Market optimism over Trump’s auto tariff relief faded quickly as China, the EU, UK, and Japan criticized US trade policies and pushed for broader deals. Further, growth fears tied to US trade policy, US-Iran tensions, and stalled Russia-Ukraine ceasefire talks further dampen sentiment. It should be noted that the uncertainty over Canada's Liberal Party forming a majority government, plus mixed global data and Japan’s holiday, also keep traders cautious.
Against this backdrop, the US Dollar Index (DXY) edges up, trimming early-week losses and weighing on major currencies, commodities, and cryptos. Still, markets stay range-bound as traders await key data—US consumer confidence, the Fed’s preferred inflation gauge, Q1 GDP, and NFP.
The US Dollar’s rebound, EU-UK trade unity to counter US pressure, and dovish ECB remarks stall the EURUSD pair’s recovery. In doing so, the Euro traders ignore Germany’s push to avoid a tariff clash with Washington.
Meanwhile, USDJPY consolidates its sharpest drop in over two weeks, boosted by Japan holiday-thin liquidity, reports of life insurers cutting JGB holdings, and tough trade talk from Japan’s economy minister.
Hopes around the UK-US trade talks, backed by the White House optimism, and upbeat UK CBI retail sales pushed GBPUSD to its highest since Feb 2022 the previous day. However, with markets turning cautious and uncertainty over the US trade impacts, Pound bulls face headwinds of late, especially amid a light calendar at home.
AUDUSD retreats from a 20-week high, and NZDUSD fades its bounce from a seven-day low as China's stimulus hopes dim amid Beijing’s tough stance on US trade policies. Elsewhere, USDCAD snaps a 3-day losing streak despite Mark Carney’s Liberals winning Canada's general elections, weighed down by minority government fears and weaker oil prices.
Gold prints mild losses within the weekly trading range as the US Dollar’s corrective bounce joins concerns over China’s bullion demand. Also likely to restrict the XAUUSD moves could be the month-end consolidation and cautious mood ahead of top-tier data/events.
Elsewhere, WTI crude oil extends losses toward a two-week low amid rising hopes of a US-Iran deal, increased OPEC+ output, and demand worries tied to Trump’s tariffs.
Bitcoin (BTCUSD) trims gains after its biggest daily jump in a week, while Ethereum (ETHUSD) extends its recovery amid dicey markets. That said, a firmer US Dollar tests sentiment, but record ETF inflows and optimism ahead of Trump’s industry dinner keep the crypto mood upbeat.
Despite a quiet start due to Japan’s holiday and a light Asian economic calendar, a busy day awaits with crucial data and political updates from the US, EU, and Canada. Key releases like EU and US Consumer Confidence, US Housing Starts, JOLTS Job Openings, and Trade Balance will steer sentiment, while ongoing discussions around Canada's general elections and US auto tariffs add to market liquidity.
The US Dollar is poised to continue its rebound, potentially putting downward pressure on major currencies, commodities, and equities. However, month-end consolidation and market indecision could limit the downside for safe-haven assets like Gold, JPY, and CHF. That said, cryptocurrencies are expected to trade mixed but defend the overall bullish trend amid industry optimism.
May the trading luck be with you!
