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Gold may find support after Moody’s downgraded the U.S. sovereign credit rating, cutting it from Aaa to Aa1. The move marked the final departure of all three major ratings agencies from the top-tier U.S. rating and cited unsustainable debt growth and rising interest costs as key factors. While Moody’s revised its outlook on the U.S. from “negative” to “stable,” it warned that meaningful fiscal reform remains unlikely. The downgrade came in the wake of underwhelming cost-saving efforts by the Department of Government Efficiency, now overseen by Tesla CEO Elon Musk. Musk had pledged $2 trillion in spending cuts, but reports indicate that only around $100 billion in verified savings have materialized, raising questions about the viability of the government’s austerity agenda. Moody’s had been the last of the major ratings agencies to maintain a top credit rating for the U.S., having placed the country on a negative outlook in late 2023 due to growing fiscal deficits and the rising burden of interest payments. Its latest action adds to investor anxiety about the long-term stability of U.S. public finances.
Market participants anticipate the Reserve Bank of Australia (RBA) will cut interest rates by 25 basis points to 3.85% at its upcoming meeting on May 20, with the potential for further reductions later in the year. The RBA is likely to place greater emphasis on domestic economic indicators, as Australia’s unemployment rate remains below the estimated non-accelerating inflation rate of unemployment (NAIRU) – a dynamic that complicates efforts to curb inflation without stalling growth. Unlike in previous meetings where forward guidance on rate paths was more explicit, expectations are that the central bank will avoid committing to future projections this time. Instead, a cautious approach involving gradual quarterly cuts throughout 2025 is seen as more likely, allowing the RBA flexibility amid persistent economic uncertainties. The RBA’s focus on homegrown data rather than global trends signals a targeted approach to managing inflation and employment issues. This mirrors a broader international trend in which central banks are recalibrating monetary policy tools to navigate a rapidly evolving economic landscape.
U.S. President Donald Trump said he would speak separately with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky on Monday, following limited progress in Friday’s direct talks between Kyiv and Moscow. The Istanbul meeting lasted just over an hour and produced no breakthrough beyond an agreement to exchange 1,000 prisoners of war from each side. A senior Ukrainian official said Russia’s negotiators presented new demands, including a full withdrawal of Ukrainian forces from all territories claimed by Moscow, as a precondition for a ceasefire. Trump, who had earlier offered to join the talks if Putin attended, ultimately remained in the Gulf after the Russian president sent a delegation instead. While the Kremlin declined to comment on the ceasefire conditions, Trump has been stepping up pressure on both leaders to reach a resolution in the three-year-old war. With Putin absent and conditions still on the table, the talks highlighted the continued diplomatic deadlock, even as prisoner swaps offered a modest sign of coordination. Trump’s planned calls on Monday could provide a fresh opportunity for movement – or reinforce the impasse, depending on Moscow’s willingness to compromise.
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