s appeal as a hedge.
2. Central Bank Buying: Continued purchases by BRICS nations highlight a shift away from dollar dominance.
3. Geopolitical Risk: Rising global uncertainty strengthens gold’s role as a safe-haven asset, with predictions it could breach $3,000/oz in the near future.

It is important to note that while the long-term trend for gold appears bullish, a correction or temporary pullback is possible before reaching the $3,000/oz milestone. Market volatility, unexpected geopolitical developments, or sudden shifts in Federal Reserve policy could influence short-term price movements.

Important Financial Instruments Impacted

1. Gold: Continuing its bullish trend, poised to test and possibly exceed $3,000/oz, though corrections may occur along the way.
2. U.S. Treasuries: Rising deficits and trade wars could push yields higher, increasing borrowing costs.
3. Energy Stocks: U.S. producers benefit from domestic demand and geopolitical leverage.
4. Global Currencies: Emerging markets face volatility as the dollar strengthens amidst trade wars.

Possible Outcomes & Scenarios

1. Trade War Fallout: Global economic alliances shift, with BRICS nations and Mexico benefiting from U.S.-led isolationism.
2. Inflationary Pressures: Rising tariffs and energy prices keep inflation elevated, challenging central bank rate policies.
3. Gold Surge: With inflationary and geopolitical pressures mounting, $3,000/oz or higher seems plausible, though short-term corrections are likely.
4. Economic Polarization: The U.S. consumer weakens while energy and industrial sectors strengthen domestically.

Final Thoughts
The convergence of trade wars, rising inflation, and geopolitical shifts presents a complex economic landscape in 2025. With gold prices surging and markets reacting to policy uncertainties, investors must remain vigilant. Staying informed, diversified, and strategically positioned has never been more crucial in navigating these turbulent times.


Disclaimer
This information reflects my personal views and analysis and is intended solely for informational and educational purposes. It should not be considered financial or investment advice. Trading or investing in gold or any other asset involves significant risk, and you should conduct your own thorough research or consult a qualified financial advisor before making any decisions. I am not responsible for any financial losses incurred based on this information.

Global Trade War Escalates: AI Disruption, Tariffs, Energy Wars & Financial Retaliation


The global economy is at a critical juncture, with escalating trade wars, energy crises, and financial retaliation reshaping markets. From Trump’s aggressive tariff policies to Canada’s oil embargo threats and China’s countermeasures, the landscape is shifting dramatically. Below, we break down the key developments and their potential implications.

China’s AI Breakthrough: A Game-Changer Against U.S. Tech

Attached Image (click to enlarge)

China’s DeepSeek AI has emerged as a major challenge to U.S. tech dominance, shaking up the AI sector and pushing Nvidia stock down by 17%. Unlike OpenAI’s ChatGPT, DeepSeek is designed to be significantly more efficient in processing speed and resource consumption. It operates with 30x fewer GPUs while delivering comparable performance, leveraging a novel algorithmic structure that optimizes token generation. Additionally, DeepSeek’s fully open-source model allows for broader innovation and adaptation, further disrupting the commercial AI landscape. Unlike OpenAI and other U.S. firms investing billions in AI, DeepSeek was reportedly developed for just $5.5 million—yet claims to be 50x more efficient than ChatGPT.
Why This Matters

1. Open Source Disruption: DeepSeek is free and open-source, threatening AI monetization models in the U.S.
2. China’s Strategic Leap: Beijing’s decentralized economic model has enabled rapid tech advancements despite sanctions.
3. Semiconductor Sanctions Failing: China still acquired 10,000+ Nvidia H100 GPUs despite U.S. restrictions.

Impact on Markets: U.S. tech stocks, especially AI-driven firms, face significant downside risk as investors question the AI hype.

U.S. Tariff War: A Global Economic Earthquake

Trump’s New Tariff Policy

1. Universal 10% tariffs on all imports; 25% tariffs on Canada & Mexico.
2. Aims to force industries back to the U.S. but risks global retaliation.
3. The effective tariff rate could surge to 18%, crushing corporate margins worldwide.

Canada’s Response: Oil Embargo on the U.S.?

1. Canada exports 97% of its crude oil to the U.S. (4.4 million barrels per day), though it has explored alternative markets such as China and India to reduce reliance on U.S. demand.
2. In retaliation, Canada may impose an oil export tax or embargo, forcing the U.S. to pay more.
3. This would drive gasoline & diesel prices higher, worsening U.S. inflation.

Global Impact:

1. U.S. inflation rebounds, forcing the Fed to hold rates higher.
2. Germany & the EU face risks due to their reliance on U.S. trade.
3. China, BRICS, and emerging markets strengthen trade ties to counter U.S. economic pressure.

Europe Seeks Mexico’s Help Amid U.S. Trade Disruptions

EU-Mexico Trade Agreement

1. EU signs new trade deal with Mexico to diversify away from U.S. tariffs.
2. Mexico removes tariffs up to 100% on EU food exports.
3. Mexico gains unrestricted EV exports to the EU, benefiting Chinese automakers.

China’s Clever Move

1. BYD & Chinese EV makers expanding in Mexico to bypass EU tariffs.
2. Mexico-produced EVs avoid the EU’s 10% tariff on Chinese-built cars.

China’s Financial & Trade Countermeasures

China Dumps U.S. Treasuries

1. 42% reduction in U.S. Treasury holdings since 2016.
2. $768 billion still held but actively decreasing exposure.

China’s Energy Shift

1. Cutting U.S. LNG purchases, relying on Russia, Qatar, & BRICS.
2. 44% of China’s electricity now comes from renewable sources.

Targeting U.S. Industrial Inputs

1. 74.9% tariff on U.S. plastics, disrupting electronics & EV supply chains.

U.S. Energy Policy: The War for Oil Control

Trump’s Energy Strategy

1. Doubling U.S. energy production to fuel AI-driven industries.
2. Cutting energy prices by 50%, but requires massive subsidies or OPEC compliance.

Saudi Arabia & OPEC’s Response

1. Trump pressures Saudi Arabia to lower oil prices, but Saudi prioritizes China due to long-term energy contracts, strategic geopolitical alliances, and stronger economic incentives from Beijing. China's commitment to purchasing Saudi oil in yuan, extensive investments in Saudi infrastructure projects, and its role as a major trade partner make it a more attractive long-term partner than the U.S.
2. OPEC production cuts continue, frustrating U.S. energy plans.

The U.S. aims to bring industries home, but China, Russia, and BRICS are countering with aggressive financial & trade policies. However, potential diplomatic or economic solutions could involve negotiated tariff rollbacks, expanded trade agreements, and coordinated energy policies to de-escalate tensions and prevent a full-scale trade war.

DXY is still bullish.

Not anymore, US economic numbers are cooling off, Dollar is bearish.