The Day Ahead: China Talks, Fed Call, and Powell Set the Tone for Markets Today

Ethereum Market Analysis - May 7, 2025

Ethereum is consolidating below the $1,850 resistance level, indicating market exhaustion as of May 7, 2025.

The ongoing consolidation under $1,850 is pivotal for market direction, as Ethereum's potential break could shift investor sentiment.

Ethereum recently faced rejection at the $1,850 resistance level. Decreasing trading volume hints at market uncertainty, creating a narrow trading range between $1,775 and $1,850 as of early May. A potential breakout remains dependent on a daily close above $1,850.

Despite struggles at this level, Ethereum's broader outlook remains cautiously optimistic, with analysts projecting a target between $2,000 and $2,150. This anticipated breakthrough would mark a significant market shift if realized. Current price action patterns reflect underlying accumulation phases suggesting possible upward moves.

The dwindling trading volume signals investors are awaiting a clear direction before major moves. The consolidation under $1,850 impacts market psychology, potentially influencing short-term Ethereum trading strategies. As noted by Crypto News, "Ethereum is currently consolidating below a major resistance area after being rejected at the $1,850 zone." A potential breakout could reinvigorate the market, propelling Ethereum towards the psychological $2,000 mark.

Analysts highlight the importance of technical indicators such as the Ichimoku Cloud, suggesting potential upward trends. As volume increases historically after price squeezes, Ethereum could see a renewed buying interest driving further gains, though risks of a price decline remain.

Looking forward, market players will watch if bullish sentiment continues into June, potentially pushing Ethereum into a trading range between $2,700 and $2,900. Further analysis points to potential financial, technological, and investor shifts following current consolidation patterns affecting market forecasts. For ongoing crypto news updates and insights, visit Crypto news updates and insights.

Source: CryptoSlate

World shares were mixed on Wednesday as the U.S. Federal Reserve prepared to wrap up its policy meeting with virtually everyone expecting it to keep interest rates unchanged despite U.S. President Donald Trump’s calls for it to cut borrowing costs.

Germany’s DAX was nearly unchanged at 23,250.56, while the CAC 40 in Paris slipped 0.5% to 7,661.64. Britain’s FTSE 100 shed 0.3% to 8,573.67.

The futures for the S&P 500 and the Dow Jones Industrial Average were up about 0.6%.

In Asia, shares advanced after the U.S. and China said they plan to hold trade talks in Switzerland later this week.

Hong Kong’s benchmark briefly jumped more than 2% after officials in Beijing rolled out interest rate cuts and other moves to help support the Chinese economy and markets as higher tariffs ordered by Trump hit the country’s exports.

But the markets’ reaction to both developments was relatively restrained.

Tokyo’s Nikkei 225 edged 0.1% lower to 36,779.66.

The Hang Seng in Hong Kong gained only 0.1% by the end of trading, closing at 22,691.88. The Shanghai Composite index rose 0.8% to 3,342.67.

The trade talks may account for the decision to announce the economic rescue package, Lynne Song of ING Economics said in a report.

“This way, the easing won’t be seen as a knee-jerk reaction to tariffs. Policymakers are likely now privy to some of the early data on how the economy is being impacted by the tariff shock,” Song said.

But analysts said the muted response to the policies announced Wednesday also may reflect disappointment over the lack of major government spending increases that many economists say may be needed to wrest the Chinese economy out of its doldrums.

“These will help to shore up growth at the margin. But any boost to credit demand will be modest and today’s moves are no substitute for an expansion in fiscal support,” Julian Evans-Pritchard of Capital Economics said in a report.

Australia’s S&P/ASX 200 picked up 0.3% to 8,178.30, while the Kospi in South Korea gained 0.6% to 2,573,80.

On Tuesday, U.S. stocks closed lower as quarterly results showed more companies refraining from forecasting their future profits because of uncertainty created by Trump’s tariffs.

The S&P 500 fell 0.8% in its second drop after breaking a nine-day winning streak, its longest such run in more than 20 years. The Dow dropped 0.9%, and the Nasdaq composite finished 0.9% lower.

Palantir Technologies, which offers an AI platform for its customers, was one of the heaviest weights on the market as it sank 12%.

AI-related companies have been finding it more difficult recently to convince investors to support their stocks after they’ve already shot so high. Palantir’s stock’s price remains near $110, when it was sitting at only $20 less than a year ago.

