Last week, the market was generally concerned about the potential impact of the slowdown in economic growth and the US tariff policy, and the US President's erratic remarks on tariffs on imports from Mexico, Canada and other countries further exacerbated the market's uncertainty. At the same time, Germany unexpectedly proposed a new spending plan, which aroused the market's attention to policy changes in major economies around the world.

A series of new policies of the Trump administration, including tariffs, trade policies, immigration policies, energy policies, tax policies and federal spending, are having a profound impact on the US economy. These policies not only lead to economic uncertainty, but may also have a chain reaction on inflation, consumer confidence and the labor market. The combination of various factors has caused risk assets to be under great selling pressure in the short term.

Last week, the US stock market continued to swing. Despite a rebound on Friday, the S&P 500 index had its worst week since September with a loss of 3.1%. Meanwhile, the Dow Jones Index fell 2.4% this week. The Nasdaq Composite Index fell 3.5% this week - in February, the S&P 500 fell about 2.2%, the Dow fell about 1.6%, and the Nasdaq fell about 4%.

Gold prices continued to rise last week due to safe-haven inflows and the US employment report showed that employment growth in February was lower than expected, indicating that the Federal Reserve will cut interest rates this year. COMEX gold futures fell 0.26% to $2,919.00 per ounce, and rose 1.77% this week, with a trading range of $2,866.30 to $2,941.30 per ounce. Spot gold closed at $2,909.70 for the week, up 1.92%.

Silver prices fluctuated well last week and consolidated above $32,000. The three-day rally ended before the weekend and is currently trading near $32,000. Buyers failed to continue their upward momentum and challenge the last cycle high of $33.390. . COMEX silver futures were quoted at $32.920 per ounce, up 4.55% this week.
The U.S. dollar is undergoing a "regime change", and traders' favor for it has dropped sharply. The U.S. dollar index has fallen by more than 3.5% this week, the worst week in more than a year. The U.S. dollar index has fallen for five consecutive days, and the market atmosphere is filled with anxiety and wait-and-see. The disk price around 103.70 shows that behind this wave of decline, there are both new changes in fundamentals and repricing of Fed policy expectations.
In the eurozone, the fundamentals are relatively stable, inflationary pressures have eased, and the hawkish stance of the European Central Bank has also softened. It rebounded to a five-month high of 1.0888 last week. Traders generally believe that the current rebound of the euro is more of a "side effect" of the weakness of the U.S. dollar, rather than an outbreak of its own driving force. However, in the short term, euro bulls have clearly seized the weakness of the U.S. dollar.
USD/JPY continued to hover near a nearly five-month low, with a low of 146.95. Rising market expectations for further rate hikes by the Bank of Japan, coupled with global market concerns about external tariff policies and uncertainty about future economic growth prospects, have pushed the yen to continue to strengthen on the back of safe-haven demand.

Last week, the pound rose sharply against the dollar, despite the latest US jobs report showing that the economy remains solid. However, concerns about a US recession have kept the dollar weak, with the GBP/USD pair soaring 2.73% last week, reaching a five-month high of 1.2945.

Meanwhile, the Australian dollar rose 1.68% against the US dollar last week, closing at 0.6309. The Australian dollar exchange rate is the worst performing currency among the G7, and it is difficult to recover from the deterioration of risk sentiment, as traders react to lower-than-expected job growth and modest wage growth. At the same time, China's trade balance data showed an unexpected decline in imports, further raising concerns about slowing demand, which put additional pressure on the Australian dollar.

Last week, the crude oil market showed a volatile pattern of "first suppression and then rise" under the fierce game of long and short factors, but it still recorded a significant decline in the end. In terms of weekly performance, Brent crude oil fell 3.8% this week, the largest weekly drop since the week of November 11, 2023; WTI crude oil fell 4.37% this week, the largest weekly drop since the week of January 21, 2024.

Before the weekend, Bitcoin plummeted to around $86,000. At the first cryptocurrency summit in the White House, US President Trump reiterated the Bitcoin national strategic reserve announced during the week, and the updates during the period were limited to the stablecoin legislative process, which disappointed crypto traders.

Despite the uncertainty, Powell remained optimistic about economic fundamentals last week, saying that inflation and job growth "continued" but progress was "uneven." The latest data showed that the consumer confidence index fell from 110 to 106 in February, and companies' concerns about the economic outlook intensified. At the same time, the 10-year US Treasury yield fell to 4.1% on the day, indicating market expectations of slower growth. The Fed's wait-and-see strategy aims to avoid exacerbating market volatility due to policy misjudgments.

Outlook for this week:

Investors are struggling to cope with huge policy changes around the world. Trump's repeated imposition of new tariffs on Mexico, Canada and China has heightened concerns about a recession. Germany's unexpected spending plan also shook the market, leading to a sell-off in German government bonds, which are the benchmark for European financial markets.

The combination of various factors has put risky assets under huge selling pressure in the short term. The market's next focus is undoubtedly the US Consumer Price Index (CPI) to be released this week, because this data will directly affect the Fed's subsequent policy direction and may further impact or boost the market.

Recently, a number of US economic data have performed weakly, causing the market to begin to question whether the US economy can maintain steady growth. In the past January, CPI rose 0.5% month-on-month, the largest monthly increase since August 2023; the month-on-month increase in CPI in February may fall back to 0.3%, but even so, there is still a certain degree of uncertainty in inflationary pressure. However, if inflation remains high or shows signs of re-emergence, the Fed may have to maintain the current interest rate range of 4.25%-4.5% for a longer period of time to prevent prices from rising too quickly, which would put some pressure on the market.

