Market sentiment remains mildly positive early Thursday, mirroring Wall Street's gains, as traders await major trade deal news from Trump and developments in US-China talks. Optimism is supported by the Fed’s cautious pause and remarks from Treasury Secretary Bassent. However, risks linger as China refuses to compromise, Trump resists tariff cuts, and geopolitical tensions rise in the Middle East, Pakistan, and Ukraine. Additionally, caution prevails ahead of the Bank of England’s (BoE) policy decision and quarterly updates on “Super Thursday.”
As expected, the Fed held rates steady, but Chair Powell struck a cautious tone, citing inflation concerns, tariff uncertainties, and the need for more data before considering rate cuts. Meanwhile, China reaffirmed its refusal to compromise in trade talks, and Trump ruled out lowering tariffs to entice negotiations. Adding to the intrigue, Trump announced he’ll unveil a “major” trade deal Thursday at 10 a.m. ET, with reports pointing to the UK as the partner.
Elsewhere, Treasury Secretary Bassent forecasted a drop in the US debt-to-GDP ratio next year, adding to the slightly positive sentiment. However, Geopolitical tensions challenged the risk-on mood, with US-Iran friction, escalating Indo-Pak conflict, ongoing Gaza unrest, Ukraine-Russia standoff, and a fresh missile launch from North Korea.
Against this backdrop, the US Dollar Index (DXY) holds firm after breaking a three-day losing streak, pressuring EURUSD and Gold while boosting USDJPY. Further, GBPUSD stays mildly bid, but USDCAD inches higher. That said, AUDUSD and NZDUSD trim recent losses, and Bitcoin (BTCUSD) and Ethereum (ETHUSD) hit multi-day highs. Asian equities edge higher, tracking Wall Street’s strength, though bond markets remain tense.
EURUSD remains pressured as a stronger US Dollar and the ECB’s dovish stance outweigh upbeat German data and trade optimism in the bloc. The pair posted its steepest daily drop in two weeks the previous day. Meanwhile, USDJPY extends the previous day’s rebound, supported by cautious BoJ minutes and broad risk-on sentiment. However, gains are capped as BoJ Governor Ueda flags concerns over food-driven inflation, even as former Governor Kuroda backs policy normalization.
Despite expectations for a 25bps rate cut from the BoE, GBPUSD rebounds after its steepest loss in a week, supported by optimism around potential UK trade deals with the US, EU and India. Additional support comes from upbeat UK house price data and anticipation of positive remarks from BoE Governor Bailey. That said, recent UK efforts to secure agreements with major partners like the EU, US, and India could further bolster the Pound, in case of more positive updates, even if the central bank maintains a dovish tone.
Optimism over potential US trade deals with China and the UK helps AUD/USD and NZD/USD recover from recent losses. In contrast, the Canadian Dollar struggles as mixed signals from Beijing and Washington, along with weaker crude oil and limited progress on US-Canada trade, weigh on sentiment. As a result, AUDUSD and NZDUSD remain mildly bid, while USDCAD extends its rebound.
Gold prices decline for a second day as trade tensions ease and the US Dollar strengthens, shadowing ongoing tariff and political risks involving major buyers like China and India. Month-start positioning may also be contributing to the pullback. Meanwhile, WTI crude oil remains under pressure despite a larger-than-expected US inventory draw and trade deal optimism. Concerns over OPEC+ supply increases and weaker global energy demand due to US tariffs are weighing on prices.
Bitcoin (BTCUSD) extends its four-day rally, hitting the highest level since late February, while Ethereum (ETHUSD) breaks out of its short-term range to reach a five-week high. The surge is fueled by trade optimism, strong ETF inflows, and increasing adoption as several US states move toward holding Bitcoin reserves.
Markets remain cautiously optimistic as Trump signals a major trade deal announcement Thursday, while no abrupt collapse in US-China trade talks sustains hope. However, any lack of concrete progress from Washington, London, or Beijing could revive risk-off sentiment and weigh on the US Dollar.
GBPUSD may struggle to benefit from a softer dollar, as the BoE is expected to cut rates, and confidence in Governor Bailey’s optimism remains limited. Still, positive trade headlines could support the Pound’s rebound.
Other majors and commodities may find limited relief, with the Dollar likely to hold firm, especially if US jobless claims data reinforces labor market strength. Gold may extend its decline, while cryptocurrencies and equities could prolong gains unless trade-related setbacks resurface.
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