Markets remain under pressure midweek as traders turn cautious ahead of the week’s key economic events and growing geopolitical tensions. Optimism surrounding a possible rollback of Trump-era tariffs is fading rapidly amid renewed friction between the US and China. The US has banned Nvidia from selling its advanced H20 chips to China, triggering fears of an escalating trade war. In response, Beijing criticized the tariffs for damaging the global economy, while Hong Kong announced it would suspend duty-free parcel shipments to the US.
Adding to the risk-off tone, US Empire State Manufacturing data posted its second-lowest forward outlook in over two decades, raising concerns over the US economy. Fears are also growing that Trump could interfere with the Federal Reserve’s independence, especially targeting Fed Chair Powell.
Meanwhile, China reported stronger-than-expected Q1 GDP, retail sales, and industrial output, providing some support to commodity-linked currencies such as AUD and NZD. On the same line, the White House also said some trade deals could be announced “very soon,” while Trump justified a 90-day pause on new tariffs.
In the currency markets, the US Dollar Index reverses Tuesday’s rebound and Gold rallies to a fresh all-time high near $3,300 as safe-haven demand picks up, supporting JPY and CHF as well. Further, EURUSD ends a two-day losing streak, GBPUSD hits a 6.5-month high, and both AUDUSD and NZDUSD defend their six-day winning streaks. USDCAD slips for the first time in three days, despite weaker oil prices.
Elsewhere, equities are in decline, cryptocurrencies stay under pressure, and bond yields remain firm as investors seek clarity on what’s next.
EURUSD rebounds for the first time in three days, shaking off weak EU sentiment data and concerns over stalled EU-US trade talks. The pair gains strength from broad US Dollar softness as traders await US Retail Sales, Fed Chair Powell’s speech, and Thursday’s ECB rate decision.
GBPUSD extends its winning streak to a seventh day, hitting the highest level since early October 2024. This comes despite mixed UK jobs and inflation data, which fail to fully back the Bank of England’s optimistic stance.
Meanwhile, USDJPY retreats, giving up Tuesday’s recovery. The drop comes even after BoJ Governor Ueda warned that Trump’s tariffs are pushing Japan’s economy toward a worst-case scenario, casting doubt on market hopes for a rate hike in May.
Both AUDUSD and NZDUSD rise for the sixth straight day, driven by a weaker US Dollar and positive China data. The Antipodean buyers are also hopeful about upcoming US trade deals with Australia and New Zealand, despite the lack of significant positive data from either country.
USDCAD dips for the first time in three days, despite weaker Canadian housing data, inflation signals, and falling crude oil prices—Canada's key export. The commodity-linked currency benefits from a softer USD as traders focus on today’s Bank of Canada (BoC) rate decision, which is expected to maintain the current policy stance.
However, the pair remains sensitive to US-Canada tensions, upcoming US Retail Sales data, and Fed Chair Powell's speech. If the US rejects the USMCA deal with Canada and Mexico, a dovish BoC stance could revive USDCAD buying pressure.
Gold prices surge to a fresh all-time high near $3,295, driven by a softer US Dollar, global growth uncertainties due to US tariffs, and challenges for Fed hawks. China’s strong demand and a technical breakout also support the rally in bullion.
Meanwhile, WTI crude oil faces pressure, weighed down by concerns over global energy demand from US trade protectionism, rising oil output, and a surprise build in US crude inventories reported by the API.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) remain under pressure, weighed down by declining optimism over Trump-linked industries, broader negative sentiment from US tariffs, and higher fund outflows. Despite a softer US Dollar, these cryptocurrencies also face the fallout from recent hacking incidents. As a result, both BTCUSD and ETHUSD stay lower while continuing their recent downward trend.
Traders face an action-packed Wednesday with important events like US Retail Sales, Fed Chair Jerome Powell’s speech, and the Bank of Canada’s (BoC) rate decision. While US data might not lift the US Dollar, Powell's optimistic remarks could change the outlook. A surprise rate cut from the BoC could lead to a short-term USDCAD rebound—unless the Greenback remains under pressure due to concerns over US growth and a dovish Fed.
Additionally, Eurozone inflation data, the BOE’s Quarterly Bulletin, and updates on US tariffs will keep markets on their toes throughout the day.
May the trading luck be with you!
