US-China trade talks in Geneva have raised hopes of resolving differences, boosting market optimism and supporting riskier assets. This has put pressure on the Gold and the US Dollar, as both sides expect improved trade relations ahead of a joint statement. Additionally, Trump’s push to cut prescription drug prices and positive signs from recent trade deals, like with the UK, have contributed to the risk-on mood.
While some mixed comments from Fed officials and concerns about growth and inflation have limited support for the US Dollar, investors are awaiting key US data this week. Meanwhile, China’s deflation and rising tensions surrounding Iran and Pakistan added to global uncertainties. Despite challenges, optimism around the US trade deals with major economies is strengthening market sentiment.
Against this backdrop, the US Dollar Index (DXY) remains subdued after snapping a two-day winning streak, while Gold prices drop to a weekly low, breaking through a month-old support level. That said, EURUSD slides to its lowest point in a month, while GBPUSD and USDJPY lack clear direction after positive moves for the Yen and the British Pound against the Greenback.
AUDUSD picks up momentum, extending its rebound from a one-week low, and NZDUSD follows the same trend, while USDCAD ends its three-day uptrend. Further, crude oil rose for a third consecutive day, reaching a two-week high, as the commodity maintained upward momentum.
Meanwhile, cryptocurrency markets pause a strong weekly rally. In equities, Asia-Pacific stocks are mostly higher, and US index futures also point to gains, whereas US and Japanese Treasury bond yields remain steady and firm.
EURUSD takes a step back, reversing the previous day’s rebound from a three-week low, as traders grow skeptical about the European Union’s trade deals outside the US. Adding pressure, diminishing dovish Fed bets, and cautious comments from ECB officials weigh on the Euro.
Meanwhile, optimism around the UK-US and UK-India trade deals fades, pushing GBPUSD lower, although sellers remain hesitant. Recent UK data also shows weakening employer confidence, with hiring expectations dropping to post-COVID lows.
In Japan, PM Ishiba reaffirmed his opposition to US trade deals, including auto tariffs, keeping the Japanese Yen in check. Japanese bank loans grew at a slower pace, and the current account surplus eased while matching forecasts. As a result, USDJPY fluctuates near a one-month high after ending its two-day rally.
AUDUSD rises nearly half a percent, building on the previous day's rebound from a one-week low. The Aussie pair benefits from optimism surrounding the US-China trade deal, reinforcing its role as a risk barometer, despite weaker inflation data from China. Australia’s strong trade ties with China make it sensitive to Beijing’s news, as the AUDUSD continues to climb, shrugging off concerns about the Reserve Bank of Australia’s (RBA) dovish stance ahead of upcoming Australian inflation and employment data, as well as key US economic reports.
The New Zealand and Canadian Dollars follow the Aussie’s upward momentum, benefiting from the broader market optimism. However, weaker economic data and persistent rate cut expectations for the Reserve Bank of New Zealand (RBNZ) and Bank of Canada (BoC) limit any major bullish moves. While Canadian employment data beat expectations on Friday, the details were underwhelming, with job gains tied to the general elections. Additionally, rising Crude Oil prices, Canada’s key export, support CAD after three consecutive days of losses.
Despite the risk-on sentiment, Gold (XAUUSD) struggles, breaking a month-old support line to hit a weekly low, likely as markets brace for this week’s key US inflation and consumer data. Easing geopolitical concerns and mixed trade signals also weigh on Gold’s performance.
Meanwhile, WTI Crude Oil rises for the third consecutive day, driven by expectations of increased energy demand from China, bolstered by optimism over the US-China trade deal. A weaker US Dollar and rising supply concerns in the Middle East also support oil prices, though OPEC+ production increases and the impact of US tariffs pose challenges for energy bulls
Bitcoin (BTCUSD) and Ethereum (ETHUSD) pause after impressive weekly gains, edging lower while testing recent highs. Despite strong ETF inflows and a positive risk-on sentiment, the cryptocurrencies struggle to maintain momentum.
Traders will focus on joint statements from US and Chinese officials about weekend trade talks, especially with a light economic calendar and cautious optimism in the markets. Key data this week, including US and Australian inflation, UK and Aussie employment reports, US Retail Sales, and Michigan Consumer Sentiment Index, will keep markets active. The White House’s progress on trade deals and reduced dovish Fed expectations could support the US Dollar, pressuring Gold, Euro, GBP, and JPY. However, the Antipodeans and Crude Oil are likely to remain supported unless unexpected negative developments arise.
May the trading luck be with you!
