US President Donald Trump’s delayed ‘reciprocal’ tariffs joined escalating hopes of a trade deal between the US and Asian majors to tame the market’s fears about a trade war. On the same line are increasing expectations of peace talks between Russia and Ukraine and receding political tensions in Gaza, which has allowed the market players to turn optimistic lately. This positive sentiment, along with weak US PPI, mixed Jobless Claims, and rising household debt, has pressured the US Dollar as traders await Retail Sales data ahead of the long weekend in the US and Canada.
As a result, the US Dollar Index (DXY) dropped to a three-week low, allowing major currencies and Antipodeans to gain. Gold is on track for a new record high, while Crude Oil looks to end its three-week decline. Cryptocurrencies are slightly up, and equities are edging higher.
EURUSD brushes off dovish ECB comments, weak Eurozone Industrial Production, and ongoing trade and political concerns to set up for its first weekly gain in three. The Euro benefits from easing Ukraine war fears, a softer US Dollar, and growing hopes for an EU-US trade deal.
Similarly, GBPUSD looks past Bank of England (BoE) Chief Economist Huw Pill’s rate cut signals, focusing on positive UK GDP data and trade optimism, setting the Pound up for its biggest weekly gain in three.
Meanwhile, USDJPY is on track for its first weekly rise in five, despite a two-day losing streak, with Japan officials praising the softer Yen for benefiting the export economy
AUDUSD and NZDUSD prepare for the second consecutive weekly gain while USDCAD appears well-set to stretch the last week’s downtrend. In doing so, the commodity-linked currencies seem preparing for interest rate cuts from the respective central banks while cheering softer US Dollar and easing trade war fears. It’s worth noting that the recent strength in Crude Oil exert additional downside pressure on USDCAD due to it being Canada’s biggest export item.
Gold is thriving, driven by a weaker US Dollar, easing trade tensions, and strong demand from China and India. On track for its seventh consecutive weekly gain, it’s hitting new record highs, especially with today’s key US data in focus. Falling US Treasury yields and concerns over the US debt limit also support the bullion’s recent strength.
Crude oil is set for its first weekly gain in four, despite pulling back from a seven-week low. The rally is driven by the softer US Dollar, rising energy demand concerns, supported by the EIA's forecasts, and fears of a supply crunch due to geopolitical tensions. However, potential increases in supply—like Russia's return to the market, OPEC+'s willingness to boost output, and Trump's push for more drilling—are keeping energy buyers cautious.
Despite a boost in market risk appetite benefiting Bitcoin (BTCUSD) and Ethereum (ETHUSD), both remain within their weekly trading range as traders await more signs of industry optimism sparked by Trump. Concerns over global trade and geopolitical tensions add uncertainty to the outlook.
On Friday, the Eurozone Q4 2025 GDP and US January Retail Sales will be key market movers. Also in focus will be headlines about US trade tactics and political updates on Gaza, Ukraine, and China. Despite stronger inflation signals, markets are questioning the Fed's hawkish stance, which could weaken the US Dollar even if Retail Sales beat forecasts. This could push Gold closer to $3,000 and support Crude Oil. EURUSD and GBPUSD may extend their weekly gains, while USDJPY could retreat. Cryptocurrencies and equities are likely to end the week with modest gains. It’s worth noting that the long weekend in the US and Canada may limit USDCAD moves, potentially keeping AUDUSD and NZDUSD stronger.
May the trading luck be with you!
