Trump and Musk "open up" and call on the Fed to cut interest rates by 100 basis points

This week, major U.S. stock indexes closed higher, with the S&P 500 hitting a new high in more than three months on Friday, closing above 6,000 points for the first time since February 21. The Dow Jones Index also rose to a three-month high.

The better-than-expected non-farm employment report eased market concerns about the economy, while Tesla (TSLA.O) rebounded from a sharp decline on Thursday, and technology stocks continued to rise.

However, as of June 4, U.S. stock funds had a third consecutive week of outflows due to continued concerns about U.S. trade policy. Data from Refinitiv (LSEG) Lipper showed that US stock funds flowed out of US$7.42 billion this week, but European funds flowed in US$2.72 billion, which was favored for the eighth consecutive week, while Asian funds flowed in US$1.84 billion.

Forex Market:The overall trend of the US dollar index fluctuates this week, and continues to be affected by Trump's tariff policies and negotiation progress. Among them, on Wednesday, the US dollar index fell below the 99 mark and returned to a six-week low as weak U.S. economic data pushed up expectations of interest rate cuts. On Thursday, the call between the Chinese and US dollar heads boosted market sentiment and the US index rebounded. After Friday's non-farm data, the U.S. index returned to above the mark and closed at 99.22 this week, down 0.23%. In terms of non-US currencies, as the US dollar fell, the euro, pound, Australian dollar, and Canadian dollar all recorded overall declines against the US dollar this week. The dollar closed higher against the yen for the second straight week, but this week was its least volatile week in nearly ten weeks. The recent rise in Japan's long-term Treasury yields highlights the need for the Bank of Japan to tighten its policies carefully.

Gold Market:Spot gold rose overall this week, mainly boosted by weakening the dollar and increased trade and geopolitical risks. The most exciting market occurred on Thursday, when gold prices took a roller coaster, hit the $3,400/ounce mark during the session and then took a sharp turn for the worse, giving up all the gains in the day, continuing the decline on Friday, closing at $3,311.68/ounce this week, up 0.67%. In addition, the precious metals market has recently experienced collective rises, with silver, platinum and palladium prices all performing strongly. Silver rose to a 13-year high on Thursday, breaking above $36 an ounce for the first time since February 2012, and platinum also rose to its highest level since 2022.

Crude Oil Market: In terms of international oil prices, U.S. and Blanc oil are expected to close for the first time in three weeks. The outlook for Russia-Ukraine peace talks and the U.S.-Iran nuclear negotiations are bleak, with Canadian wildfires jeopardizing oil supply, and more news of progress in trade agreements boosting demand prospects and driving oil prices to rise. However, on Wednesday, oil prices plunged sharply during the session due to news that Saudi Arabia planned to push OPEC+ to continue to increase production sharply. On Friday, the two oils suddenly soared, and WTI crude oil once rose by more than 2.00% during the day.

Review of the news of the week

1. Trump put pressure on the Fed to cut interest rates and hinted that the new presidential candidate will be announced

U.S. President Trump once again put pressure on the Fed through social media, urging him to cut interest rates by 100 basis points. He called Federal Reserve Chairman Powell "Mr. Tai Chi", accusing Powell of maintaining high interest rates that have damaged U.S. national wealth and also pushing up the federal government's borrowing costs.

Trump believes that if the Fed cuts interest rates, the United States can significantly reduce the long-term and short-term interest rates of maturing debts. He also said that there is no inflationary pressure in the United States at present, and even if inflation appears again, it can be dealt with by raising interest rates.

In addition, Trump also revealed that the result of the appointment of the next Federal Reserve Chairman will be announced soon, and he already has a clearer candidate in his mind. He added that a good Fed chairman would lower interest rates.

Federal Chairman Powell recently stated that he needs to have a deeper understanding of the impact of other countries' policies on the US economy and financial markets, especially the potential impact of the violent fluctuations in the US dollar on American households and businesses. The latest Fed report noted that U.S. economic activity has slowed down in the past six weeks, hiring slowed, and consumers and businesses are concerned about the price increase caused by tariffs.

