Risk appetite remains subdued early Friday as Thursday’s upbeat US PMIs and jobless claims data overshadow concerns over rising US debt. Sentiment took a hit after the US House passed Trump-era tax cuts, intensifying worries about ballooning deficits. Adding to the pressure are lingering effects of Moody’s US credit rating downgrade and renewed trade tensions between Washington and the EU, Japan, and China, especially Beijing's criticism of US treatment of its chipmakers.
Geopolitical risks further dampen optimism. Europe is preparing additional sanctions on Russia, while Moscow shows little interest in a Ukraine ceasefire. Heightened tensions between India and Pakistan, as well as growing friction between Israel and Iran, also cloud the outlook. However, signs of progress in US-Iran nuclear talks provide a glimmer of hope for markets seeking stability.
With this, the US Dollar Index (DXY) weakens, reversing Thursday’s rebound, boosting major currencies and gold. Crude Oil remains under pressure on expectations of increased supply from Iran if a US deal is reached, with OPEC+ also ready to raise output. Cryptocurrencies trade mixed—Bitcoin (BTCUSD) pulls back from its all-time high, while Ethereum (ETHUSD) hits a new weekly peak. Equities show a mixed tone, and bond yields rebound after a volatile session.
The Euro is on track for a weekly gain despite mixed EU/German PMIs, trade tensions, and ECB criticism of US policies. Support comes from a broadly weaker US Dollar and the ECB Accounts, which reflected growing confidence in reaching the inflation target. ECB officials echoed that optimism, further boosting EUR/USD.
The British Pound also extends gains. UK consumer confidence improved in May (though still negative at -20), while upbeat April retail sales and positive sentiment around recent UK trade deals with the US, EU, and India underpin GBP/USD. The pair nears key resistance at 1.3450, flirting with a bullish “Cup and Handle” pattern amid domestic strength and a soft USD.
Meanwhile, USD/JPY pulls back, erasing Thursday’s rebound from a two-week low. Japan’s inflation data reinforces a hawkish tilt at the Bank of Japan, while safe-haven demand for the Yen and unresolved trade issues—especially Japan’s push for the US to drop auto tariffs—add pressure. The pair looks set for its biggest weekly loss since early April, breaking a four-week uptrend.
AUDUSD and NZDUSD hold within weekly ranges, posting slight gains on a weaker US Dollar. However, their upside remains limited by growing dovish sentiment toward the RBA and RBNZ, despite recent improvements in Australian and New Zealand data and positive trade deal prospects. Notably, New Zealand’s strong Q2 retail sales on Friday failed to alter market expectations of an RBNZ rate cut next week.
Meanwhile, USDCAD extends its five-day losing streak, set for its biggest weekly drop since April 7, reversing the previous two-week uptrend. The Canadian Dollar benefits from improved global trade and political sentiment, though downside in crude oil—Canada’s key export—and BoC rate cut expectations limit further gains ahead of today’s Canadian retail sales report.
Gold rises early Friday after facing resistance near the mid-$3,300s and a brief Dollar bounce on Thursday. The metal is on track for its largest weekly gain in six weeks, supported by a weaker US Dollar, uncertainty over US trade and fiscal policies, and global economic concerns. Geopolitical tensions involving Iran, Ukraine, and Pakistan also drive demand for the safe-haven asset.
WTI crude oil prices fall for a third straight day, pressured by rising expectations of eased sanctions on Iran and Russia, OPEC+’s readiness to boost output, and increasing US inventories. Despite a softer US Dollar, crude struggles as global demand concerns, fueled by ongoing trade war fears, limit buying after a two-week rally.
Meanwhile, Bitcoin and Ethereum remain resilient. Although BTC pulls back from its all-time high, both top-tier cryptos gain traction as investors explore alternative assets amid growing optimism in the crypto space. Support comes from continued tech innovation and a surprising boost from US President Trump’s favorable comments on digital assets.
While traders will keep an eye on Canada Retail Sales, US New Home Sales, and speeches from mid-tier Fed officials, the spotlight remains on broader risks, particularly concerns over US economic growth due to tax cuts and rising debt, as well as ongoing trade deal uncertainty.
A key event will be Fed Chair Powell’s weekend speech, which could offer clues on monetary policy and the growth outlook. In the meantime, skepticism over the US economic and trade stance is likely to weigh on the US Dollar, supporting traditional safe havens like Gold, the Japanese Yen, and the Swiss Franc.
Cryptocurrencies such as Bitcoin and Ethereum may stay firm amid growing investor interest and a shift toward non-traditional assets. Most major currencies—excluding JPY and CHF—could see mixed moves, while AUD and NZD may face limited upside despite broader USD softness.
May the trading luck be with you!
