Market direction is uncertain as mixed updates on Trump’s tariffs and geopolitical tensions clash with concerns over the Fed's next move, following weaker US Nonfarm Payrolls, downbeat Unemployment Rate, firmer wage growth and rising inflation expectations. Traders are cautious ahead of key data, including US inflation, Retail Sales, and Fed Chair Powell's testimony, as well as UK GDP and BoE Governor Bailey’s speech. Meanwhile, strong China inflation and hesitance in the US Dollar support risk assets and benefit traditional havens like Gold.
China’s inflation and tariff concerns create cautious optimism, but fears about Trump’s tax agenda, US-China trade tensions, and the Russia-Ukraine peace talks weigh on sentiment. US-Japan talks and Europe’s readiness for trade talks with the US offer some positives.
Against this backdrop, the US Dollar Index (DXY) is on a three-day winning streak, while EURUSD, GBPUSD, and USDJPY show mixed movements. Antipodean currencies are unclear after recent gains, and Crude Oil starts the week positively. Gold stays near all-time highs, cryptocurrencies remain weak, and equities struggle to attract buyers.
EURUSD remains weak, weighed down by Germany’s disappointing data, dovish ECB bias, US growth hopes, and tariff tensions. The Eurozone's willingness to lower US car tariffs helps ease trade war concerns but keeps the pair under pressure as a key data week begins.
GBPUSD edges higher due to an improvement in the UK housing market but faces headwinds from dovish comments by BoE's Huw Pill and uncertainty ahead of UK data.
USDJPY justifies Friday’s Doji candlestick while recovering from a two-month low, paring the biggest weekly loss since late November after a four-week losing streak. Apart from the technical details, positive talks between US President Donald Trump and Japanese Prime Minister Shigeru Ishiba in Washington also underpin cautious optimism and favor the Yen pair’s rebound. It should be noted, however, that the hawkish bias about the Bank of Japan (BoJ) gains more acceptance than the odds favoring the US Federal Reserve’s (Fed) slower rate cuts, which in turn join the risk-negative catalysts to challenge the USDJPY buyers.
Australian, New Zealand, and Canadian Dollars posted weekly gains against the US Dollar but remain under pressure from US-China tensions, expectations of more rate cuts from the RBA, RBNZ, and BoC, and weak Crude Oil prices.
Gold remains on the front foot while posting mild gains after a six-week uptrend refreshing the all-time high. In doing so, the precious metal benefits from the tariff and geopolitical woes, as well as the US Dollar’s hesitance in rising, not to forget an increase in China gold buyers during January.
Meanwhile, Crude oil defends the previous day’s corrective bounce from a six-week low as upbeat China inflation joins fresh doubts about Trump’s ability to infuse more oil even as geopolitical tensions and tariff wars challenge supply lines.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) face pressure from a drop in Ether derivatives and a lack of positive news from the Trump administration. However, a weaker US Dollar and hopes for favorable actions from Trump provide some optimism ahead of key data.
After a volatile week, Monday’s economic calendar looks light, but updates on US tariffs, Trump’s tax agenda, and geopolitical tensions could keep traders engaged. ECB President Christine Lagarde’s speech may also influence market momentum. These factors could help the US Dollar edge higher, putting pressure on major currencies, Antipodeans, and Crude Oil buyers. However, Gold may remain attractive to buyers, while equities and cryptocurrencies face challenges.
Traders are bracing for key data this week, including US inflation, Retail Sales, and Fed Chair Powell's testimony, alongside UK economic reports. The US Dollar is expected to recover on stronger job signals and higher inflation expectations, testing Gold buyers and supporting the USDJPY rebound. EURUSD and GBPUSD are likely to remain under pressure, while AUDUSD and NZDUSD may face selling, and USDCAD could see renewed upside.
May the trading luck be with you!
