Trading sentiment softened early Friday as market participants reassessed the positive momentum from the UK-US trade talks and the upcoming US-China meeting. Rising fears of an India-Pakistan conflict, Ukraine-Russia ceasefire issues, and escalating Middle East tensions challenge previous optimism.
Meanwhile, the US Dollar Index (DXY) eyes a three-week uptrend despite the latest inaction around the monthly top, ignoring mixed US employment data and inflation concerns, signaling resilience in the Greenback.
This strength weighs on major currencies, gold, and crude oil, while cryptocurrencies stay positive and equities edge up. However, commodity-linked currencies like the Australian, New Zealand and Canadian dollars remain pressured despite broadly firmer sentiment.
The US Dollar’s strength continues to pressure the Euro (EUR), British Pound (GBP), and Japanese Yen (JPY), despite recent consolidation. Eurozone tariffs on the US and criticism from the White House add extra downside pressure on EURUSD.
GBPUSD shows hesitation to fall further, supported by a split in Bank of England (BoE) rate cut votes and positive sentiment surrounding the UK-US and the UK-India trade deals.
Meanwhile, deadlock in the US-Japan trade talks and a three-month decline in Japan's real wages have boosted USDJPY. However, the Bank of Japan’s hawkish stance, amid growing Fed rate cut expectations, limits the Yen's downside potential.
Despite a generally firmer market sentiment, the Australian (AUD), New Zealand (NZD), and Canadian Dollars (CAD), seen as risk barometers, remain under pressure due to concerns over the US-China trade deadlock and dovish central bank policies.
While Canada's key export, crude oil, has recovered, it hasn’t been enough to attract USDCAD sellers.
As a result, AUDUSD and NZDUSD are in a three-day losing streak, and USDCAD has risen to a three-week high, though it lacks momentum ahead of Canada’s upcoming employment report.
Gold prices rebound slightly to around $3,330, ending a two-day losing streak and positioning for the first weekly gain in three. Despite a stronger US Dollar, gold remains supported by growing economic and geopolitical uncertainty, as seen in increased ETF buying, according to the World Gold Council.
Meanwhile, rising tensions between India and Pakistan, US-Iran concerns, and the Ukraine-Russia crisis challenge oil supply, supporting a rebound in crude oil prices. However, fears of lower energy demand and an OPEC+ supply increase weigh on oil buyers.
Driven by broad market optimism and reports of increased crypto reserve accumulation, Bitcoin (BTCUSD) and Ethereum (ETHUSD) saw impressive gains. BTCUSD surged over 6%, reclaiming the $100K level, while ETHUSD spiked more than 20%, approaching $2,300.
While the Bank of England Governor Bailey’s speech, Canada’s employment report, and Fed talks are on Friday’s agenda, the market’s main attention will be on rising geopolitical risks, including the India-Pakistan conflict, US-China trade talks, and global economic concerns.
Despite the dovish Fed bias, growing pessimism supports a firmer US Dollar, which could remain strong unless risk news suggests otherwise. As a result, Gold, crude oil, and commodity-linked currencies like the AUD, NZD, and CAD may face pressure. Gold could see bearish momentum if it breaks below $3,290, and USDCAD may reach multi-day highs on downbeat Canada jobs data. Further, the US-China talks in Switzerland over the weekend will be crucial, with any positive news potentially boosting Gold, even as Indo-Pak tensions weigh on its upside potential.
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