Markets remain quiet after a volatile start to the week, with lackluster data and few major updates. China confirmed parts of its trade deal with the US but criticized the US-UK pact, raising concerns about British demand. Meanwhile, Trump praised his deal-making and urged the Fed for more rate cuts, showing optimism about China talks. Iran demanded firm guarantees before any US deal, while the US expressed readiness to aid Ukraine-Russia peace talks.
On the data front, a weaker US CPI fueled expectations of Fed rate cuts, weighing on the dollar. EURUSD rose despite mixed EU signals, and GBPUSD climbed even with unimpressive UK jobs data. Further, USDJPY dipped amid BoJ rate hike bets despite sluggish PPI, while Aussie and Kiwi dollars rebounded on trade hopes and local data. Crude oil ended its 4-day rally, but USDCAD stays pressured. Moving on, gold slipped, and crypto saw minor losses, whereas stocks were mixed, but bond yields stayed strong as markets awaited fresh drivers.
EURUSD posted its biggest daily gain in three weeks as the weak US Dollar and mixed markets offered support, despite soft ZEW data and cautious ECB comments. However, the pair is steady as doubts over the EU’s economic outlook and the lack of a US-EU trade deal grow. Recent EU data backs potential ECB rate cuts, but inflation concerns and uncertainty still cloud the recovery.
Meanwhile, GBPUSD remains supported by upbeat UK data, trade deal optimism with the US and India, and a softer dollar. Still, gains are capped as traders await speeches from BoE officials, including Governor Bailey, amid a light data calendar and cautious sentiment.
USDJPY stands out among its G10 peers, dropping 0.25% intraday as it extends losses from a six-week high. The decline reflects risk-off sentiment and growing hawkish expectations for the Bank of Japan, despite soft PPI data. However, uncertainty around US-Japan trade talks and optimism tied to Trump limit further downside, especially with a light economic calendar.
The Australian, New Zealand, and Canadian Dollars are flat early Wednesday after gaining on US-China trade hopes and a weaker US Dollar. Strong Aussie wage data and Fitch’s positive view on Australian banks failed to lift AUDUSD, while NZDUSD stayed muted despite upbeat retail sales. USDCAD steadies as falling oil prices offset earlier losses, with traders eyeing upcoming Canadian housing data.
Gold and Crude Oil eased early Wednesday after Tuesday’s gains, which were driven by a weaker US Dollar and optimism over China's demand following the US-China trade deal. With little fresh data or news, markets are reassessing the durability of recent trade optimism. Oil faces added pressure from rising US inventories (API), snapping a four-day rally and falling from a three-week high, while Gold retreats to $3,230 support.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) edge lower after rebounding from two days of losses, supported earlier by soft US inflation data and optimism over Coinbase’s S&P 500 inclusion. However, bullish momentum fades as traders grow cautious about a possible May correction following strong April gains. Positive signs like ETF inflows, solid on-chain data, and a friendlier regulatory outlook have so far failed to reignite buying interest.
Wednesday’s economic calendar is light, with focus on the OPEC report, Canada Building Permits, and speeches from BoE and Fed officials. The lack of major data could help the US Dollar recover, pressuring major currencies and commodities, except the Yen and Swiss Franc. Gold may test monthly lows, oil could extend losses, and crypto is likely to stay flat. Equities may edge higher, while bond yields hold recent gains. Still, any surprises on the US trade front or caution ahead of Thursday’s US Retail Sales could spark volatility.
May the trading luck be with you!
