Early Monday, cautious optimism is supported by hopes for progress in US-China trade talks, a slightly better-than-expected US jobs report, and holidays in Australia and parts of Europe. This improved mood, however, is tempered by riots in Los Angeles and warnings from JP Morgan’s CEO about cracks in the bond market, which weigh on the US Dollar. As a result, major currencies and commodities recover some of Friday’s losses and extend weekly gains.
Japan’s upbeat final GDP data helps pull USDJPY lower, snapping its two-day winning streak and pausing a two-week uptrend. Antipodean currencies rise despite weak inflation data from China. Gold attempts a rebound after two days of losses, while crude oil struggles for direction following a strong weekly gain.
In the crypto space, Bitcoin (BTCUSD) retreats after a three-day rally, while Ethereum (ETHUSD) remains under pressure after posting its first daily loss in three sessions.
Meanwhile, Asia-Pacific equities stay firm and bond yields edge higher as markets await the key US-China trade talks set to begin in London on Monday.
Despite cautious signals from the Bank of England (BoE) and the European Central Bank (ECB), both EURUSD and GBPUSD open the week with mild gains, recovering from the previous day’s losses and holding onto weekly advances.
GBPUSD also finds support from its defense of the bullish “Cup and Handle” chart pattern confirmed in late May. However, EURUSD faces headwinds from bank holidays in France, Switzerland, and Germany, especially amid ongoing EU tensions over trade talks with the US and China.
USDJPY posts its first daily loss in three sessions and starts the week lower after a two-week uptrend, supported by an upward revision in Japan’s Q1 GDP (0.0% vs. -0.2% forecast), progress in US-Japan trade talks, a broadly weaker US Dollar, and cautious market optimism. Japan’s May Eco Watchers Survey also came in slightly better.
However, the downside for USDJPY may be limited as doubts grow over the Bank of Japan’s hawkish stance, mainly due to weak bond demand. At the same time, reduced market expectations for Fed rate cuts (now seen at 70 bps, down 10 bps) could boost the US Dollar and challenge further losses in the Yen pair.
AUDUSD and NZDUSD regain upward momentum after last week’s pullback from multi-month highs, supported by optimism over a potential US-China trade deal. In contrast, USDCAD weakens, giving up last week’s rebound from its lowest level since October 2024.
Canada’s strong jobs data and rising crude oil prices—its key export—add extra pressure on USDCAD. NZDUSD also stays firm, helped by upbeat Q1 Manufacturing Sales from New Zealand, despite a long weekend in Australia.
However, China’s inflation data remains concerning, with the CPI still negative and the PPI falling deeper into negative territory.
Gold ends a two-day losing streak, rebounding from the $3,295 support zone, supported by a softer US Dollar, technical factors, and optimism around China, one of its major buyers.
Meanwhile, crude oil struggles to hold onto its biggest weekly gain since late September. Last week’s uncertainty over an OPEC+ output increase and progress on the US-Iran nuclear deal, along with a weaker US Dollar, had lifted oil prices before today’s pullback.
Early Monday, rising exchange inflows and a dip in ETF inflows, along with a cautious market mood, weigh on Bitcoin (BTCUSD) and Ethereum (ETHUSD). Adding pressure are concerns over the US-China trade deal ahead of Monday’s key meeting in London.
As a result, BTCUSD breaks its two-day winning streak, while ETHUSD stays under pressure for the second straight day.
A week-long US-China trade talks start Monday in London, drawing focus ahead of next week’s G7 meeting. Trump tweeted on Friday that the negotiations should go well. At the same time, Chinese media has stayed quiet on criticizing US trade policies, seen as a positive sign, especially after three US firms were recently allowed to import rare earth metals following Beijing’s recent restrictions.
Holidays in Germany, France, and Switzerland may limit market momentum, but early-week cautious optimism is expected to persist. This optimism contrasts with market caution ahead of US inflation data, which could challenge the US Dollar’s recent dip and test other major currencies, Antipodean dollars, and commodities.
Meanwhile, USDJPY is set to benefit from Japan’s GDP data, recent optimism in Japan’s bond markets, and renewed confidence in the Bank of Japan’s hawkish stance.
May the trading luck be with you!
