MARKET COMPASS
Tariff Tensions Ease
“Donald Trump, who was elected US President on January 20, likes to play hardball, but he is using tariffs as a tool to strengthen his hand before he sits down at the negotiating table. ” And we are finally at the negotiating table.
The trade war agenda and Trump’s softening tone helped ease tensions. Stock markets found ground for gains and digital assets appreciated in an environment of increased risk appetite. Bitcoin surpassed the 6-digit price level for the first time since February. We can say that developments specific to the ecosystem, such as the steps taken by two states in the US on crypto reserves, were also effective in this.
Global markets will continue to monitor the progress on trade wars and clues regarding the US Federal Reserve’s (FED) decisions. Therefore, these topics will continue to be important for the digital assets front as well. The second week of May contains important dynamics in this respect.
Trade Talks in Switzerland
The fact that an agreement was reached with the UK during the week strengthened the belief that tensions over trade wars would start to ease. The US delegation’s talks with China over the weekend will be important to maintain this conviction. This will be the first official face-to-face contact between the two countries after the imposition of 145 percent tariffs on Chinese goods.
Both sides’ delegations will be led by senior officials. The main agenda item is of course the reduction of high tariffs and the rebalancing of relations. According to Bloomberg sources, if the talks were positive, the US could lower tariffs on China below 60%. However, President Trump said on Friday that “80% tariffs for China seems about right”, although he noted that it was up to Treasury Secretary Bessent. This could be taken as a sign that the negotiations will be tough and uncertain at first.
Sources close to the issue state that the meeting will be more about voicing problems rather than finding solutions to the problems between the two countries. It is said that among the US’s prioritized demands is the lifting of China’s export restrictions on rare earth elements used in magnet production. There are also reports of progress on the problematic fentanyl trade.
Our expectation is that there will be an agreement that the talks will continue. Apart from that, we do not expect to see any statement that the existing problems will be resolved. Of course, even this can be considered as an important step. In terms of the markets, the pricing points to the possibility of a “pretty good” scenario. We can say that this poses a downside risk after the recent rises. In a scenario where expectations are not fully met, we are likely to see value losses. If real progress is made, we may witness a bullish climate, but for now, this route seems to have a slightly lower probability.
US Consumer Price Index: CPI
US President Donald Trump’s unpredictable behavior and tariffs have certainly not made things easier for the US Federal Reserve (FED). The latest inflation data may have provided some relief for the Federal Open Market Committee (FOMC), which is trying to make decisions in a challenging environment. However, we know that the FED generally avoids making decisions based only on one-period data.
Consumer prices in the world’s largest economy recorded the largest monthly decline (-0.1%) in March since May 2020. The biggest contributor to this was gasoline prices, which fell by 6.3%. However, we also saw lower figures in core data, which excludes food and energy prices. Core CPI rose by 0.1% (unrounded 0.06%), the smallest increase since January 2021. Airline ticket prices (-5.3%), out-of-home accommodation (-3.5%) and used car prices (-0.7%) were the notable components of the slowdown. The annual headline CPI decelerated to 2.4% (February: 2.8%) and reached the level of September 2024.
Source: Bloomberg
As can be seen in the chart above, core services continue to hold the largest share in the overall price level. Our expectation is for a monthly increase of 0.16% and an annual CPI of around 2.28%. Nevertheless, the market will react according to the consensus expectation.
A lower-than-expected CPI reading could mean that the FED will be in a better position to cut interest rates, which could have a positive impact on digital assets. A figure that exceeds forecasts, on the other hand, has the potential to exert pressure by reinforcing expectations that the FED will not rush into another rate cut.
FED chair Powell’s speech
Speaking after the last Federal Open Market Committee (FOMC) meeting of the US Federal Reserve (FED) on May 7, Chairman Powell signaled that the Bank would maintain its “wait-and-see” strategy. On Thursday, May 15th, Powell will speak at the Second Thomas Laubach Research Conference, and we do not expect him to take a different stance compared to his recent statements. However, the Fed Chairman’s speech is always important and any message about the interest rate cut course may have an impact on the markets. In this context, we can consider Powell’s speech among the important developments of the week.
Digital Compass
In the US, the locomotive of the world economy, we consider the strategic crypto reserve, which started with Trump’s nomination process, as a very important development. However, the fact that the markets had already priced in the “best case scenario” before and after the US elections and the “less than perfect” news on this issue put pressure on digital assets. We continue to keep the strategic reserve issue in our equation as a positive variable for cryptocurrencies in the long run. Taking into account the recent developments on trade wars, we maintain our bullish expectation for the medium and long term.
*General Information About Forecasts
In addition to the general market expectations, the forecasts shared in this report are based on econometric modeling tools developed by our research department. Different structures were considered for each indicator and appropriate regression models were constructed in line with data frequency (monthly/quarterly), leading economic indicators and data history.
The basic approach in all models is to interpret historical relationships based on data and to produce forecasts that have predictive power with current data. The performance of the models used is measured by standard metrics such as mean absolute error (MAE) and is regularly re-evaluated and improved. While the outputs of the models guide our economic analysis, they also aim to contribute to strategic decision-making processes for our investors and business partners. Data is sourced directly from the FRED (Federal Reserve Economic Data) platform in an up-to-date and automated manner, so that every forecast is based on the latest economic data. As the research department, we are also working on artificial intelligence-based modeling methods (e.g. Random Forest, Lasso/Ridge regressions, ensemble models) in order to improve forecast accuracy and react more sensitively to market dynamics. The macroeconomic context should be taken into account in the interpretation of model outputs, and it should be kept in mind that there may be deviations in forecast performance due to economic shocks, policy changes and unforeseen external factors. With this monthly updated working set, we aim to provide a more transparent, consistent and data-driven basis for monitoring the macroeconomic outlook and strengthening decision support processes.
Darkex Research Department Current Studies
US Bitcoin Strategy: Tariff Revenues on the Table
Current Situation and Market Analysis in Bitcoin Futures
Trump Pressures Fed: A New Era in the Spiral of Interest and Confidence
Click here for all our other Market Pulse reports.
Important Economic Calendar Data
Click here to view the weekly Darkex Crypto and Economy Calendar.
INFORMATION
*The calendar is based on UTC (Coordinated Universal Time) time zone.
The calendar content on the relevant page is obtained from reliable data providers. The news in the calendar content, the date and time of the announcement of the news, possible changes in the previous, expectations and announced figures are made by the data provider institutions.
Darkex cannot be held responsible for possible changes arising from similar situations. You can also check the Darkex Calendar page or the economic calendar section in the daily reports for possible changes in the content and timing of data releases.
Legal Notice
The investment information, comments and recommendations contained in this document do not constitute investment advisory services. Investment advisory services are provided by authorized institutions on a personal basis, taking into account the risk and return preferences of individuals. The comments and recommendations contained in this document are of a general type. These recommendations may not be suitable for your financial situation and risk and return preferences. Therefore, making an investment decision based solely on the information contained in this document may not result in results that are in line with your expectations.
