Insights 
VT 
Gold Prices and Geopolitical Tensions
The New Zealand Producer Price Index for the first quarter exceeded expectations, registering a 2.1% quarterly increase. This was a substantial rise compared to the anticipated 0.1% increase.
EUR/USD dropped to three-day lows, reaching around 1.1130, as the US Dollar gained strength despite weaker data from the U-Mich index. Concurrently, GBP/USD fell to 1.3250, influenced by an uptick in US consumer inflation expectations.
Gold prices fell below the $3,200 mark, reversing gains from a prior rally. This decline resulted from a stronger US Dollar and reduced geopolitical tensions, putting gold on track for the largest weekly loss this year.
Ethereum continued its recovery over $2,500, benefiting from the Pectra upgrade’s positive market reception. This development led to an increase in EIP-7702 authorizations, reflecting healthy adoption by wallets and decentralised applications.
Former President Trump’s Middle East visit in May 2025 resulted in several trade agreements aimed at enhancing US trade relationships. These deals were focused on correcting trade imbalances and bolstering America’s technological and defence exports.
In foreign exchange trading, the use of leverage entails a high risk due to the potential for substantial losses. Traders must assess their experience and risk tolerance carefully before engaging in such trades.
Knock On Effects of Price Index Rise
The unexpectedly high 2.1% rise in New Zealand’s Producer Price Index for the first quarter has created some immediate knock-on effects across macro trading strategies. Forecasts had pointed to a flat 0.1% increase, so the actual data release came as a jolt. Costs are clearly rising more aggressively than traders had priced in. These outcomes tend to push interest rate expectations higher, prompting market participants to consider upward revisions to local bond yields. Naturally, this also leads to recalculated interest rate differentials, something we must keep close eyes on — especially when setting up medium-term cross-rate exposures.
Over in currency markets, EUR/USD slid lower, falling to a weekly trough of around 1.1130. This came even as U.S. consumer sentiment readings were disappointing. The reaction was more about underlying dollar strength fed by increased inflation expectations in the U.S., rather than microeconomic data points that are often shrugged off unless particularly extreme. Euros took the brunt of the adjustment, but it wasn’t alone. Sterling also retreated, with GBP/USD hitting lows around 1.3250. The decline reflected a combination of repositioning and the adjustment in implied rates prompted by the same higher U.S. inflation expectations. Inflation breakevens and short-end swap curves have steepened in tandem, particularly on the U.S. side, which gives dollar bulls more runway in the shorter cycles.
Gold’s drop beneath the $3,200 mark brings metals positioning back into focus. The earlier upward trend was largely driven by hedge demand amidst geopolitical flare-ups, which have since eased. That, together with recovery in the dollar and reduced appetite for safety flows, created a situation ripe for profit-taking in gold. The fact that it’s tracking for its largest weekly drop of the year suggests that some momentum strategies may have shifted back into net short territory, or at least gone flat. When both volatility compression and dollar strength occur simultaneously, metals become less appealing both as hedges and directional bets.
Meanwhile, Ethereum’s move through the $2,500 level has been underpinned by fundamental progress in network upgrades. The recent traction gained by EIP-7702 authorisations following the Pectra update points to both growing adoption and enthusiasm from developers. Unlike short-term sentiment-driven rallies, this price strength appears grounded in real uptake metrics — reflected by the increase in integrated wallets and decentralised applications. This type of development often supports a broader base for pricing models used in smart contract platforms. We continue to monitor gas fee structures and validator metrics for early warning signs of overextension.
Trump’s May 2025 Middle East visit, which resulted in several detailed trade agreements, brought a stream of positive commentary around greater U.S. technology exports and broader bilateral trade cooperation. Defence exports appear to have formed a key part of the discussions. From a geopolitical angle, such deals may bring supply chain changes that affect defence-linked manufacturers and select tech producers. These are difficult to price immediately but often show up in sector-based equity derivatives before making their way into broader valuation models.
As always, leveraged foreign exchange trading remains inherently risky, particularly in weeks like these, where data shocks and sharp repricing events cluster together. Risk should be weighed more cautiously during periods of dollar strength, especially when it’s driven not by growth but by shifts in inflation expectations. We advocate re-evaluating exposure levels, particularly on pairs facing asymmetric shocks, and recalibrating stop-loss positioning accordingly.