Uncertainty around tariffs has made U.S. households more pessimistic about the economy and could affect their long-term plans for purchases. That uncertainty has helped fuel a surge in imports ahead of potentially more severe tariffs ahead.

The U.S. trade deficit soared to a record $140.5 billion in March as consumers and businesses alike tried to get ahead of tariffs that went into effect in April and others that have been postponed until July. Last week, the government reported the U.S. economy shrank at a 0.3% annual pace during the first quarter of the year because of a surge in imports.

Some companies say they’re already seeing impacts to their business from the uncertainty created by tariffs.

DoorDash fell 7.4% after reporting weaker revenue than analysts expected for the latest quarter.

Also early Wednesday, the yield on the 10-year Treasury rose to 4.32% from 4.31% late Tuesday.

U.S. benchmark crude oil gained 54 cents to $59.63 per barrel. Brent crude, the international standard, gained 44 cents to $62.57 per barrel.

The U.S. dollar rose to 143.39 Japanese yen from 142.41 yen. The euro fell to $1.1348 from $1.1369.

Source: BNN BIoomberg

GBPUSD forecast: key trading points

• UK construction PMI: previously at 46.4, projected at 46.0
• Fed interest rate decision: previously at 4.5%, projected at 4.5%
• GBPUSD forecast for 7 May 2025: 1.3440 and 1.3270

Fundamental analysis

The UK construction PMI is a monthly gauge that reflects the performance of the country's construction sector. Compiled from purchasing manager surveys, it assesses new orders, employment, and business confidence in construction companies.

A reading above 50.0 indicates growth, while a lower figure signals contraction.

The forecast for 7 May 2025 suggests a further decline in the UK construction PMI to 46.0. Although not dramatic, the reading remains below the 50.0 threshold, which could be a negative factor for the pound and support the ongoing corrective wave.

The GBPUSD forecast also hinges on the Federal Reserve’s interest rate announcement. Markets remain divided, intensifying uncertainty. While the consensus expects the rate to remain unchanged at 4.5%, the possibility of a shift cannot be ruled out. The announcement poses a serious challenge for investors and could significantly impact the GBPUSD rate.

GBPUSD technical analysis

Having tested the upper Bollinger Band, the GBPUSD price has formed a Harami reversal pattern on the H4 chart. It is now developing a corrective wave following the received signal. Since the pair remains within an ascending channel, and given today’s fundamental data from both the US and UK, the bullish wave will likely develop following a correction.

The target for the pullback is 1.3270. A rebound from the support level could open the door for a more substantial upward movement.

The GBPUSD forecast for today also takes into account an alternative scenario, where the price climbs to 1.3440 without testing the support level.

Summary

Alongside the GBPUSD technical analysis, a weaker UK construction PMI and the upcoming Federal Reserve rate decision suggest growth to 1.3440 after a correction.

Source: RoboForex

China expanded its gold reserves for a sixth straight month in April, underlining its push to boost holdings of the precious metal as prices trade near a record and the trade war rumbles on.

Bullion held by the People’s Bank of China rose by about 70,000 troy ounces last month, according to data on Wednesday. In the latest six-month span, volumes have climbed by close to 1 million ounces or about 30 tonnes.

Gold has rallied to successive records this year, supported by concerted central-bank buying as authorities seek to diversify holdings away from the US dollar. Bullion’s upswing — with prices up nearly 30% this year — has also been aided by rising investment demand as the US-led trade war unsettles financial markets, raises concern about US assets and drives haven demand.

In China, there have been signs investors are piling into gold, with volumes on the Shanghai Futures Exchange surging to a record in recent weeks. The voracious onshore appetite has also seen the PBOC issuing fresh quotas for commercial banks to import bullion.

At the same time, the authorities have moved to shore up support for the economy and set the stage for trade talks with senior US officials later this week. On Wednesday, Beijing reduced its policy rate and lowered the amount of cash lenders must keep in reserve, highlighting efforts to buttress growth.

Central banks have increased their gold purchases roughly fivefold since 2022, after a freeze on Russian reserves, according to Goldman Sachs Group Inc, which has been among the most vocal bullion bulls in recent months. The trend is likely “a structural shift in reserve-management behaviour and we do not expect a near-term reversal”, analysts said in a March note.

