Asia-Pacific markets saw limited activity on Friday following a busy Thursday, as the US Independence Day holiday and a quiet global calendar slowed momentum. However, hopes for a US-China trade deal and strong US economic data kept investors cautiously optimistic, pressuring the US Dollar Index (DXY) after a two-day rebound from its February 2022 low.
Fresh signs of progress in US-China trade talks—supported by positive comments from both sides—lifted market sentiment. Strong US Nonfarm Payrolls, ISM Services PMI, and a lower unemployment rate also helped, alongside Fed Chair Powell’s continued support for a patient rate stance despite political pressure to cut.
On Thursday night, US and Chinese officials crossed wires and showed readiness to act on earlier trade agreements, further boosting optimism. Still, Trump signaled readiness to impose new tariffs from August 1 on the rest of the world. Meanwhile, Treasury Secretary Bessent mentioned a likely 10% reciprocal tax across 100 countries and dismissed gloomy US growth forecasts, expecting faster expansion despite the deficit.
Globally, Hamas appeared open to a 60-day ceasefire, Putin confirmed Russia’s willingness to engage in talks with Ukraine, and Zelenskyy expressed readiness for a leaders’ summit to end the war.
In Japan, a surge in household spending bolstered the Yen amid rising bets from the Bank of Japan (BoJ) that it would become more hawkish. However, Australia’s household spending also rose, but rate cut expectations for the Reserve Bank of Australia (RBA) stayed intact.
Canada’s May trade deficit met expectations at -$5.90B, but optimism around a US-Canada trade deal and a possible Bank of Canada (BoC) rate pause kept the Canadian Dollar strong. Oil's weekly gains added further downside pressure on the USDCAD pair.
Despite the softer US Dollar, AUDUSD and NZDUSD remained under pressure. USDCAD, meanwhile, aimed for its largest weekly gain in three weeks. Oil stayed defensive after a recent pullback, while Gold rebounded from key support. EURUSD and GBPUSD showed mild recoveries.
Lastly, Bitcoin and Ethereum ended their two-day winning streaks with slight losses, while Asia-Pacific equities and bond yields edged higher.
Despite concerns over the UK’s fiscal health and political turmoil, GBPUSD posted a two-day rebound and is set for a weekly gain. Similarly, EURUSD ignored ongoing trade deal tensions between EU and US policymakers, along with mixed ECB statements and data, to register its first daily gain in three days, looking toward a second consecutive weekly rise.
This weekend, EU and US officials will discuss the trade deal, which could impact momentum traders on Monday. However, neither side is likely to budge from their demands, which may disappoint trade optimists.
USDJPY saw its first daily loss in three days, heading for a second consecutive weekly loss, driven by strong Japanese household spending, growing concerns over the US-Japan trade deal, and a pullback in the US Dollar.
BoJ policymaker Takata hinted at further rate hikes, dismissing worries about weaker real wages and trade tensions, despite Japan’s lackluster growth. Additionally, Japan’s resilient bond market added further downward pressure on USDJPY.
AUDUSD struggles to extend gains despite upbeat Australian household spending data and renewed optimism over US-China trade relations. The pair remains under pressure as markets increasingly price in a possible RBA rate cut in July, while concerns about Australia’s broader economic health further weigh on sentiment. Although AUDUSD bulls eye a second consecutive weekly gain, recent momentum has faded following a two-day pullback, even as the pair tries to defend its two-week uptrend.
In contrast, USDCAD is on track for its biggest weekly loss in three weeks, despite a lack of strong domestic support from Canadian PMIs or trade data. The decline appears driven by growing optimism around a US-Canada trade deal, the recent strength in crude oil—Canada’s key export—and expectations that the Bank of Canada may hold rates steady for an extended period. These factors continue to favor the Canadian Dollar, keeping pressure on the USDCAD pair.
Crude oil trades cautiously ahead of this weekend’s OPEC+ meeting, holding onto weekly gains despite a surprise rise in US inventories and the US Dollar’s recovery. While hopes for a ceasefire in the Middle East, a possible OPEC+ output hike, and signs of progress toward ending the Ukraine-Russia war could put downward pressure on oil prices, support remains from expectations of stronger demand from China, recent US trade deal progress with key energy suppliers, and a decline in active US oil rigs.
Meanwhile, gold prices rebound after Thursday’s pullback, heading for their first weekly gain in three weeks. The precious metal is supported by a softer US Dollar, ongoing uncertainty around US trade talks, the final passage of Trump’s “Big Beautiful Bill,” and persistent geopolitical tensions. Additional support for XAUUSD comes from continued central bank gold buying and increased purchases by China, reflecting strong institutional demand despite mixed risk sentiment in global markets.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) are on track for their second straight weekly gain, despite mild intraday losses at the time of writing. The upside is supported by the US administration’s announcement of “Crypto Week,” the approval of multiple crypto-related ETFs, a weaker US Dollar, and improved risk sentiment across broader markets. These factors continue to attract investor interest and help offset short-term volatility in the crypto space.
With US markets closed and limited data releases elsewhere, Friday may see subdued trading activity. Still, updates on trade and geopolitical developments could stir some market interest. German factory orders and the EU PPI, along with speeches from mid-tier ECB and BoE officials, might provide minor volatility.
The US Dollar looks set to close the week lower, which could support commodities and major currencies, particularly the Japanese yen. Meanwhile, cryptocurrencies and equities are likely to post mixed performances amid the quieter market backdrop.
May the trading luck be with you!
