Dollar edges lower after US rating downgraded

The US dollar trimmed a four-week gain in early Asian trade as markets digested a surprise downgrade of the US government's credit rating and as lingering trade frictions weighed on sentiment, reports Reuters.

The greenback advanced 0.6% against major currencies last week after a temporary trade truce between the United States and China eased fears of a global recession. But economic data pointed to rising import prices and waning consumer confidence.

Moody's cut America's top sovereign credit rating by one notch on Friday, the last of the major ratings agencies to downgrade the country, citing concerns about the nation's growing US$36 trillion debt pile.

"The focus on US growth risks and the US administration's policy agenda may have put the US safe-haven status in question," said Mahjabeen Zaman, head of foreign exchange research at ANZ.

US Treasury Secretary Scott Bessent said in television interviews on Sunday that President Donald Trump will impose tariffs at the rate he threatened last month on trading partners that do not negotiate in "good faith."

Trump is facing resistance within his own party in pushing forward a sweeping tax cut bill that would add an estimated US$3 trillion to US$5 trillion to the nation's debt over the next decade.

The dollar lost 0.3% to 145.22 yen. The greenback was also 0.2% lower against the Swiss franc, another safe-haven currency.

The Australian dollar edged up 0.1% to US$0.6409 after three days of losses. The euro stood at US$1.1185, up 0.2%. Sterling traded at US$1.3299, up 0.1%.

 

US Allies Reject Trump’s Trade War

In recent political developments, close allies of the United States—Australia, Singapore, and Canada—have pushed back against former President Donald Trump’s aggressive trade policies. Last year was politically turbulent, with ruling parties in the United States, Britain and other nations losing elections, while governments in countries like Japan and India suffered setbacks. This year, however, the trend appears to be reversing.

Within a single week, Australia, Singapore, and Canada—despite their geographic and cultural differences—held critical elections. All three countries delivered remarkably similar outcomes: victories for incumbent parties that campaigned on strong opposition to Trump’s tariff threats and his transactional approach to global alliances.

Although foreign policy typically plays a minor role in national elections, this time was different. Voters went beyond domestic issues to send a clear message: they reject Trump's combative trade tactics and support leaders who are willing to stand up to them.

The broader takeaway from these elections is the emergence of a new political consensus among America's allies. Public opinion is coalescing around leaders who oppose Trump’s “America First” doctrine, which has disrupted global supply chains, strained diplomatic relationships, and undermined decades of multilateral economic cooperation. This shift signifies not just electoral continuity, but a popular mandate for resisting a zero-sum approach to international relations.

In Japan, Prime Minister Shigeru Ishiba’s ruling Liberal Democratic Party faces another electoral test this summer, with elections for the less powerful—but still influential—upper house of the Diet. Ahead of this, Japan is eager to secure a trade agreement with the US.

Tokyo is preparing for a third round of tariff negotiations this month, though analysts remain skeptical about a breakthrough. Unlike Brirain, which recently secured a limited deal, Japan faces steeper challenges. It starts from a higher baseline tariff rate and must contend with the Trump administration’s firm stance on automotive trade—one of Japan’s most vital export sectors.

On the cybersecurity front, Sergiy Korsunsky, former Ukrainian ambassador to Japan and now a senior adviser at Nihon Cyber Defence Corporation, warns that excessive data accumulation poses serious risks in the age of artificial intelligence.

Diplomatically, Julia Longbottom, the British Ambassador to Japan, highlights recent British trade deals with India and the United States as evidence of shared values with Japan—particularly a mutual commitment to open and free trade.

Saudi Arabia rejects Palestinian displacement

Saudi Arabia has reaffirmed its unequivocal rejection of the forced displacement of Palestinians “under any circumstances,” Minister of State for Foreign Affairs Adel Al-Jubeir said Saturday during the 34th Arab League Summit in Baghdad, reports Saudi Gazette.

He reiterated the Kingdom’s commitment to the establishment of an independent Palestinian state with East Jerusalem as its capital.

“The exceptional circumstances facing the Palestinian cause require us to intensify joint efforts to alleviate the humanitarian suffering of the Palestinian people and to stop the crimes and violations committed by the Israeli occupation forces,” Al-Jubeir said.

He described these acts as flagrant violations of the UN Charter and international law.

Al-Jubeir emphasized the need for a sustainable ceasefire in Gaza and condemned any attempts to impose solutions that undermine Palestinian aspirations for self-determination and statehood within 1967 borders.

