Markets started the week on a positive note after the German election results, boosting riskier assets. However, Trump’s tariff confirmation on Canada and Mexico, along with mixed Ukraine headlines, dampened sentiment. Progress on the US-Ukraine minerals deal and Putin’s acknowledgment of Trump’s peace efforts eased geopolitical fears, but doubts about Russia’s willingness to step back and tensions with Europe kept uncertainty high. This helped the US Dollar recover and challenge the run-up of major currencies, commodities, and Antipodeans. Meanwhile, weak Dallas Fed and Chicago Fed data, along with Fed’s Goolsbee advocating a 'wait and see' approach on inflation and policy impact, challenged the Dollar’s gains afterward.
The US Dollar’s week-start rebound challenged the Euro (EUR) and the Japanese Yen (JPY) buyers. However, the EURUSD refrains from declining further while the USDJPY fades the previous day’s recovery from a multi-week low amid mixed market sentiment. In doing so, the Euro traders overlook weak German IFO and EU inflation data, as well as the ECB’s dovish stance, likely due to German elections and cautious optimism on Ukraine, alongside soft US data.
Meanwhile, strong Japan PPI Services data reinforced hawkish BoJ expectations and reverses the USDJPY pair’s U-tur from a 12-week low. However, Japanese policymakers have recently been supporting market intervention to defend the Yen but an absence of actual measures confuses the JPY traders.
GBPUSD initially surged to a 2.5-month high but ended Monday with slight losses for the second consecutive day. The pullback was driven by the US Dollar’s recovery and BoE policymaker Swati Dhingra’s comments hinting at further rate cuts. Economic transition concerns and trade war fears also pressured the Pound. However, optimism over Ukraine developments, along with market caution ahead of speeches from BoE’s Huw Pill, Fed’s Michael Barr, and Richmond Fed’s Thomas Barkin, helped GBPUSD regain ground with its first intraday gains in three days.
Like other major currencies, the Australian, New Zealand, and Canadian Dollars posted their first intraday gains in three days against the US Dollar early Tuesday. Antipodeans benefited from cautious optimism, China’s stimulus readiness, and an unchanged MLF rate from the PBoC, alongside a weaker US Dollar. Meanwhile, USDCAD sellers struggled for momentum despite a rebound in crude oil prices, which pared Friday’s steepest daily drop since November.
Gold hit a new all-time high on Monday amid a weaker US Dollar and uncertain market sentiment but later retreated as traders awaited fresh catalysts. A light economic calendar, lack of major demand updates from China and India, and caution ahead of key US data/events kept buyers in check early Tuesday.
Meanwhile, crude oil extended its recovery from Friday’s steep drop, supported by a softer US Dollar, cautious optimism, and supply concerns. Traders also awaited Tuesday’s US private oil inventory data, which helped crude hold its gains.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) extended losses into Tuesday, pressured by fresh US tariff fears on Canada and Mexico, as well as industry hacking concerns. Cryptos also struggled to benefit from easing Ukraine tensions amid a cautious market mood and mixed ETF signals.
With no major data or events on Tuesday, market momentum may stay limited amid mixed trade and geopolitical news. This could keep the US Dollar under pressure, allowing other currencies and commodities to defend recent gains. Gold may extend its pullback, while GBPUSD and EURUSD struggle for upside amid dovish central bank signals. USDJPY could stay weak, Antipodeans may edge higher, and crude oil may continue recovering. Meanwhile, cryptocurrencies can face further downside, while equities could hold lower ground after an initial rebound at the US open.
May the trading luck be with you!
