Several Fed officials expressed hawkish views, and the market bet on the Fed to raise interest rates

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Gold prices fell 0.7% on Friday and were on track for a fourth straight weekly loss, hitting their lowest since Feb. 4 at $1,798.86 earlier in the session. A strong U.S. dollar and imminent U.S. rate action on more aggressive interest rates has eroded interest in gold; Fed Chairman Jerome Powell said the Fed's inflation-fighting battle will "have some pain" as the impact of higher interest rates plays out. Gold took a hit as the Federal Reserve has been aiming to raise interest rates quickly, and the U.S. dollar has been extremely strong. Looking ahead, inflation data will be closely watched; the U.S. dollar index is set for a sixth straight weekly gain and is now hovering near a 20-year high.

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According to data released by the U.S. Bureau of Labor Statistics, the U.S. CPI rose 8.3% year-on-year in April, a slowdown from the 8.5% increase in the previous month, but higher than market expectations of 8.1%. The core CPI, which excludes food and energy prices, rose 6.2% year-on-year, slightly down from the previous month's peak of 6.5%, but still beating market expectations of 6%. U.S. inflation may have shown some signs of cooling. However, economists and analysts generally agree that it is too early to say that inflation has peaked or is close to it.

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Long-term government bonds led the decline in the U.S. bond market, with yields near the highest level in the session, and the stock market continued to be well supported in the afternoon. German Bunds fell near the London market's close, helping to push up U.S. Treasury yields. U.S. 20-year Treasury bond yields closed up as high as 9.5 basis points, and long-term Treasury bonds were weaker than the broader market; 10-year Treasury bond yields closed at around 2.935%, approaching the low end of the 2.82% to 3.20% range; The University of Michigan's consumer confidence index fell short of expectations in May, but yields faced upward pressure on the stock market's opening gains. An options trade that day bet on the 10-year Treasury note to be higher, with a target for yields to fall to 2.25% by the end of August.

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WTI crude futures for June delivery rose $4.36 to settle at $110.49 a barrel. A global shortage of refined products continues to push up fuel prices as Russia’s diesel exports slump; buyers shunning supplies from Russia led to a drop in the country’s diesel exports in April compared to before the invasion of Ukraine. Fuel is currently the bullish driver for crude oil, especially with Russian diesel exports falling, and the path of least resistance for all petroleum products still looks to be up as demand continues to outstrip supply; the U.S. peak summer driving season is approaching A drop in fuel inventories means the situation for consumers is unlikely to improve. U.S. gasoline futures are now $55 a barrel above crude, the widest spread in years.

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The U.S. Senate confirmed Powell's nomination for re-election as Fed chairman with 80 votes in favor and 19 against. At the end of last year, US President Biden nominated Powell for re-election as Fed chairman. On the same day, Powell said in an interview with a radio program that the Fed is prepared to try to bring inflation back to its 2% target level, even if it has a short-term impact on the economy. Powell said the process of bringing inflation back to 2% will be painful, but the bigger pain is that we have failed to fight inflation, and if that happens, we will have a deeper recession. On May 4, the Federal Reserve Open Market Committee announced that it would raise the target range of the federal funds rate to a range of 0.75%-1.00%, which is the first time the Fed has raised interest rates by 50 basis points in nearly 20 years. In addition, the Fed decided to reduce its holdings of U.S. Treasury securities, agency debt and agency mortgage-backed securities starting June 1, initially by $47.5 billion per month, and increased to $95 billion per month three months later.

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German Bunds were set to end the week lower for the first time this week as traders trimmed positions ahead of the weekend and a fresh wave of risk appetite emerged in the market. German 10-year bond yields rose 12 basis points to 0.96% at one point; Italian bonds also fell, 10-year bond yields rose 16 basis points to 2.87% at one point, and the Italian-German bond yield spread rose since Monday. Widening for the first time since; return to normalization of interest rate volatility requires less uncertainty about central bank policy; traders now expect the ECB to raise rates by more than 85 basis points by December, up more than 5 basis points from the previous session; ECB April Minutes of the policy meeting are due next week; Bund yields rose 11 basis points to 0.95%, while Bund futures fell 84 points to 153.92.