Gold prices tick higher on fresh U.S. tariff threats, Fed rate cut hopes
Investing.com - Federal Reserve rate-setters are set to reveal their latest monetary policy decision this week, as well as a slew of other central banks around the world. Developments in U.S. President Donald Trump’s trade policy will likely remain a major focus, particularly after recent data has pointed to a first-quarter contraction in the world’s largest economy. The tariffs will likely factor into a new batch of corporate earnings this week, as well as fresh economic figures.
1. FOMC decision this week
The U.S. Federal Reserve is expected to leave interest rates unchanged at its upcoming meeting this week, despite repeated calls from Trump for the central bank to slash borrowing costs.
In a television interview over the weekend, Trump called Fed Chair Jerome Powell a "total stiff", but said he would not remove Powell from his post prior to the end of the central bank leader’s term in May 2026.
Trump recently rattled already-jittery markets by suggesting that he could oust Powell for not moving quick enough to bring down rates. He has since appeared to temper this position, although he told NBC News on Sunday that Powell "should lower them".
"And at some point, he will. He’d rather not because he’s not a fan of mine," Trump said.
Powell, for his part, has stressed that the Fed is in a "wait-and-see mode" on rates, as policymakers focus on their dual mandate of maintaining price stability and supporting the labor market.
Other central banks around the world are scheduled to announce rate decisions as well this week, including the Bank of England, Norges Bank, and Riksbank.
2. Earnings ahead
A bevy of corporate earnings are due out in the days ahead, as the first-quarter reporting season marches on.
Carmaker Ford Motor (NYSE:F), semiconductor group Advanced Micro Devices (NASDAQ:AMD), entertainment behemoth Walt Disney (NYSE:DIS), oil major ConocoPhillips (NYSE:COP), and crypto exchange Coinbase (NASDAQ:COIN) are among the firms set to reveal results this week.
Results in recent weeks have broadly been above expectations. With roughly two-thirds of companies in the benchmark S&P 500 having now reported, earnings are in aggregate around 7% higher than expectations, according to LSEG IBES data cited by Reuters.
Still, developments around Trump’s tariff plans are a major source of uncertainty for company executives. The president has paused punishing tariffs placed on a host of countries in early April, giving U.S. negotiators time to forge trade deals with individual nations. But elevated tariffs remain in place on China, as well as on items like steel and aluminum.
An LSEG estimate for second-quarter S&P 500 earnings growth has dropped to 6.9%, down from 10.2% on April 1, data last week showed.
3. ISM services PMI
Highlighting the economic calendar this week will be the Institute for Supply Management’s non-manufacturing purchasing managers’ index for April.
The reading is tipped to show that activity in the services sector in the U.S. -- a major driver of the world’s largest economy -- cooled slightly last month. However, it is expected to stay above 50 points, the key divider between expansion and contraction.
"There’s a very real risk this dips into contraction territory, which would underscore the sense that the economy is cooling and recession is a realistic possibility," said James Knightley, Chief International Economist at ING, in a note.
Worries have swirled around the possible impact of Trump’s tariffs on the U.S., especially after an advance reading from the Commerce Department found that the economy shrank in the first quarter largely because of a tariff-related surge in imports. Economists have flagged that the levies could drive up inflationary pressures and potentially drag the broader economy into a recession.
4. Trump trade developments in focus; Bessent to speak at Milken conference
Investors will keeping tabs on potential trade-related comments from Treasury Secretary Scott Bessent at the Milken Institute Global Conference on Monday.
The remarks are set to come after Trump said on Sunday that he had no plans to speak with Chinese President Xi Jinping this week, although he noted that U.S. officials had been in contact with Beijing.
Recent speculation has revolved around any potential discussions between the U.S. and China, with the world’s two largest economies slapping tariffs on one another that threaten to heavily weigh on trade flows.
Speaking on Air Force One on Sunday, Trump said he was in talks with China and a selection of other countries about trade deals. But he added that his main priority was to finalize an agreement with Beijing, who has become one of the central targets of his push to roll out elevated tariffs during the early months of his second term in the White House.
Chinese officials have said that they are "evaluating" an offer from Washington to discuss the matter, but told the U.S. that it should not engage in "extortion and coercion".
5. OPEC+ decision
The Organization of the Petroleum Exporting Countries and its allies -- a group known as OPEC+ that makes up a bulk of global oil production -- agreed to raise output by 411,000 barrels per day from June, during a meeting over the weekend.
OPEC+’s projected uptick in output is nearly three times the volume that was initially signaled, and will see key member states Saudi Arabia and Russia increase production.
The prospect of higher supplies and tepid demand dented crude on Monday, which was already nursing steep losses so far in 2025. The declines put oil back in sight of a four-year low hit in early-April.
A key driver of this trend has been Trump’s trade agenda. In particular, Trump imposed 145% tariffs on top oil importer China, drawing ire and retaliatory tariffs of about 125% from Beijing. Oil prices took little relief from the U.S. and China expressing some openness to trade talks last week.