He also denounced Israeli attacks on Syrian territory, and stressed the importance of supporting Syria’s sovereignty and stability.

Al-Jubeir praised US President Donald Trump’s recent decision to lift sanctions on Syria during his visit to the Kingdom, calling it “a great opportunity for recovery, development, and reconstruction.”

Turning to other regional conflicts, Al-Jubeir reaffirmed Saudi Arabia’s continued efforts to mediate peace in Sudan, calling for a complete ceasefire, humanitarian access, and the preservation of Sudan’s sovereignty and unity.

He reiterated Saudi Arabia’s support for a comprehensive political resolution in Yemen, and stressed the importance of maritime security and freedom of navigation in international waters.

Addressing Lebanon, Al-Jubeir voiced support for President Joseph Aoun’s efforts to reform state institutions and consolidate all arms under the authority of the state. He expressed hope that Lebanon’s government would meet the aspirations of its people and preserve national stability and unity.

Al-Jubeir concluded by urging stronger Arab cooperation and development to achieve a secure and prosperous future for the region.

Trump once again suggests US taking over Gaza

President Trump has once again suggested the United States would look to take control of the Gaza Strip and turn it into a “freedom zone,” highlighting one of his more controversial foreign policy proposals during a visit to Qatar, according to The Hill.

“I have concepts for Gaza that I think are very good: Make it a freedom zone. Let the United States get involved, and make it just a freedom zone,” Trump said during a business roundtable.

“I’d be proud to have the United States have it, take it, make it a freedom zone, let some good things happen. Put people in homes where they can be safe, and Hamas is going to have to be dealt with,” Trump added.

Qatar has played host to periodic ceasefire talks between Israel and Hamas in an attempt to stop the fighting between the two sides, but so far negotiations have been at a stalemate as bombings continue.

The president, earlier this year first proposed the idea of the US taking control of Gaza, which has been devastated by Israeli military strikes. 

Trump has previously suggested Palestinians living in Gaza would relocate elsewhere in the region while the US rebuilt the strip. He has brushed off questions about how the US would take over the territory, though he previously floated that Israel would turn it over at the conclusion of its war with Gaza.

The idea has drawn pushback from the head of the Palestinian National Authority, as well as from US allies such as Saudi Arabia.

 

United States downgraded by Moody’s Ratings

According to Bloomberg, the US was downgraded by Moody’s Ratings on Friday thanks to government debt that’s approaching a mind-numbing US$37 trillion. It was a dramatic move that cast further doubt on the polarized nation’s status as the world’s highest-quality sovereign borrower. Moody’s lowered the US credit score to Aa1 from Aaa, joining Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position.

The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. The federal budget deficit is running near US$2 trillion a year, or more than 6% of gross domestic product, and Congressional Republicans are pushing through budget legislation that could add trillions of dollars more.

“While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s wrote in a statement. 

Earlier on Friday, new data showed US consumer sentiment has fallen to the second-lowest level on record, and inflation expectations climbed to multi-decade highs.

The preliminary May sentiment index declined to 50.8 from 52.2 a month earlier, according to the University of Michigan. That was lower than all but one estimate in a Bloomberg survey of economists. The main reason cited was President Donald Trump’s trade war.

Nearly three-fourths of respondents to the Michigan survey spontaneously mentioned tariffs. The topic crosses partisan lines, including a notable share of Republicans bringing it up. The new, sobering survey data comes as inflation data from the Trump administration’s Department of Labor has been unexpectedly upbeat, coming in softer than estimates three months in a row.

 

PSX benchmark index up 11.64%WoW

Pakistan Stock Exchange (PS) regained momentum after a ceasefire agreement between Pakistan and India on May 10, 2025, brokered through US mediation. This eased geopolitical tensions and helped stabilize investor sentiment following a week of heightened volatility. The benchmark index closed the week on May 16, 2025 at 119,649 points, recording a gain of 12,474 points, up 11.64%WoW.

On the first trading day of the week, the benchmark KSE-100 index surged by 10,123 points— the highest single-day gain in point terms. Investor confidence was further reinforced by the International Monetary Fund’s approval and disbursement of US$1 billion tranche under the Extended Fund Facility (EFF) and approval of an additional arrangement for the US$1.4 billion under the Resilience and Sustainability Facility (RSF).

On the macroeconomic front, workers’ remittances were reported at US$3.2 billion, resulting in a current account surplus of US$12 million during April 2025. Alongside, Net FDI for the month was reported at US$141 million. Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$71 million to US$10.4 billion.

