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New Zealand’s BusinessNZ Performance of Manufacturing Index edged up from 53.2 to 53.9 in April. The gain was driven by improvements in employment and new orders, up to 55.0 and 51.4 respectively, with employment reaching its highest level since July 2021. However, production eased slightly to 53.8.

BNZ Senior Economist Doug Steel noted that while the sector isn’t booming, the recovery is clear, with the PMI rebounding sharply from a low of 41.4 last June.

Still, he cautioned, "there remain questions around how sustainable it is given uncertainty stemming from offshore”.

Full NZ BNZ PMI release here.

Fed Governor Michael Barr highlighted solid growth, low unemployment, and continued progress on disinflation in the US economy. However, he flagged growing concern over rising trade-related uncertainty, which has begun to weigh on consumer and business sentiment.

In a speech overnight, Barr specifically pointed to the vulnerability of small businesses, which are more exposed to "disruptions to supply chains and distribution networks".

These firms are integral to broader production networks, and failures in this segment could trigger cascading effects across the economy.

Drawing a parallel to the pandemic, Barr noted that "disruptions can have large and lasting effects on prices, as well as output," leading to lower growth and higher inflation ahead.

Full speech of Fed's Barr here.

The analysis in this article is a follow up from Gold (XAU/USD) Slides 2.2% to One-Month Lows. $3150 incoming?

Gold prices have surged around 3% from the Asian session lows around the $3125/oz handle. Gold had surged toward the $3180/oz handle ahead of the US open thanks in large part to a weaker US Dollar.

The US Dollar faced renewed selling pressure in the US session after a wave of economic reports, including data showing retail spending slowed in April as worries about the economy affected confidence.

US Data Weighs on the US Dollar

The Commerce Department reported that retail sales rose slightly by 0.1% in April, following a revised 1.7% increase in March. Economists had expected no change after the previously reported 1.5% rise in March. Meanwhile, the Labor Department said weekly jobless claims stayed steady at 229,000, matching economists' predictions, though job openings have become scarcer.

Source: LSEG

The retail sales data does show that tariff impacts have for now been largely avoided thanks to pre-emptive buying in March. The PPI figure points to companies absorbing cost-related shocks for now, whether this will continue remains to be seen.

The concern is the drop in the retail sales figure which suggests that the pre-emptive buying has disappeared quickly which could be a sign of things to come.

US small businesses are getting more pessimistic about the economy:

The NFIB Small Business Optimism Index declined 1.6 points in April, to 95.8, its lowest since October 2024. 6 of the 10 index components decreased, with expected business conditions having the most negative contribution.Over the last 4 months, the index has fallen 9.3 points, the sharpest drop since the 2020 pandemic.

At the same time, the share of small firms expecting better business conditions 6 months from now has plummeted 37 percentage points, to 15%, the lowest since October 2024.

This in part aided the push by Gold beyond the $3200/oz mark and could be the catalyst for a deeper recovery.

Market Sentiment

Looking at overall client sentiment at OANDA and 71% of traders are net-long on Gold.

With the OANDA Sentiment Tool you can see the OANDA traders’ positions sentiment for 20 most traded instruments for the last seven days and sort them by bullish or bearish bias expressed through their positions. If total short positions outweigh long positions, the clients appear to have a “bearish sentiment” against that instrument. Similarly, if long positions exceed short positions, customers are supporting a rising “bullish” trend.

https://proptrader.oanda.com/en/lab-education/tools/sentiment/

I, however, hold a contrarian view of client sentiment. Given that 71% of traders are long on Gold there is a possibility the precious metal may continue to face selling pressure.

Technical Analysis - Gold (XAU/USD)

From a technical analysis standpoint, gold is now up nearly 3% from its Asian session lows.

The break above the previous two-hour swing high at 3186 means a change in structure has taken place.

There is another swing high at 3240 which is the next area of interest which could come into play.

There is a probability of a pullback with support at 3195 and 3186 needed to hold if another leg to the upside is to materialize.

If Gold breaks above the 3240 then a run toward the 3272 and 3300 may be in offing.

Gold (XAU/USD) Two-Hour (H2) Chart, May 15, 2025

Source: TradingView (click to enlarge)

Gold: ⬆️ Buy

• Gold reversed from support zone
• Likely to rise to resistance level 3300.00

Gold recently reversed up from the support zone located between the pivotal support level 3155.00 (former top of the impulse wave 3 from the start of April), lower daily Bollinger Band and the 61.8% Fibonacci correction of the upward impulse from January.

The upward reversal from the support zone stopped the C-wave of the previous medium-term ABC correction (4) from the middle of April.

Given the clear daily uptrend and the oversold daily Stochastic, Gold can be expected to rise to the next resistance level 3300.00.

