Moody’s downgrades US credit, China cuts US bond holdings. Gold and JPY rally, USD weakens. Global markets react strongly on May 19, 2025.

US creditworthiness shaken, safe-haven assets surge, and global market sentiment shifts. The financial landscape opened the week with sharp reactions after Moody’s stripped the US of its final AAA rating, marking the end of an era. Combined with geopolitical pressures, commodity volatility, and shifting forex trends, May 19 was a pivotal day for global investors.

Moody’s Downgrades US Credit, Triggering Market Shock

Moody’s officially downgraded the US credit rating, becoming the final of the three major agencies to do so. The immediate market response included:

• A broad USD sell-off

• Falling US equity indices

• Sharp declines in US Treasury bond prices, with yields surging

Impact: Confidence in the US fiscal outlook dropped significantly. Global investors began reassessing risk, driving a move toward safe-haven assets.

China Cuts US Bond Holdings, Slips to 3rd Largest Holder

China continued reducing its holdings of US government bonds, dropping to third place behind the UK.

Impact: A clear signal of weakening global confidence in US debt stability. Long-term Treasury yields may face continued upward pressure due to falling demand.

Gold and Japanese Yen Rally as Safe Havens

Gold prices surged, with Vietnam’s SJC gold price climbing by VND 800,000 per tael. The Japanese yen strengthened against the USD and EUR.

Impact: Risk-off sentiment returned to markets. Investors sought protection in traditional safe-haven assets amid rising global uncertainty.

AUD, NZD, and RMB Weaken Amid Weak Data

The Australian dollar, New Zealand dollar, and Chinese yuan slipped due to:

• Disappointing Hong Kong GDP data

• Falling commodity prices

Impact: Regional currencies underperformed as traders shifted capital to safer assets and USD-alternatives like JPY and gold.

US Stocks Mixed: Tech Recovers, Energy Weakens

• Real estate and energy stocks continued to slide.

• Healthcare and technology stocks posted modest gains after a prior sell-off.

Impact: Sector rotation in progress. Defensive and growth sectors are showing resilience while cyclical stocks remain under pressure.

China Tightens Rare Earth Exports, Slaps 75% Tariff on US Plastics

China imposed stricter controls on rare earth exports and introduced a near-75% tariff on US plastic imports.

Impact: Increased risk of disruption to high-tech supply chains globally, especially in semiconductors, EVs, and defense technology.

US-Iran Nuclear Standoff Escalates

The US issued a stern warning regarding Iran’s nuclear activities. Iran responded with strong rhetoric, rejecting compromise.

Impact: Rising geopolitical risk in the Middle East could fuel further volatility in oil and defense markets.

North Korea Advances Drone Warfare Capabilities

North Korea unveiled advancements in UAV integration for military operations.

Impact: Heightened tensions in Northeast Asia could impact regional defense spending and investment risk perception.

USD and CNY Retreat; Forex Market in Flux

• The US dollar weakened across both free and interbank markets.

• Chinese yuan followed suit as risk aversion increased.

Impact: Forex traders should closely monitor central bank guidance and shifting capital flows amid rising global uncertainty.

Commodity and Equity Markets in Holding Pattern

• Commodity markets remain directionless, awaiting outcomes from US-China trade negotiations.

• Global stock indices are in a narrow range, with low liquidity and cautious sentiment prevailing.

Trading Strategy Insights – May 19, 2025

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