Average daily trading volume was up by 34.8%WoW to 685 million shares as compared to 508 million shares traded in the earlier week.

Other major news flow during the week included: 1) GoP proposed to 10% tax cut for salaried class, 2) Pakistan and Russia consented to set up a steel mill, 3) IFEM on petrol and diesel increased, 4) Prime Minister set up panel for petroleum sector reforms, and 5) Pakistan and India talks in Saudi Arabia to be scheduled shortly.

Vanaspati & Allied Industries, Transport, Refinery, Woollen and Inv.Banks/ Inv.cos/ Securities.cos were amongst the top performers, while Textile Spinning and Jute were amongst the worst performers.

Major selling was recorded by Banks/ DFIs with a net sell of US$20.6 million. Mutual Funds absorbed most of the selling with a net buy of US$39.2 million.

Top performing scrips of the week were: AGL, FCEP, PTC, ATRL and SEARL, while laggards included: PKGP, IBFL, NESTLE, and PGLC.

According to AKD Securities, PSX is expected to remain positive in the coming weeks, with the recent announcement of a ceasefire and release of tranche by IMF likely to be key triggers. The KSE100 is anticipated to sustain its upward trajectory, driven by strong earnings in Fertilizers, sustained ROEs in Banks, and improving cash flows of E&Ps and OMCs, benefiting from falling interest rates and economic stability.

Top pick of the brokerage house include: OGDC, PPL, PSO, FFC, ENGROH, MEBL, MCB, HBL, LUCK, FCCL, INDU and SYS.

US close to nuclear deal with Iran, says Trump

US President Donald Trump said on Thursday that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had "sort of" agreed to the terms, reports Reuters.

"We're in very serious negotiations with Iran for long-term peace," Trump said on a tour of the Gulf.

"We're getting close to maybe doing a deal without having to do this... there (are) two steps to doing this, there is a very, very nice step and there is the violent step, but I don't want to do it the second way," he said.

An Iranian source familiar with the negotiations said there were still gaps to bridge in the talks with the United States.

Oil prices fell by about US$2 on Thursday on expectations for a US-Iran nuclear deal that could result in sanctions easing.

Talks between Iranian and US negotiators to resolve disputes over Tehran's nuclear programme ended in Oman on Sunday with further negotiations planned, officials said, as Tehran publicly insisted on continuing its uranium enrichment.

The Trump administration gave Iran a proposal for a nuclear deal during the fourth round of negotiations on Sunday.

Though Tehran and Washington have both said they prefer diplomacy to resolve the decades-long nuclear dispute, they remain divided on several red lines that negotiators will have to circumvent to reach a new deal and avert future military action.

Iran's president reacted to Trump's comments on Tuesday calling Tehran the “most destructive force” in the Middle East.

“Trump thinks he can sanction and threaten us and then talk of human rights. All the crimes and regional instability is caused by them (the United States),” Masoud Pezeshkian said.

“He wants to create instability inside Iran.”

However, in an interview with NBC News published on Wednesday, an Iranian official said Iran was willing to agree to a deal with the US in exchange for the lifting of economic sanctions.

Ali Shamkhani, an adviser to Iran's Supreme Leader Ayatollah Ali Khamenei, said Iran would commit to never making nuclear weapons and getting rid of its stockpiles of highly enriched uranium, agree to enrich uranium only to the lower levels needed for civilian use and allow international inspectors to supervise the process, NBC reported.

US officials have publicly stated that Iran should halt uranium enrichment, a stance Iranian officials have called a "red line" asserting they will not give up what they view as their right to enrich uranium on Iranian soil.

However, they have indicated a willingness to reduce the level of enrichment.

Iranian officials have also expressed readiness to reduce the amount of highly enriched uranium in storage—uranium enriched beyond the levels typically needed for civilian purposes, such as nuclear power generation.

But they have said it would not accept lower stockpiles than the amount agreed in a deal with world powers in 2015 - the deal Trump quit.

The Iranian source said that while Iran is prepared to offer what it considers concessions, "the issue is that America is not willing to lift major sanctions in exchange."

Western sanctions have severely impacted the Iranian economy.

Regarding the reduction of enriched uranium in storage, the source noted: “Tehran also wants it removed in several stages, which America doesn't agree with either.”

There is also disagreement over the destination to which the highly enriched uranium would be sent, the source added.