GBPAUD: ⬆️ Buy

• GBPAUD reversed from the support zone
• Likely to rise to resistance level 2.1000

GBPAUD currency pair recently reversed up from the support zone between the pivotal support level 2.050 (which has been reversing the price from the end of March), the lower daily Bollinger Band and the 61.8% Fibonacci correction of the upward impulse from January.

The upward reversal from the support zone stopped the C-wave of the previous short-term ABC correction 4 from the start of April.

Given the predominant daily uptrend, GBPAUD currency pair can be expected to rise to the next resistance level 2.1000.

The New Zealand dollar is down for a second straight day. In the North American session, NZD/USD is trading at 0.5872, down 0.45% on the day.

New Zealand inflation expectations projected to rise

New Zealand releases inflation expectations for the first quarter on Friday. Inflation expectations can manifest into actual inflation and are considered a market-mover. Over the past three quarters, inflation expectations have hovered around the 2% level, which is the mid-point of the Reserve Bank of New Zealand's target band of 1%-3%. However, inflation expectations are expected to climb to 2.4% in the second quarter, which could complicate the Reserve Bank's plans to further trim interest rates.

New Zealand consumer inflation rose 2.5% y/y in the first quarter, up from 2.5% in Q4 2024 and above the market estimate of 2.2%. This is comfortably within the RBNZ target band and enabled the Bank to cut rates to 3.5% from 3.75% last month.

The central bank left the door open to further rate cuts at the April meeting, stressing the risk to the New Zealand economy due to rising global trade tensions. New Zealand's largest trading partner is China and the temporary agreement between the US and China to slash tariffs is good news for New Zealand's export sector. The Reserve Bank meets next on May 28.

US posts soft retail sales, PPI

US retail sales in April posted a weak gain of 0.1% m/m. This was well below the upwardly revised 1.7% gain in March but edged above the market estimate of 0%. There was also soft data from the inflation front. Producer Price inflation declined 0.5% in April, down from the upwardly revised 0% in March and below the market estimate of 0.2%.

The Federal Reserve is virtually certain to hold rates at the June 30 meeting, but there is a 36% chance of a rate cut in July and a 50% likelihood in September, according to CME's FedWatch. Fed Chair Powell has adopted a wait-and-see stance due to the uncertainty over US trade policy. With inflation largely under control and the labor market in solid shape, Powell is in no rush to lower rates.

NZD/USD Technical

• NZD/USD is testing support at 0.5871. Below, there is support at 0.5844
• There is resistance at 0.5920 and 0.5947

NZDUSD 1-Day Chart, May 15, 2025

The S&P 500 Index has surpassed levels from the beginning of the year, up about 23% from the lows reached in early April. The market is currently just 4% below the area of highs that functioned as active resistance from December to February. This raises the question of whether resistance at the 6,000 point level on the S&P 500 is still relevant.

The market decline from February, which turned into a significant drop in April, may have contributed to the market’s recovery and set the stage for a rally. On weekly timeframes over the past 14 years, the market’s approach to the 200-week moving average has served as an indicator of profitable buying. This year was no exception, although the S&P 500 fell slightly short of that line, like the situation in October 2023. Most bounces from this level in recent years have coincided with changes in monetary policy.

However, tariff policy, not monetary policy, was the main market driver this year. Negotiations aimed at lowering rates caused an increase in market activity, replacing Fed action. In recent days, there have been signs of progress in tariff negotiations, supporting market growth.+

Technical indicators also support a positive trend. With the last major correction, the S&P 500 gave back half of the gains from the lows of October 2022. This decline is consistent with technical market correction patterns, which are often followed by an update of historical highs. The lows of the current correction are almost identical to the peaks prior to the 2022 decline.

Historical data shows different market development scenarios near the previous highs, and we should expect possible volatility in the 6000-6100 range. The market’s upside potential is also evident from past data: the February highs corresponded to 150% of the 2020-2022 rally, indicating a possible target around 7500.

