Market sentiment remains mixed early Thursday as traders await May PMI data from Europe, the UK, and the US. Caution prevails amid concerns over rising US fiscal debt tied to Trump’s tax cuts and ongoing trade tensions with major economies. Geopolitical strains in Ukraine and the Middle East further dampen optimism, while central banks’ warnings on persistent inflation reduce hopes for rate cuts, fueling fears of slower global growth, trade conflicts, and heightened political risk.
On Wednesday, US President Trump’s secretary reportedly told European leaders that Russian President Putin isn’t ready to end the war in Ukraine, adding to a growing list of geopolitical concerns. Markets are also weighed down by fears of a potential Israeli strike on Iranian nuclear sites and rising tensions between India and China despite an official ceasefire.
Trade-related uncertainties persist as US-Japan tensions remain unresolved and EU-US talks fail to yield progress. Meanwhile, China is strengthening its global ties by securing trade deals with 10 ASEAN nations, while the UK and Australia are actively pursuing new trade partnerships with early signs of success.
Trump’s tax bill is now close to becoming law, heightening concerns over the US fiscal deficit and its potential drag on economic growth, especially given escalating global trade and political strains.
In Asia-Pacific, Australia’s PMIs delivered mixed signals, New Zealand revised its fiscal deficit forecasts downward, and Japan’s May activity data remained indecisive, prompting cautious commentary from the BoJ and government officials.
This risk-off environment drove global long-term bond yields higher and pressured the US Dollar Index (DXY), while traditional safe havens like Gold, the Swiss Franc (CHF), and Japanese Yen (JPY) gained ground. Major currencies and commodity-linked Antipodeans also edged higher, with GBP/USD standing out on the back of a bullish technical setup and strong UK CPI data.
Oil prices briefly hit multi-day highs but turned lower after the EIA’s weekly report—mirroring API’s data—showed an unexpected inventory build, signaling rising supply. Bitcoin (BTCUSD) refreshed its all-time high in crypto markets, and Ethereum (ETHUSD) also climbed. However, equities slipped following a weak close on Wall Street.
EURUSD trades sideways near a two-week high after a three-day rally, as recent ECB commentary casts doubt on the Euro’s strength amid persistent inflation, growth, and trade concerns. While policymakers struck a cautiously optimistic tone and pushed back against imminent rate cuts, their remarks lacked conviction.
At the same time, sluggish progress in EU-US trade talks and lackluster economic data offer little support to the Euro. This leaves a softer US Dollar as the primary driver behind the pair's recent gains. With May PMI data from the Eurozone and Germany on deck, any downside surprise could challenge the pair’s upward trajectory and stall its weekly advance.
GBPUSD surged to its highest level since February 2022, supported by a bullish eight-month “Cup and Handle” formation, strong UK inflation data, and broad US Dollar weakness. However, the rally paused after a three-day winning streak, as markets entered consolidation mode ahead of key PMI releases.
Meanwhile, USDJPY extended its decline for an eighth straight day, touching a two-week low. Yen strength was driven by its safe-haven appeal, a hawkish tone from the Bank of Japan, and growing doubts over the perceived safety of US Treasuries, which boosted yields. Despite Japan’s PMIs offering little encouragement, bearish momentum has slowed slightly as traders await key US data and a vote on Trump’s tax bill.
Despite broad US Dollar weakness, AUDUSD posts only a modest gain for the second day, supported by mixed Australian PMI data and trade deal optimism. NZDUSD, meanwhile, reverses the previous day’s gains but struggles to find momentum, with markets unimpressed by New Zealand’s updated fiscal forecasts and lacking fresh catalysts from Auckland.
USDCAD remains under pressure at a two-week low after a three-day slide, as upbeat Canadian data, political optimism, and firm crude oil prices, Canada’s key export, weigh on the pair. That said, downside momentum has eased, especially after oil snapped a three-day winning streak despite hitting a monthly high, following a surprise build in US crude inventories.
Crude oil prices struggled for direction after a volatile session. Prices initially surged to a monthly high on escalating tensions involving Iran, but reversed sharply to close lower for the first time in four days. The decline followed a surprise build in US official weekly inventories, in line with earlier industry data. Additional pressure came from the absence of supply disruptions, speculation about a potential OPEC+ output hike, and persistent concerns over global demand amid slowing growth and trade uncertainties.
Meanwhile, gold extended its winning streak to a fourth day, testing a key resistance level not seen in over a month. Safe-haven demand remains strong as investors seek shelter from growth fears, a weakening US Dollar, and a lack of meaningful progress in trade talks. Rising Treasury yields also reflect investor caution, further supporting bullion.
Bitcoin (BTCUSD) extended its rally, refreshing its all-time high during a three-day winning streak, while Ethereum (ETHUSD) held firm for a second day, reaching a new weekly high. The surge comes despite sluggish overall market sentiment, driven by a softer US Dollar, growing industry optimism, and bullish technical breakouts.
Looking ahead, Thursday’s economic calendar features the first readings of May PMIs from the Eurozone, Germany, the UK, and the US, along with weekly US jobless claims. While most PMIs are expected to show stronger service activity and ongoing inflation pressures, markets will closely watch the broader activity outlook, especially for the US. A positive surprise could help the US Dollar recover recent losses, potentially triggering a pullback in major currency pairs and crude oil.
However, unless the USD sees a strong rebound, which is less likely, safe havens like JPY, CHF, Gold, and cryptocurrencies may hold steady and avoid deeper corrections.
Meanwhile, if Trump’s tax bill passes, it could stoke concerns over rising US debt and slower growth, adding pressure on the Dollar while lifting Treasury yields and reinforcing broader asset market trends seen this week.
May the trading luck be with you!