Within the Federal Reserve, officials have mixed opinions on the inflation prospects that Trump's tariff policies may cause. Some officials believe that the impact of tariffs is short-term and limited and tend to cut interest rates; others worry that inflation will continue and advocate keeping interest rates unchanged.

Federal Governor Waller said the job market is strong, inflation is approaching the 2% target, and if tariffs remain stable, it may support interest rate cuts later this year. Chicago Fed Chairman Goulsby also believes that the US economy is performing soundly and that if trade policies no longer bring uncertainty, there is room for continued interest rate cuts.

PhotoKashkali and Logan, who are cautious, tend to keep interest rates unchanged. Kashkali believes that trade negotiations may last for a long time and should wait until the tariff trend becomes clearer before taking action; Logan stressed that the current interest rate level is appropriate, and a rapid rate cut may trigger an inflation spiral, and the Federal Reserve should pay attention to the long-term trend of the economy.

Atlanta Fed Chairman Bostic pointed out that despite the recent improvement in inflation data, further progress is still needed. Tariff-related price pressures may appear in the xm-forex.coming weeks. If tariffs continue to exist, inflation risks may intensify, and policy adjustments may be required at that time.

Federal Director Cook reiterated the importance of price stability and said that the Fed is ready to deal with various situations and will consider lowering interest rates, keeping interest rates unchanged or hikes based on actual conditions.

Data released on Friday showed that the number of non-farm employment in the United States increased by 139,000 in May, higher than expected, and the unemployment rate remained at 4.2%. Financial markets expect Fed rate cuts to weaken expectations in September, and institutional analysts believe employment data supports the Fed to maintain interest rates until the fourth quarter.

In addition, in a high interest rate environment, the Fed's unrealized losses in 2024 expanded to $1.06 trillion, which was mainly affected by rising market interest rates, but some of the losses were offset by a reduction in balance sheet. Although losses will not affect monetary policy operations, the Fed's net income is expected to remain negative in 2025 and is expected to return to positive values ​​from 2026.

The Fed's balance sheet has dropped from its peak of $9 trillion to $6.7 trillion, and is expected to stabilize at about $6.2 trillion in 2026.

2. Musk and Trump openly break up: from cooperation to full-scale conflict

The conflict between billionaire Musk and US President Trump broke out in full swing, and the two sides openly broke up.

Musk accused Trump of being ungrateful, saying that without his support, Trump could not win the election and the seats in the Senate and House of Representatives would be detrimental to the Republican Party. Musk also hinted that Trump refused to disclose documents related to Epstein because he was also involved and called for Trump's impeachment.

Trump responded on social platforms, saying Musk was "crazy" and threatened to cut off all government contracts between Tesla and SpaceX. Trump pointed out that Musk's opposition to the tax law is that one of the provisions would reduce the tax credit for electric vehicles, which is extremely unfavorable to Tesla.

Musk also proposed the idea of ​​creating a new party, saying that the party would "really represent 80% of the people in the middle." He stressed that he had no objection to reducing the EV credit if lawmakers waived the “disgusting content” of the bill.

However, Trump believes Musk's opposition stems from the damage to his personal interests. The conflict between the two sides not only involves political differences, but also involves huge economic interests. Data shows that SpaceX and Tesla have earned US$22.5 billion in revenue from federal non-confidential contracts since fiscal 2000Yuan.

This conflict has triggered violent fluctuations in the financial market. Tesla's stock price fell by as much as 18% on Thursday, with its market value evaporating $150 billion in a single day, setting the highest in xm-forex.company history. Trump Media Technology Group's shares closed down 8%. The cryptocurrency market also saw a sell-off, with Ethereum falling by more than 8%, and Bitcoin falling by $3,000.

However, Musk soon expressed his willingness to calm down on social media and canceled the decision to retire the Dragon Spaceship. The conflict between the two sides has put Republican lawmakers in a dilemma, and the White House has arranged for a call on Friday to facilitate a reconciliation between the two sides.