At that time, the bank estimated that the PBOC held around 8% of its reserves in gold, below the global average of about 20% and also far lower than the elevated share seen in some developed economies. If Beijing were targeting an allocation of 20% and maintained an average pace of about 40 tonnes a month, it would take about three years to reach that level, the analysts said.

Spot’s gold latest peak came in April, when prices topped US$3,500 (RM14,836.49) an ounce. They’ve posted gains every month so far this year and were last at about US$3,387.

Source: Theedgemarkets

Big news from Beijing today! The People’s Bank of China (PBOC), the nation’s central bank, has just announced a significant move that could inject billions into the financial system and potentially send ripples across the global economy, including the ever-watchful crypto markets. We’re talking about a 0.5% cut to the reserve requirement ratio (RRR) for financial institutions.

This announcement, made by PBOC Governor Pan Gongsheng on May 7th, according to state-owned People’s Financial News, is a key piece of China RRR cut policy aimed at stimulating lending and bolstering economic activity. But what exactly does this mean, and why should anyone outside of China care?

What Exactly is the RRR Cut and Why Does it Matter?

Let’s break down this central banking jargon. The reserve requirement ratio (RRR) is the percentage of deposits that commercial banks and other financial institutions must hold as reserves, either in their vaults or on deposit at the central bank (the PBOC in this case). Think of it like a safety buffer or a mandated savings account for banks.

When the PBOC cuts the RRR, it effectively lowers the amount of money banks are required to hold in reserve. This frees up more capital that banks can then lend out to businesses and consumers. It’s a classic tool of monetary easing – making it easier and potentially cheaper for money to flow through the economy.

Why does it matter? In simple terms, a lower RRR means:

• More Money Available for Lending: Banks have more funds at their disposal.
• Potential for Lower Interest Rates: Increased supply of loanable funds can put downward pressure on borrowing costs.
• Stimulus for the Economy: Cheaper and more accessible credit can encourage investment, spending, and business expansion.

For a massive economy like China’s, even a 0.5% cut can release a substantial amount of liquidity into the system. Estimates often place the amount of freed-up capital in the hundreds of billions of yuan.

Why is the PBOC Implementing This Monetary Easing Now?

Central banks don’t cut the RRR just because. Such a move is typically a response to economic conditions and a forward-looking attempt to steer the economy in a desired direction. While the official reasons provided by the PBOC might be framed around maintaining ample liquidity and supporting credit growth, the underlying context is often related to the health and pace of the China economy.

Recent economic data from China has shown signs of uneven recovery post-pandemic. While some sectors perform well, others, particularly property and domestic consumption, have faced headwinds. Export growth has also seen fluctuations.

By implementing this monetary easing, the PBOC is signaling its commitment to providing support to the economy. It’s a proactive step designed to counter potential slowdowns, boost confidence, and ensure that businesses have access to the funding they need to invest and hire, and that consumers feel confident enough to spend.

Consider these potential drivers for the decision:

• Supporting Economic Growth Targets: China sets annual GDP growth targets, and the PBOC’s policies are crucial in helping achieve them.
• Addressing Deflationary Pressures: Sometimes, RRR cuts are used to combat falling prices by stimulating demand.
• Stabilizing Key Sectors: Providing liquidity can help distressed sectors, though the impact on specific areas like property might be limited without targeted measures.

This move is part of a broader toolkit the PBOC uses, alongside adjusting interest rates and other liquidity operations.

How Could This PBOC Move Ripple Through the Global Economy?

China isn’t just a large economy; it’s a global economic powerhouse. Its policies have significant international implications. A China RRR cut doesn’t happen in a vacuum; its effects can be felt far beyond its borders.

Here are a few ways this monetary easing could influence the rest of the world:

1. Impact on Commodity Markets: As a major consumer of raw materials, increased economic activity in China (driven by more lending and investment) can lead to higher demand for commodities like oil, metals, and agricultural products. This can influence global prices.

2. Currency Movements: Monetary easing in China can potentially lead to a weaker yuan relative to other currencies as liquidity increases. This can affect trade dynamics and capital flows.

3. Capital Flows and Investment: Increased global liquidity originating from China could seek opportunities abroad, potentially flowing into emerging markets or even developed economies, depending on investor sentiment and relative returns.

4. Demand for Goods and Services: A healthier China economy means stronger demand for imported goods and services from other countries, benefiting trading partners.

