U.S. and Canadian holidays, along with a quiet calendar outside the Asia-Pacific, led to a calm Monday. This, combined with month-start positioning and fresh trade and geopolitical updates, eased market fears, putting pressure on the U.S. Dollar and benefiting riskier assets. Gold stood out, hitting a new all-time high above $3,500 after breaking April’s resistance.
Key drivers included a U.S. court blocking Trump’s tariffs, comments from Treasury Secretary Scott Bessent, and news from the Shanghai Cooperation Organization (SCO) Summit. Additionally, reports of potential stimulus from China and Japan's plans to boost growth kept market attention. Hawkish comments from the ECB, mixed news on the U.S.-Japan trade deal, and updates from Australia and New Zealand added to the trading momentum on Tuesday after a quiet Monday.
"U.S. President Donald Trump and his team are ready to challenge a U.S. court's decision that deemed Trump's use of national emergency powers to impose heavy tariffs as illegal. This news eased market fears of further tariff escalations. Meanwhile, U.S. Treasury Secretary Scott Bassent expressed confidence that the U.S. Supreme Court will not overturn Trump's tariffs. He also criticized the U.S. Federal Reserve (Fed) but emphasized its independence, adding that it was surprising the Fed hadn't independently reviewed allegations against Fed official Cook. Bassent further stated that if the allegations were true, Cook should be removed, noting that she hadn't denied them. He also dismissed claims that President Trump pressured the Fed. Bassent mentioned there was a good chance that Miran would be a voter at the September Federal Open Market Committee (FOMC) meeting.
At the SCO Summit, China's President Xi Jinping and Russia's President Vladimir Putin presented a united front, strengthening their ties with India, likely as a counter to the U.S. On a similar note, the BRICS nations (Brazil, Russia, India, China, and South Africa) announced plans to settle trade in Indian Rupees (INR) for the first time. While not a major issue, this move challenges the U.S. Dollar’s status as the global reserve currency and raises concerns in the market.
China’s stock market has surged 25% since February, with officials citing previous measures to support the rally and signaling readiness to introduce further measures. Meanwhile, a report from Japanese media revealed that Japan's Prime Minister Shigeru Ishiba is planning to instruct ministers to prepare economic measures to address key concerns, including inflation and Trump's tariffs. These measures could be announced as soon as this week.
Separately, Japan’s top trade negotiator, Akazawa rejected reports that Washington had pressured Japan to lower agricultural tariffs. He also reiterated calls for Trump to reduce auto tariffs, stating that there were no misunderstandings in U.S.-Japan trade talks.
According to Primoz Dolenc, Slovenia’s acting central bank governor, the European Central Bank (ECB) is likely done cutting interest rates. Dolenc stated that the ECB’s July Governing Council meeting concluded the easing cycle, and no new developments since then justify a change in policy.
In terms of data, Australia’s current account for Q2 2025 showed a slight improvement, with net exports contributing 0.1% quarter-on-quarter (QoQ) to GDP, compared to an expected 0.0%. The Current Account Balance stood at -13.7 billion AUD, better than the expected -16.0 billion AUD. Meanwhile, New Zealand reported a 4.1% quarter-on-quarter rise in its Terms of Trade (ToT), which is the ratio between export prices and import prices. This was much higher than the expected 1.9%.
Against this backdrop, the U.S. Dollar Index (DXY) ended its five-day losing streak and bounced off a five-week low early Tuesday. This rebound could challenge risk assets after an upbeat Monday. However, Gold remained strong, hitting a new all-time high near $3,509, after breaking the resistance level from April near $3,482.
On the forex front, the EURUSD stopped a three-day winning streak, and the GBPUSD reversed Monday’s gains. The USDJPY rose for the third consecutive day, marking its largest daily gain in over a week. The AUDUSD retreated from a three-week high, ending its five-day winning streak, while the NZDUSD recorded its first daily loss in four days. Meanwhile, the USDCAD extended its recovery from a three-week low.