Markets

Asian currencies remained among the best performers today. They still thrive on yesterday’s rumours of the US and South Korean having talked about FX policy even though sources later denied the news. Similar speculation of local governments ready and willing to beef up their currency as a bargaining chip in trade talks with the US was the reason Asian currencies in early May ripped higher as well. The story back then centered around the Taiwan dollar though. The SK won strengthens sub USD/KRW 1400 while the Japanese yen moves from USD/JPY 146.75 to 146.1 in a three-day winning streak. Moves in other USD pairs remain very limited and insignificant from a technical point of view. EUR/USD oscillated in a tight sideways trading range around 1.12, the trade-weighted index treaded water just north of 100. Core bonds gain ground with the front outperforming the long end of the curve. German yields drop 4 (30-yr) to 6 bps (2-yr) in a consistent move lower throughout the day. US yields lose up to 6 bps in the 2-yr yield, triggering a test and break of the recently conquered 4% barrier again. The long end of the curve, the 30-yr in particular, suddenly spiked towards the symbolically important 5% before attracting buyers and paring gains again as a result. The moves both at the front and long end coincided with the publication of some US economic data but we wouldn’t draw too many conclusions from them. Especially with respect for long-term bond yields, which we think are more driven by the comeback of fiscal sustainability as a market theme, heralded by Monday’s release of the House reconciliation bill details and yesterday’s dire CRFB deficit-impact calculations. US April retail sales came in to the low end of expectations but saw the March reading revised higher across all gauges. Headline sales last month rose by 0.1% m/m as 5 rising categories made up for the 8 categories printing a drop. A core measure excluding car and gas printed 0.2% growth. The control group series used in GDP calculations unexpectedly declined by 0.2%. PPI numbers for April were a similar story: a sub-consensus outcome offset by upward adjustments for March. Weekly jobless claims remained low (229k) and some confidence indicators for May, including the Empire Manufacturing (-9.2 from -8.1) and Philly Fed Business Outlook (-4 from -26.4) were a mixed bag. The US equity market rally, supported a.o. by Trump’s deal-making tour in the Middle East, is catching a breather with a slightly lower open. Oil in commodity markets faced some selling pressure after the US president said the US and Iran were getting closer to a nuclear deal which could pave the way for a (partial) return of Iranian oil on broader global markets.

News & Views

The International Energy Agency projects global oil demand to slow for the remainder of the year as economic headwinds and record EV sales curb use. In their monthly oil market report, they forecast demand growth averages of 740k b/d in 2025 and 750k b/d in 2026. Those estimates nevertheless are an upward revision from respectively 726k and 692k b/d. World oil supply looks on track to rise by 1.6m b/d on average this year and by an additional 970k b/d in 2026 (from 1.2m & 960k estimates previously). Amid the weaker outlook for the world economy and global oil demand, OPEC+ surprised the market in early May by announcing a second consecutive monthly increase of 411k b/d for June. With the rises in global supply expected to considerably outpace demand growth, oil inventories are forecast to jump by an average of 720k b/d this year and 930k b/d next year, compared with a decline of 140k b/d in 2024. Oil prices are under downward pressure since early “Liberation Day” (April 2) on supply/demand dynamics. One of the most immediate impacts of the recent slump in oil prices is expected to fall on US shale output with independent producers opting to trim rig counts end lower capex plans.

Flash Q1 GDP estimates in Poland and in Switzerland both beat consensus. Polish economic growth slowed from 1.4% Q/Q in Q4 to 0.7% while markets feared a slowdown to just 0.1%. Y/Y broadly stabilized at 3.2% (from 3.4%). Details will follow on June 2nd. Preliminary Swiss (sport event adjuster) Q1 GDP accelerated from 0.5% Q/Q to 0.7% (vs 0.4% expected). The State Secretariat for Economic Affairs that growth was driven significantly by the services sector with industry also showing overall expansion. Detailed numbers for both countries will be available on June 2nd.

The British pound is in positive territory on Thursday. In European session, GBP/USD is trading at 1.3287, up 0.23% on the day.

UK GDP gives the pound a boost

The British economy expanded 0.7% q/q in the first quarter, below the 1% gain in Q4 2024 but just above the market estimate of 0.6%. This marked the strongest growth in three quarters, driven by stronger activity in services and manufacturing. Annually, growth rose 1.3% in Q1, below the 1.5% gain in Q4 2024 but higher than the market estimate of 1.2%.

The Bank of England lowered the cash rate to 4.25% from 4.5% last week and signaled that further cuts were coming. However, the stronger-than-expected GDP reports has lowered the markets' rate expectations.

The US tariffs have created a lot of uncertainty over global trade. President Trump's unexpected trade deal with the UK and the deal with China to slash tariffs for 90 days are welcome steps but have reinforced Trump's unpredictability. This has made it difficult for the BoE to make growth and inflation projections, as the tariff factor remains a huge question mark.

US retail sales ease, PPI declines

US retail sales in April posted a weak gain of 0.1% m/m. This was well below the upwardly revised 1.7% gain in March but edged above the market estimate of 0%. There was also soft data from the inflation front. Producer Price inflation declined 0.5% in April, down from the upwardly revised 0% in March and below the market estimate of 0.2%.

The Federal Reserve is widely expected to hold rates at the June 30 meeting, but there is a 36% chance of a rate cut in July and a 50% likelihood in September, according to CME's FedWatch. Fed Chair Powell has adopted a wait-and-see stance, hoping that the uncertainty over US trade policy becomes clearer.

GBP/USD Technical

• GBP/USD is testing resistance at 1.3292. Next, there is resistance at 1.3331
• 1.3225 and 1.3186 are the next support levels

GBPUSD 1-Day Chart, May 15, 2025