The US Dollar tumbled Wednesday as a one-month tariff reprieve for Canada and Mexico fueled risk sentiment. A multi-month low US ADP Employment Change and the Fed’s “Beige Book” downgrade added to the downside pressure on the USD, overshadowing strong ISM Services PMI and Factory Orders. Further, the CME’s FedWatch tool now shows an 86% chance of a June rate cut, up from 70% a week ago, further weighing on the Greenback.
Meanwhile, global criticism of US tariffs and Trump’s efforts to prevent a government shutdown sent mixed signals, limiting optimism early Thursday. As a result, the US Dollar Index (DXY) hit a four-month low after three days of losses, lifting EURUSD and GBPUSD to their highest since November 2024. AUDUSD and NZDUSD defend their four-day rally, while USDCAD stabilized after a three-day drop.
Elsewhere, crude oil bounces off a 22-month low, gold held near weekly highs, and cryptocurrencies posted a third straight daily gain, eyeing weekly advances. Equities also increased ahead of the European Central Bank’s (ECB) rate decision.
Broad US Dollar selling and optimism over Germany’s defense spending lifted EURUSD to a four-month high ahead of today’s ECB rate decision. However, dovish ECB expectations and trade concerns limit further gains. A hawkish ECB rate cut could extend the pair’s rally if the US Dollar remains weak.
Mixed signals from Bank of England (BoE) Governor Andrew Bailey, Chief Economist Huw Pill, and policymaker Megan Greene on the UK economy and inflation cast doubts on recent upbeat British data and test the GBPUSD bulls at a four-month high. However, a weaker US Dollar keeps the buyers hopeful in their fourth straight day of gains.
Meanwhile, Japan’s top currency diplomat Atsushi Mimura flagged trade concerns, weighing on USDJPY. The pair struggles after Tuesday’s rebound from a five-month low, as speculation over Japan’s intervention and uncertainty around the BoJ’s next move keep traders cautious.
AUDUSD and NZDUSD extend their four-day rally, while USDCAD declines for a third straight day. However, momentum fades as China braces for a trade battle with the US. Rate cut expectations from the RBA, a surprise RBNZ leadership change, and the BoC’s dovish stance also weigh on the Antipodeans. Meanwhile, the likely fierce impact of the US tariffs on Canada and downbeat Crude Oil prices, Canada’s main export, act as additional filters to the USDCAD downside.
WTI crude oil dropped to its lowest level since May 2023 despite a weaker US Dollar and market optimism, before staging a corrective bounce on Thursday. Pressure mounted from looming OPEC+ supply increases and an unexpected rise in US crude inventories, though the commodity managed to pause its four-day losing streak of late.
Gold extends its four-day rise but lacks strong upside momentum as market uncertainty prevails. However, a weaker US Dollar and safe-haven demand amid trade and political risks keep the metal on track to erase last week’s losses.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) extend their three-day winning streak, supported by US President Donald Trump’s optimism ahead of the White House Crypto Summit, broader market positivity, and a softer US Dollar. However, concerns over long liquidation and institutional resistance limit further upside.
While Eurozone Retail Sales and mid-tier US employment data feature on Thursday’s economic calendar, traders will focus on the European Central Bank’s (ECB) anticipated 0.25% rate cut. ECB President Lagarde’s likely dovish remarks, combined with a potential US Dollar bounce, could curb EURUSD’s recent rally. However, if the ECB opts for a hawkish rate cut and the US Dollar struggles to rebound, supported by weak job data and a risk-on mood, EURUSD may push toward the November 2024 peak around 1.0940.
Meanwhile, GBPUSD could face resistance, and USDJPY may consolidate alongside the Antipodeans if the Greenback recovers. Gold may maintain its gains regardless of outcomes, while crude oil could retreat toward recent lows. Cryptocurrencies may gain ahead of the White House Crypto Summit, and equities could pare some gains if negative tariff-related headlines emerge from the US.
May the trading luck be with you!