When asked if he would consider cutting the government contracts held by Musk, Trump said he would consider all possibilities. He said there was no plan to talk to Musk and hoped that Musk would succeed at Tesla.

3. Trump raises steel and aluminum tariffs, and trade negotiations are still in progress.

U.S. President Trump announced on June 3 that he would increase import tariffs on steel and aluminum from 25% to 50% from June 4. The White House statement said the move was to protect the national security of the United States and ensure that domestic industries can maintain the necessary capacity utilization to meet defense needs.

According to the statement, the tariffs on steel and aluminum imported from the United States will remain at 25%, but starting from July 9, the United States can adjust the tariff rates and formulate import quotas according to the Environmental Policy Statement. If the UK fails to xm-forex.comply with relevant regulations, the tariff rate may be raised to 50%.

The United States is negotiating with several trading partners on reciprocal tariffs, and the Trump decision further exacerbates trade tensions. Last week, federal court overturned many other tariffs Trump imposed under the State of Emergency Act, but steel and aluminum tariffs were not affected by the ruling. The Trump administration is still conducting legal proceedings for tariffs imposed under the International Emergency Economic Powers Act.

At present, the United States is actively negotiating with countries and regions such as the EU, Japan, Vietnam and India. Although White House economic advisers have repeatedly stated that multiple agreements are close to being reached, the United States has only reached a limited agreement with the United Kingdom so far, and the agreement is more like a framework for ongoing negotiations.

The Office of the U.S. Trade Representative said that trade negotiations are still moving forward rapidly and it is in the interests of all parties to assess progress. The U.S. National Foreign Trade xm-forex.commission welcomed this, believing that reaching a trade agreement will help restore the predictability and stability of trade relations.

4. The Russian-Ukrainian negotiations broke down and the conflict escalated, and the dawn of peace was dim.

The second round of negotiations between Russia and Ukrainian was held in Istanbul on June 3, but it ended in a hurry after only one hour. No substantial results were achieved except for the exchange of prisoners of war and the return of the bodies of the dead soldiers.

Ukraine proposed a 30-day ceasefire request, but was rejected by Russia. Russia was only willing to temporarily ceasefire on some fronts for two or three days. Russia's reconciliation conditions include Ukraine's abandonment of new territory, restricting military power, and recognizing Russia's sovereignty in controlling the region. Ukraine described these conditions as"surrender".

Ukraine insists on not accepting any agreement to weaken sovereignty and military strength, and has proposed countermeasures such as war xm-forex.compensation. Although Ukraine said it had formulated a peace roadmap, the two sides had huge differences in positions, resulting in no progress in negotiations.

At the same time, the war escalated significantly. The Ukrainian army launched a "spider web operation" last weekend, attacking Russia's strategic air force base and attacking the Crimea Bridge for the third time, severely damaging its underwater support structure. The Russian side announced the arrest of a Ukrainian agent, accusing him of terrorist activities, and filed a case for treason.

New trends have also emerged at the diplomatic level. Trump and Putin had a phone call for 1 hour and 15 minutes. Both sides did not make a clear statement on the ceasefire or sanctions, and only stated that they would continue to negotiate the Iranian nuclear issue. Putin made it clear that he would retaliate against the Ukrainian drone attack. Meanwhile, the United States' refusal to provide air defense support for the proposed Ukrainian security forces in Europe, which has blocked British and French military plans.

As the conflict continued to intensify, Trump described the Russian-Ukrainian conflict as a "child fight" during a meeting with German Chancellor Mertz, implying that the two sides were not ready for negotiations.

Ukrainian President Zelensky confirmed that the Russian army launched a large-scale air strike on the entire Ukraine in retaliation, causing at least 49 casualties and using more than 400 drones and more than 40 missiles. The mayor of Kiev said that a nighttime air strike on the Ukrainian capital killed one person and injured 20 people. The situation once again slid to the brink of losing control.

