Financial markets gained traction on Wednesday, supported by cooler US inflation, easing recession fears, and progress in Russia-Ukraine peace talks. However, sentiment turned mixed as the EU and Canada retaliated against US tariffs, Trump prepared countermeasures, and US shutdown concerns faded.
Early Thursday, market moves were limited by caution ahead of the US Producer Price Index (PPI), jobless claims, and the US Senate’s final efforts to prevent a shutdown.
The US Dollar Index (DXY) struggles to extend its rebound from a five-month low, while gold climbs to a three-week high. EURUSD eases after hitting its strongest level since October, GBPUSD retreats from a four-month peak, and USDJPY slips, snapping a two-day winning streak.
Meanwhile, AUDUSD, NZDUSD, and crude oil posted their first daily losses in three sessions, USDCAD halted its two-day slide, cryptocurrencies trim weekly gains, and equities edged higher.
EURUSD stays defensive after reversing from a five-month high as markets await more US inflation clues to confirm dovish Fed bias and receding hopes of the US recession, not to forget improving optimism about Germany. In doing so, the Euro pair also justifies mixed statements from ECB President Christine Lagarde and ECB policymaker, Gediminas Šimkus, not to forget the looming fears of the US-EU trade war.
GBPUSD snaps a two-day winning streak, pulling back from its highest level since November, while USDJPY posts its first daily loss in three, reversing its rebound from a five-month low.
Pound Sterling (GBP) faces pressure early Thursday as traders remain cautious ahead of US-UK trade talks and softer UK housing data weighs on sentiment. Meanwhile, uncertainty over the Bank of Japan’s (BoJ) next policy move for the interest rates and bond buying, as well as Tokyo’s official stance on deflation, challenge USDJPY buyers.
Fading early-week optimism, US-China trade war concerns, and dovish expectations from the central banks of Australia, New Zealand, and Canada weigh on the AUD, NZD, and CAD.
As a result, AUDUSD and NZDUSD post their first daily loss in three sessions, while USDCAD rebounds from a two-day decline. Softer crude oil prices, the Bank of Canada’s rate cut, US-Canada trade tensions, and political uncertainty in Canada following the appointment of a new national leader exert additional downside pressure on the Canadian Dollar (CAD).
Gold extends its rally for a third straight day, hitting a three-week high amid market uncertainty, a weaker US Dollar, and a technical breakout above the $2,922-$2,925 resistance.
Meanwhile, WTI crude oil posts its first daily loss in three as unchanged OPEC+ demand forecasts and a smaller-than-expected rise in US crude inventories fail to support prices.
A decline in crypto trading volume signals waning investor interest amid fading optimism over Trump’s industry support. That said, easing institutional buying and ETF outflows adds to the pressure.
As a result, Bitcoin (BTCUSD) posts its first daily loss in three, reversing its early-week rebound from a four-month low, while Ethereum (ETHUSD) extends its slide toward the lowest level since October 2023, tested on Tuesday.
With downbeat US inflation signals and a struggling US Dollar, traders focus on February’s US PPI data and weekly jobless claims. However, US tariff developments and Ukraine-Russia peace talks will take center stage.
Market consolidation ahead of next week’s FOMC could help the US Dollar pare weekly losses, challenging EURUSD, GBPUSD, Antipodeans, and crude oil buyers. Meanwhile, gold may edge higher, USDJPY and cryptocurrencies could stay under pressure, and equities may struggle to hold weekly gains.
Overall, market consolidation and a potential US Dollar rebound remain key themes.
May the trading luck be with you!