Crude oil not only reversed Friday’s losses but continued to rise, while cryptocurrencies held their late Monday rebound. Equities in the Asia-Pacific region were slightly upbeat.
Hawkish comments from Slovenia’s acting central bank governor, Primoz Dolenc, didn’t boost the EURUSD bulls, as the currency pair retreated from a two-month resistance, ending its three-day winning streak. Euro sellers may be reacting to the USD's rebound and a cautious mood ahead of the EU’s preliminary inflation data for August.
Meanwhile, GBPUSD reversed Monday’s gains, with attention shifting to the UK’s final August PMI and upcoming U.S. PMI and employment data. Concerns over the UK’s economic growth and the Bank of England's struggle with rate cuts are weighing on the pair.
Elsewhere, USDJPY rose for the third day in a row, hitting a fresh weekly high. Positive market sentiment, reduced expectations for a Bank of Japan rate hike, and optimism over the U.S.-Japan trade deal are supporting the pair. Talks of higher wages in Japan and improving sentiment data are also helping USDJPY bulls, along with the USD rebound.
The AUDUSD and NZDUSD failed to gain from positive data on terms of trade and current account deficits, as the USD rebounded and concerns about dovish stances from the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) weighed on both pairs. As a result, AUDUSD pulled back from a three-week high, ending its five-day winning streak, while NZDUSD saw its first daily loss in four days.
Meanwhile, the USDCAD continued its recovery from a three-week low, despite stronger crude oil prices (Canada’s main export) and ongoing concerns about the U.S.-Canada trade deal. The dovish stance from the Bank of Canada (BoC) and a cautious market ahead of Friday’s U.S.-Canada employment report seemed to support USDCAD buyers.
Gold’s recent six-day rally and new record high above $3,500 can be attributed to several factors: a breakout of the ascending resistance line from April, increased demand for gold as a safe haven during uncertain times, and higher buying from ETFs, as well as from India and China. The price surge was also supported by a weaker USD and a dovish Federal Reserve stance. Additionally, market caution ahead of this week’s U.S. PMIs and Friday’s U.S. Nonfarm Payrolls (NFP) report further boosted gold prices.
WTI crude oil reversed its previous weekly loss, supported by easing market fears and the U.S. Dollar's struggle to attract buyers. However, the oil rally is also being fueled by negative headlines around the Ukraine-Russia peace talks and tensions in Gaza. On the flip side, concerns over increased OPEC+ supply, higher U.S. refining, and lower demand due to Trump’s tariffs are putting pressure on buyers.
In the cryptocurrency market, Bitcoin (BTC) continued its recovery for the second consecutive day, while Ethereum (ETH) bounced back from Monday’s losses. Both cryptocurrencies are benefiting from a slight improvement in market sentiment, likely boosted by news from Japan. Japan Post Bank announced plans to launch a digital yen by the end of fiscal 2026, offering easier access to digital transactions. The bank, managing around ¥190 trillion ($1.29 trillion) in deposits and partly owned by the Japanese government, will introduce DCJPY, a blockchain-based currency developed by DeCurret DCP.
The return of U.S. traders after a long weekend, along with the preliminary EU inflation data for August, the U.S. ISM Manufacturing PMI, S&P Global PMIs, and Canada’s final S&P Global Manufacturing PMI, is expected to stir up market activity.
Market reactions to recent trade and geopolitical news could help the USD maintain its latest rebound, putting pressure on risk assets like equities and cryptocurrencies. However, gold may still target the $3,550 level, the 78.6% Fibonacci extension from its April-May moves, unless it falls back below the $3,482 resistance-turned-support.
In addition, the legal battle between Trump and Cook, Trump’s challenge to the court’s ruling on tariffs, Russia-Ukraine tensions, and discussions about Fed independence could grab attention. Dovish bets on the Fed may test USD bulls, but they are likely to remain in control ahead of Friday’s crucial U.S. employment report."
May the trading luck be with you!
