Momentum slows midweek as month-end flows and caution ahead of major US and European data weigh on risk appetite. Softer US consumer confidence, a widening trade deficit, and weak labor market signals have pulled down the Atlanta Fed’s Q1 GDP forecast, prompting markets to price in 125 bps of Fed rate cuts by April 2026. Recession fears are rising, as reflected in Polymarket odds, while Trump’s vague comments on auto tariff relief and unclear US trade deals, despite hints of progress with India, fail to lift sentiment.
China’s weaker manufacturing PMI further dampens the mood, pressuring commodities and commodity-linked currencies like AUD and NZD.
Against this backdrop, the US Dollar Index (DXY) extends its rebound, pressuring EURUSD, GBPUSD, and Gold, while supporting a recovery in USDJPY. Meanwhile, USDCAD and USDCHF edge lower, Oil remains under pressure, and cryptocurrencies post modest gains.
EURUSD falls for the second straight day as the US Dollar stages a corrective bounce, despite growing Fed rate-cut bets and rising US recession fears. Even so, the major currency pair remains within a short-term trading range. That said, the Euro struggles due to renewed EU-US trade tensions and doubts over the Eurozone’s ability to sustain its recent economic rebound amid global trade and geopolitical headwinds. Adding pressure are weaker-than-expected German Retail Sales and soft sentiment data across the bloc. With key Eurozone and US growth and inflation figures due later today, traders remain cautious about EURUSD’s near-term direction, even as the pair eyes its third consecutive monthly gain.
GBPUSD stretches the previous day’s pullback from a 38-month high as USD rebound joins a three-month low of the UK business sentiment. Additionally, renewed EU-UK alignment against US trade protectionism, doubts over the UK's economic resilience and rate outlook also challenge the Pound Sterling buyers. Meanwhile, USDJPY extends gains after Japan’s Retail Sales and Industrial Production disappoint. The pair also finds support from stalled US-Japan trade talks and concerns that rising global recession risks may limit the Bank of Japan’s tightening path.
Growing concerns about the US-Australia trade deal and upbeat Australia inflation allow AUDUSD to reverse the previous day’s losses despite China woes and dovish comments from Australian Treasurer Chalmers.
NZDUSD traces its Australian counterpart and posts minor gains despite the jittery markets and downbeat April business confidence details from New Zealand.
Elsewhere, USDCAD remains pressured after a mixed day as optimism surrounding the US-Canada ties spread after Mark Carney’s victory in Canadian general elections. In doing so, the Loonie pair ignores the downbeat performance of Crude Oil, Canada’s key export, and the dovish BoC bias.
WTI crude drops for the third day, hitting its lowest since April 11, as a surprise build in US oil inventories, China’s economic worries, and OPEC+ output fears dampen sentiment. Gold also retreats for a second straight day despite a shaky US Dollar, pressured by China-linked demand concerns, US tariff uncertainty, and typical month-end market consolidation.
Despite the US Dollar’s rebound weighing on risk assets, Bitcoin (BTCUSD) and Ethereum (ETHUSD) edge higher, reversing Tuesday’s losses as optimism builds on Arizona Reserve plans, strong corporate demand, and rising ETF inflows.
Traders brace for key data releases today, including the first readings of Q1 2025 GDP from Europe and the US, the US Core PCE Price Index, and ADP Employment Change. Also in focus are preliminary growth and inflation numbers from Germany, along with Trump’s 'Investing in America' remarks and final efforts by Chinese players ahead of the Labor Day holiday.
Early indicators suggest weaker US growth and inflation data, which could weigh on the US Dollar and allow Gold and other major currencies to recover. However, the EURUSD may struggle to stay firm, given disappointing data from the Eurozone and Germany. Meanwhile, Crude Oil could remain under pressure, Antipodean currencies may see volatility, and cryptocurrencies and equities could see mild gains.
May the trading luck be with you!