In addition, the dispute over the appropriations bill at the congressional level is still ongoing. If the corresponding spending agreement cannot be passed by later this week, some government departments will face the risk of shutdown, which will undoubtedly add to the already weak market sentiment. On the other hand, the government's changing signals on tariffs have also made it difficult for companies and consumers to obtain clear expectations: before April 2, the Trump administration said it would not impose tariffs on Mexican and Canadian imports that meet the provisions of the US-Mexico-Canada Agreement (USMCA), but if the negotiations fail, the possibility of further escalation of subsequent tariff policies cannot be ruled out.

In addition to the risks of tariffs and government shutdowns, the market is also waiting to see how the Fed assesses the economic outlook. According to market expectations, the Fed will not adjust the benchmark interest rate for the time being at its meeting on March 18-19. However, if the CPI data is higher again this week, it may strengthen the view that "the Fed's room for rate cuts is limited." If the data falls moderately, it is expected to support the market's expectation of further interest rate cuts in the second half of the year.

It is worth noting that the Chicago Board Options Exchange Volatility Index (VIX) has recently climbed to its highest level since the end of last year, indicating that the market has become more cautious in judging future trends. Coupled with the catalysis of hot events, short-term volatility may continue to increase.

In addition, the sentiment of the equity market has entered a sensitive area, and directional choices may occur at any time due to policy and data catalysis. Bulls expect the Federal Reserve to release more accommodative signals to ease the pressure from tariffs and economic slowdown; while bears bet that inflation will not fall back quickly, thus limiting the Fed's room for interest rate cuts in the next few months. The focus of the game between the two sides will largely depend on whether the CPI data this week continues to be hot or unexpectedly cools down.

The weakening of the US dollar boosted non-US currencies, with the euro/dollar rising to 1.0870 and the dollar/yen below 148. The US dollar is standing on the edge of a cliff. The trend of the US dollar still depends on the evolution of fundamentals. If the labor market continues to cool, coupled with a decline in inflation (currently 2.5%), the Fed's interest rate cut path may accelerate, and the US dollar may enter a downward channel. The 102 or even 100 mark is not out of reach. However, if economic data unexpectedly picks up, the Fed's reasons for maintaining high interest rates will increase, and the US dollar may regain its upward momentum and challenge above 108. At present, Powell's speech tomorrow morning will be another catalyst, and his wording will directly affect the market's judgment on the policy rhythm.

Last week, gold broke out strongly under the resonance of "weak data-policy swing-technical breakthrough". The weekly moving average breakthrough and MACD golden cross marked the opening of the medium-term rising channel. Although it faces the pressure of US dollar rebound and profit-taking in the short term, the allocation value of gold will continue to stand out against the background of the global central bank's gold buying wave (according to the World Gold Council data, global central banks net bought 31 tons of gold in January) and the Fed's policy shift.

Last week, the crude oil market fluctuated violently in the tug-of-war between "supply increase" and "geopolitical supply interruption", and the technical weakness was in sharp contrast with the news disturbance. Although the short-term oversold rebound may continue, it is difficult for oil prices to reverse the medium-term decline without a substantial supply contraction. Investors need to be alert to the swings in OPEC+ policies, the escalation of the US-Russia game, and the marginal changes in inventory data, and flexibly respond to risks and opportunities in a highly volatile market.

Conclusion:

The Trump administration's new policies are injecting huge uncertainty into the US economy, making it difficult for the Federal Reserve to take clear policy actions in the short term. The Federal Reserve may keep interest rates unchanged until the summer to wait for more economic data to become clear. Although the market expects a rate cut, the patience and caution of the Federal Reserve are particularly important in the current complex economic environment. In the future, as the impact of the policy gradually emerges, the Federal Reserve's decision-making will continue to be the focus of market attention.

Overview of important overseas economic events and matters this week:

Monday (March 10): Swiss February Consumer Confidence Index-Seasonally Adjusted; Eurozone March Sentix Investor Confidence Index; US February New York Fed 3-Year Inflation Expectations (%); US President Trump meets with US technology leaders

Tuesday (March 11): Japan's fourth quarter seasonally adjusted real GDP quarterly rate revised value (%); Australia's ANZ Consumer Confidence Index for the week ending March 9; Germany's February CPI annual rate final value (%); The Third Plenary Session of the 14th National People's Congress (Closing Session)

Wednesday (March 12): Japan's first quarter BSI large manufacturing confidence index; US February CPI annual rate unadjusted (%); US EIA crude oil inventory changes for the week ending March 7 (10,000 barrels); US February IPSOS main consumer sentiment index PCSI; ECB President Lagarde delivered a speech at the annual meeting of the ECB and its observers; Bank of Canada announced interest rate decision; G7 foreign ministers' meeting to March 14

Thursday (March 13): U.S. initial jobless claims for the week ending March 8 (10,000); U.S. PPI annual rate in February (%); IEA releases monthly crude oil market report

Friday (March 14): UK GDP monthly rate in January (%); UK industrial output monthly rate in January (%); UK industrial output annual rate in January (%); UK seasonally adjusted trade account in January (billion pounds); U.S. University of Michigan consumer confidence index preliminary value in March

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