5. Regeneration of variables in the US-Iran nuclear agreement: Trump strongly opposes Iran's uranium enrichment

Trump recently publicly stated on social media that he firmly opposes Iran's uranium enrichment activities in any nuclear agreement, directly overturning the xm-forex.compromise proposal previously put forward by U.S. Special Envoy Vitkov.

The proposal originally allowed Iran to enrich low-concentration uranium for a specific period of time, and Oman had also proposed a similar proposal to allow civilian uranium enrichment levels of less than 3%.

Iran has a firm attitude and refuses to sign any agreement to ban civilian uranium enrichment, emphasizing that the U.S. position has neither taken into account Iran's core interests nor provided a clear xm-forex.commitment on the lifting of sanctions. Although Trump said the agreement "may be reached soon", he also warned that Iran would face a military strike if the negotiations failed.

People familiar with the matter revealed that Israel has promised the United States that it will not take military action without authorization during the negotiations unless Trump believes that the negotiations have xm-forex.completely broken down. Although the White House is still waiting for Iran's response, the current signs indicate that the new round of talks between the United States and Iran will be difficult to advance in the short term, and the prospects for nuclear talks are once again clouded.

6. After seven consecutive declines, the ECB implies that the currency cycle is xm-forex.coming to an end.

In response to the decline in inflation and trade tensions, the ECB announced on June 5 that it lowered the three key interest rates by 25 basis points each, which is the seventh consecutive rate cut since 2025. Against the backdrop of controlled inflation, this policy aims to enhance support for economic growth.

According to the latest forecast, the euro zone will be in 2025The inflation rate was 2.0%, falling to 1.6% in 2026 and returning to the target level of 2.0% in 2027. xm-forex.compared with the March forecast, inflation expectations for 2025 and 2026 were lowered by 0.3 percentage points respectively, reflecting the impact of lower energy prices and the appreciation of the euro. Core inflation is expected to be 2.4% in 2025 and remains at 1.9% in the next two years.

In terms of economic growth, the eurozone's GDP growth rate is expected to be 0.9% in 2025, and 1.1% and 1.3% in 2026 and 2027, respectively. The economy performed strongly in the first quarter, but the momentum of growth for the whole year was weak. Trade frictions and rising tariffs are posing a short-term suppression on corporate investment and exports, but the continued investment in defense and infrastructure by countries, coupled with increased real income and a stable labor market, will provide support for economic growth in the medium term. At the same time, loose financing conditions will enhance the eurozone's ability to resist external shocks.

The ECB stressed that future interest rate decisions will continue to be based on data assessment, without setting clear paths or making advance xm-forex.commitments. All policy tools will be flexibly used to ensure that inflation is stable at the target level of 2% in the medium term and to ensure the smooth flow of the monetary policy transmission mechanism.

Governor Lagarde said at a press conference that the monetary policy cycle is "nearly ending". Although no discussions on neutral interest rates have been held, the current policy has put the central bank in a favorable position. She pointed out that the appreciation of the euro and trade tariffs have imposed constraints on exports, and global supply chain disturbances continue to bring downside risks. She also reiterated that she would fulfill her term to stabilize market expectations.

7. South Korea's new President Lee Jae-ming was sworn in

South Korea's President Lee Jae-ming was sworn in at 11 a.m. on June 4. In his speech, Li Zaiming emphasized that he will strive to achieve great unity and become "everyone's president."

He promised to give priority to restoring people's livelihood and the economy, launch an emergency economic team, rely on national finance to achieve a virtuous economic cycle, and increase investment in cutting-edge technology industries such as artificial intelligence and semiconductors, so as to promote South Korea to become an economic power.

In terms of foreign policy, Li Zaiming said that he would implement "practical diplomacy" and handle relations with neighboring countries based on national interests and practicality. He stressed that while preventing North Korea's nuclear threats and military provocations, he will strive to open a window of xm-forex.communication with North Korea through dialogue and cooperation and build peace on the Korean Peninsula.

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