Markets turned cautious as a mix of negative headlines surrounding trade, geopolitics and fiscal stances grabbed attention. Tensions rose on reports of Israel possibly targeting Iran’s nuclear sites, while concerns over larger US deficits from potential tax cuts added pressure. Trade frustrations from China and Japan and fears of coordinated G7 tariffs on cheap Chinese imports also weighed on sentiment.
Adding to the risk-off mood were cautious Fed comments, fallout from Moody’s US credit downgrade, and a lack of progress in US trade talks—all against a light economic calendar.
In response, the US Dollar Index (DXY) slid to a two-week low, extending a three-day losing streak, whereas Gold climbed for a third straight day to its highest in over a week.
EURUSD neared a two-week high, GBPUSD hit a monthly peak, and USDJPY fell for the seventh day, reaching a fortnight low. Further, AUDUSD and NZDUSD rebound while USDCAD drops to the lowest level in two weeks.
Crude oil surged on supply concerns tied to Middle East tensions, cryptocurrencies edged higher, but Asia-Pacific stocks struggled after Wall Street's weak finish. Meanwhile, bond markets stayed volatile, pushing yields higher.
The Euro extended its rally for a third straight day, pushing EURUSD to a two-week high after breaking a key resistance level. The boost came from improved Eurozone consumer confidence, optimism over the EU-UK trade deal, and a softer US dollar, despite cautious ECB remarks and ongoing European political and trade concerns.
USDJPY continued its downtrend for a seventh session, driven by broad dollar weakness and the yen’s safe-haven appeal. This came despite mixed signals from Japan. Tokyo remains critical of US trade policies and firm on removing auto tariffs before finalizing a deal. Meanwhile, Japan's latest Reuters Tankan survey showed weaker sentiment among manufacturers and flat services confidence. April trade data also revealed deeper deficits as export growth slowed and imports fell less than expected.
GBPUSD grabbed attention as an eight-month “Cup and Handle” pattern, strong UK inflation data, and a weaker US Dollar fueled a breakout above the key 1.3435–45 resistance zone. The April inflation beat pushed back BoE rate-cut bets, while optimism around the UK’s recent deals with the US, EU, and India added further momentum, signaling a broader rally in the Pound.
The US Dollar's broad decline supported commodity-linked currencies, but AUD and NZD lagged behind CAD due to their close ties with China and cautious market sentiment. AUDUSD and NZDUSD recovered from recent losses, while USDCAD fell for a third day, hitting a two-week low.
Canadian Dollar’s gains were backed by surging crude oil prices—Canada’s key export—and stronger inflation data, which cooled expectations for BoC rate cuts. In contrast, while Australia’s Westpac Leading Index improved and New Zealand’s inflation expectations rose, mixed NZ trade data and China-related concerns limited upside for the Antipodeans.
WTI Crude hit a one-month high during a four-day rally, driven by reports suggesting Israel may imminently strike Iran’s nuclear sites, raising fears of disrupted oil supply amid ongoing US-Iran talks. The surge came despite bearish signals from rising US inventories, potential OPEC+ output increases, and possible easing of Russia sanctions tied to a Ukraine ceasefire.
Meanwhile, Gold extended gains for a third straight day, breaking past a month-old resistance to reach its highest level since May 12. The rally was fueled by global risk aversion, a weaker US Dollar, and news of China’s gold demand hitting an 11-month high.
Bitcoin climbed to a four-month high and Ethereum stayed firm, boosted by technical breakouts and a weaker US Dollar. The rally comes despite a cautious mood ahead of the June FOMC meeting and uncertainty over the SEC’s stance under its new, more crypto-friendly leadership.
With UK inflation already out and only Canadian housing data and mid-tier central bank speeches ahead, markets will turn their focus to geopolitics, US debt concerns, and trade tensions. Fears over slowing US growth, global supply chain risks, and war threats may limit any USD rebound, even with positive news, while negative headlines could weigh heavily on the Greenback.
This backdrop favors safe havens like the Gold and the Yen, while the Euro, Pound, and commodity currencies may hold recent gains. Crude oil traders, meanwhile, await official US inventory data from the EIA for clearer direction.
May the trading luck be with you!