Essentially, when the world’s second-largest economy makes a move to boost its internal engines, the vibrations are felt globally through trade, finance, and market sentiment.

What Does China’s Monetary Easing Mean for Crypto?

Now, let’s get to the question many in our audience are likely asking: How does a central bank policy in China, seemingly unrelated to digital assets, potentially impact the crypto market?

The connection is often indirect but significant, primarily through the lens of global liquidity and risk appetite.

Here’s the thinking:

• Increased Global Liquidity: When a major central bank like the PBOC injects liquidity into its system, it adds to the overall pool of money circulating globally. While much of this stays within China, some can find its way into international markets and various asset classes, including potentially riskier ones like cryptocurrencies.
• Search for Yield/Returns: In an environment where traditional assets might offer lower returns due to easing policies (both in China and potentially elsewhere), investors might look towards alternative assets like crypto for higher potential gains.
• Market Sentiment: A proactive easing measure from China can be interpreted in different ways. It could be seen positively as a sign that authorities are serious about supporting growth, boosting overall market confidence. Conversely, it could be seen negatively if it suggests the underlying economic problems are more severe than previously thought, leading to risk-off sentiment.
• Comparison to Other Central Banks: As other major central banks (like the US Federal Reserve or the European Central Bank) contemplate their own monetary policies, China’s actions provide a point of comparison and can influence the global macroeconomic narrative that often impacts crypto valuations.

It’s crucial to understand that this isn’t a direct pipeline from the PBOC to Bitcoin’s price. The impact is nuanced, filtered through global financial markets, investor psychology, and the specific dynamics of the crypto ecosystem. However, changes in the tide of global liquidity are always relevant for assets like crypto that operate on a global scale and are sensitive to macroeconomic shifts.

Challenges and Potential Downsides

While the intention behind the China RRR cut is positive – to stimulate the economy – such measures aren’t without potential drawbacks:

• Inflationary Risks: Injecting too much liquidity can, in some scenarios, lead to inflationary pressures if not managed carefully.
• Asset Bubbles: Easier credit could potentially fuel excessive speculation in certain asset classes, like real estate or stocks, leading to bubbles.
• Effectiveness: The impact of an RRR cut depends on various factors, including banks’ willingness to lend, businesses’ appetite to borrow and invest, and consumer confidence. If underlying demand is weak, the effect might be muted.
• Debt Levels: China already faces significant debt levels, particularly in the corporate and local government sectors. More lending, while intended to boost growth, could exacerbate debt risks if not channeled productively.

These challenges mean that while the RRR cut is a notable event, its ultimate success depends on a confluence of factors and complementary policies.

Actionable Insights (Not Financial Advice!)

For those tracking markets, including crypto:

• Monitor China’s Economic Data: Keep an eye on future releases regarding lending, investment, consumption, and GDP growth to gauge the effectiveness of this easing measure.
• Watch Global Market Reactions: Observe how global equity, bond, and commodity markets respond to this news and subsequent data points from China.
• Assess Global Liquidity Trends: Consider the PBOC’s action in the broader context of monetary policies being pursued (or considered) by other major central banks. Changes in overall global liquidity can influence risk asset performance.
• Understand Nuance: Avoid drawing simplistic, direct lines between the RRR cut and specific asset price movements. The relationship is complex and influenced by many variables.

Conclusion: A Significant Step in China’s Monetary Policy

The 0.5% China RRR cut announced by the PBOC is a significant step in its ongoing efforts to support the China economy through monetary easing. By freeing up capital for lending, the central bank aims to stimulate investment, consumption, and overall growth.

While primarily focused on domestic objectives, this action contributes to the pool of global liquidity and can have ripple effects on international markets, including potential indirect influences on the crypto landscape. As with any major policy intervention, its ultimate success and full impact will unfold over time, requiring careful observation of economic data and market responses.

This move underscores the interconnectedness of the global financial system and highlights how actions by major central banks, even those seemingly distant from the world of digital assets, can be relevant for understanding broader market dynamics.

Source: CryptoSlate

Investor Sentiment Sours on U.S. Amid Tariff Turbulence

Europe and Japan Attract Capital as Safe Havens and Opportunity Zones

Risk-On Mood Emerges Despite Trade Shock

Shift Toward Deflation-Protective Assets Reveals Changing Macro Expectations

U.S. Market Volatility Drives Global Portfolio Realignment

Source: CNBC