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The number of initial requests from the United States unexpectedly dropped, and a black swan incident suddenly occurred!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: The number of initial invoices in the United States unexpectedly dropped, and a black swan event suddenly occurred!". Hope it will be helpful to you! The original content is as follows:
The US dollar index stopped its previous three consecutive days of decline on Thursday, and US President Trump's huge tax cuts and expenditure bill passed the House of Representatives, and investors were temporarily relieved. Meanwhile, the euro weakened after the euro zone released its sluggish economic data.
S&P Global data released on Thursday showed that the initial value of the U.S. manufacturing purchasing managers index (PMI) rose to 52.3 from 50.2 in April, exceeding expectations of 50.1. The initial value of the US service industry PMI rose to 52.3 in May, with the previous and expected values being 50.8.
The number of initial unemployment claims in the United States was 227,000 in the week ending May 17, down from 229,000 in the previous week and below the expected 230,000, indicating that the labor market is still stable.
On Thursday local time, the U.S. House of Representatives passed the "big and American" tax reform proposal declared by President Trump. The market is now turning its focus to the process of debate in the Senate in the xmaccount.coming weeks. US President Trump urged the Senate to promptly approve.
The proposal will increase U.S. debt by $3.8 trillion to $36.2 trillion over the next 10 years, according to the nonpartisan Congressional Budget Office (CBO).
In the past month, currencies such as the Korean won and Japanese yen fluctuated significantly due to rumors that the United States would include exchange rates in negotiations with other countries to promote a weak dollar. But White House chief economist Stephen Milan refuted the statement on Thursday, saying that there is no so-called "secret exchange rate negotiation."
Milan said in an interview with the Bloomberg BigTakeDC podcast: "The United States continues to pursue a strong dollar policy." HeIt pointed out that US Treasury Secretary Besent is the official spokesperson of foreign exchange policy. It is rumored that the United States promotes secret exchange rate negotiations to guide the depreciation of the US dollar. He emphasized that "we will not promote this kind of thing secretly, and this does not exist." The conversation helped the dollar's rebound on Thursday.
Asian Market
RBA Deputy Governor Andrew Hauser highlighted his recent visit to China after a xmaccount.comprehensive adjustment of tariffs on the "Liberation Day" and pointed out that there is a "strong hand" feeling when it xmaccount.comes to managing the economic impact of the US tariffs. Additionally, as trade patterns begin to change, Australian xmaccount.companies operating in China see “opportunities in risks”.
However, Hauser is quick to emphasize that this view is inherently limited, anchored at a certain moment and influenced by a single state perspective.
Hauser lists four key warnings. First, global tariff settings remain unstable, and data on their actual economic impacts are just beginning to surface. Second, the assessments he heard may be overly optimistic, China's domestic stimulus measures may perform poorly, and the public's tolerance for economic pain may be lower than expected.
Third, there may be an indirect “general equilibrium” effect, including the possibility of Chinese xmaccount.companies exacerbating xmaccount.competition, thus getting rid of the excess supply originally intended for the U.S. market. Although the industry overlap with Australia is limited, this is a xmaccount.common concern throughout the Asia-Pacific region.
Lastly, Hauser acknowledges wider strategic uncertainty—factors outside the economy may affect Australia’s status.
European Market
The European Central Bank's meeting report from April 16 to 17 showed that unanimous support for a 25 basis point cut, and the inflation shock "almost ended." The rate cut is not only to cope with the improvement of inflation outlook, but also to cope with the increasing risk of growth downside due to the escalation of global trade tensions.
Some members specifically mentioned the latest developments surrounding tariffs as a reason to take action as soon as possible. In their view, rate cuts at the April meeting could be seen as "advanced rate cuts at the June meeting" and help anchor market sentiment as market volatility intensifies.
Some members pointed out that tariff-driven uncertainty does not appear to translate into inflationary pressures, partly due to the appreciation effect of the euro as a “safe-haven currency.” On the contrary, tariff-related adverse factors are increasingly seen as deflation, especially as growth prospects are bleak and financial conditions are tightening.
The few in the Council even advocated a more radical rate cut of 50 basis points, citing the deterioration of risk balance since March. These members stressed that “even in the case of relatively moderate trade conflicts, uncertainty has hindered consumption and investment.
The UK Services Purchasing Managers Index rose slightly from 49.0 to 50.2, while the Manufacturing Purchasing Managers Index fell slightly from 45.4 to 45.1. Therefore, the integrated procurement industryThe management index rose from 48.5 to 49.4, still below the 50 dividing line that distinguishes expansion and contraction.
According to Chris Williamson of S&PGlobal, business confidence has improved since April, partly due to ease of trade tensions. However, output across the private sector has shrunk for the second consecutive month, suggesting that the UK economy may fall into a contraction in the second quarter.
More encouraging is that inflationary pressures appear to have cooled significantly from the April soar. Slower price growth, coupled with sluggish output and emerging unemployment, strengthens the reason the Bank of England will further relax monetary policy in the xmaccount.coming months.
Germany Ifo business prosperity index rose from 86.9 in April to 87.5 in May, and is cautiously optimistic that the economy may be stabilizing.
The significant increase in the expected index drove this improvement, which climbed from 87.4 to 89.9, indicating that firms are increasingly confident about their future situation. However, the status quo index fell slightly from 86.4 to 86.1.
IfoInstitute notes that “the sentiment of German xmaccount.companies has improved” and the recent surge of uncertainty has begun to ease.
The private sector of the euro zone contracted again in May, with the xmaccount.comprehensive purchasing managers index falling from 50.4 to 49.5, a six-month low. The service industry dragged down, with PMI falling from 50.1 to 48.9, the lowest level in 16 months. Although the manufacturing index rose slightly from 49.0 to 49.4, a 33-month high, it is still in a contraction zone.
HCOB chief economist Cyrus dela Rubia said the region's economy "seems to be unable to gain a foothold" as growth signals remain elusive and market sentiment is depressed.
Moderate improvements in manufacturing may reflect front-end activities for businesses seeking to lead U.S. tariffs rather than potentially strong demand. However, the decline in the service sector is often more domestically tilted, with less influence from global trade, which has raised concerns about weak internal demand.
For the ECB, these data "may make it feel mixed." While services sector inflation appears to be slowing, input costs – possibly driven by wages – are rising again. By contrast, manufacturing procurement prices continue to decline.
U.S. Market
The U.S. economy rebounded significantly in private sector activity in May, with the manufacturing and service sector purchasing managers index rising to 52.3 and the xmaccount.composite index rising to 52.1.
This improvement marked a better slump in April, according to S&PGlobal, mainly due to improved market sentiment after the temporary suspension of tariff hikes.
Chief economist Chris Williamson stressed that after the current 90-day truce expires in July, the xmaccount.company and its clients are trying to "take the lead" orders ahead of a potential new tariff shock.
This preemptive behavior led to the largest accumulation of input inventory in the survey's 18-year history, while a surge in "supply chain delays" is now the worst since the pandemic-era disruption in 2022.
The biggest concern of policy makers is the sharp rise in prices. The report noted that the overall increase in goods and services prices was the largest since August 2022, indicating that "consumer price inflation has risen sharply."
The number of first-time unemployment benefits in the United States fell -2k to 227k, lower than expected 230k. The 4-week moving average of initial jobless claims rose 1k to 232k.
As of the week ended May 10, the number of people who renewed unemployment benefits rose by 36k to 1903k. The four-week moving average of the number of people who continue to apply for unemployment benefits rose 18k to 1888k, the highest level since November 2021.
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