Markets stayed cautiously optimistic on Tuesday, supported by upbeat US JOLTS Job Openings, positive sentiment among chipmakers, and no Russian retaliation to Ukraine drone strikes, despite concerns linked to Liberation Day. The US Dollar held firm even as US Factory Orders disappointed.
Headlines also hinted at a possible early US-Iran nuclear deal, though uranium enrichment remains a concern. However, optimism was challenged by US accusations of China smuggling potential bioterror material, renewed fears over Trump-era metal tariffs, and pressure on trade partners to submit proposals by June 4.
Investors also eyed upcoming US ADP jobs data, ISM Services PMI, and the Bank of Canada’s policy decision. Ongoing US-China trade talks and uncertainty around the US spending bill added to caution ahead of Friday’s key US jobs report.
As a result, the US Dollar Index (DXY) steadied early Wednesday after its biggest rise in a week. Gold remains under pressure, major currencies drift lower, and riskier assets like the Antipodeans and crude oil witness a pullback. Bitcoin struggled for direction, while Ethereum bounced back. Equities followed Wall Street’s mild gains, and bond yields rose.
The US Dollar’s strength ahead of key data, combined with EU trade tensions with China and the US, cautious ECB comments, and weak EU inflation, puts pressure on EURUSD. As a result, the pair holds its pullback from a six-week high.
Similarly, GBPUSD faces pressure from the BoE’s cautious tone, fading hopes over UK trade deals, and weak UK economic data. As a result, the Pound drops for a second day, testing the validity of its eight-month bullish cup-and-handle chart pattern.
In Asia, softer Japan Services PMI, uncertainty over the BoJ’s bond tapering, and US-Japan trade concerns support USDJPY. The pair remains slightly higher after its biggest weekly rise.
AUDUSD remains under pressure after Australia’s Q1 GDP and May S&P PMIs came in weaker than expected. The pair also suffers due to its strong ties with China amid ongoing US-China tensions, and its role as a risk barometer. Adding to the downside are the cautious market mood ahead of key global events, cautious remarks from Australian officials, and the absence of a trade deal with the US—all encouraging AUDUSD selling.
Even with a light economic calendar in New Zealand, NZDUSD stays under pressure, tracking the stronger US Dollar and weaker Antipodean currencies.
USDCAD defends the previous day’s recovery after three days of losses, supported by a crude oil pullback—Canada’s key export—and cautious sentiment before today’s Bank of Canada policy announcement, though the BoC is expected to keep rates unchanged.
Rising chances of a US-Iran nuclear deal and Iran’s return to energy markets, after long US sanctions, weigh on WTI crude oil, ending its two-day winning streak with slight losses. A stronger US Dollar and worries about US inventories, after a private survey showed smaller-than-expected stock drops, add to the pressure.
Gold also falls after pulling back from a month’s high, as the firm US Dollar, mixed market sentiment, and concerns about China (a major gold buyer) weigh on prices. Cautious optimism and month-start positioning further test gold buyers.
Both top cryptocurrencies, Bitcoin (BTCUSD) and Ethereum (ETHUSD), posted losses on Tuesday. However, Ethereum regained upward momentum while Bitcoin struggled due to outflows from spot BTC ETFs. Crypto bulls, especially Bitcoin, also face challenges from heavy reliance on Trump-driven optimism and the US SEC’s lack of positive news as expected.
The Bank of Canada (BoC) is expected to keep interest rates steady for the second time after seven cuts. However, worries about a dovish pause, trade tensions with the US, and mixed Canadian data could push USDCAD higher.
Meanwhile, US ADP Employment Change, ISM Services PMI, and final May S&P Global PMIs could follow recent strong US JOLTS Job Openings and inflation signals, supporting the US Dollar. This may weigh on major currencies, Antipodean dollars, and commodities—unless trade deal updates and geopolitical events in Iran, Ukraine, China, and Gaza disappoint.
Overall, the US Dollar’s consolidation ahead of Friday’s jobs report and a possible Trump-Xi meeting will likely influence near-term market moves.
May the trading luck be with you!
