Risk appetite remains fragile as fears grow over the US-China trade deal, Trump's tariffs, and mixed geopolitical developments. Traders also face uncertainty from inconsistent US data and the Fed's firm stance on data-driven decisions, resisting political pressure for rate cuts.
The Bank of Japan struggles to justify its bond tapering and hawkish outlook, while Japan also faces challenges securing a favorable US trade deal. Recent global manufacturing data adds to the gloom—US ISM and S&P PMIs hit multi-month lows, while China's Caixin PMI ends an eight-month expansion streak. Weak numbers from the UK, Japan, Canada, and Australia further underscore global risks associated with US tariffs.
Tensions rise as the US presses Iran over uranium enrichment, and uncertainty continues around the Ukraine-Russia ceasefire. US-China and US-EU trade tensions deepen, with both sides trading accusations. However, a US move to extend tariff relief on some Chinese goods until August 31 offers a slight reprieve, along with signs of progress in global trade talks ahead of the June 4 deadline.
The BoJ’s policy struggle causes the Japanese yen to lose some safe-haven appeal. Meanwhile, the US Dollar Index (DXY) rebounds from a 3-week low, weighing on EURUSD and GBPUSD, while lifting USDJPY and USDCAD.
Crude oil pulls back after a strong rally, gold eases from a 3-week high, and Bitcoin ends its 3-day winning streak. Ethereum also struggles to gain, while equities edge higher, tracking Wall Street’s positive close and mixed bond yields.
The EU is set to press the US for tariff cuts in this week’s talks, as the Eurozone’s final May manufacturing PMI stays in contraction. Similarly, UK PMIs remain below the 50.0 mark, and BoE’s Catherine Mann criticized US trade policy while also calling for better coordination between quantitative tightening (QT) and rate decisions.
That said, weak UK and EU data, paired with the US’s soft stance toward both nations, challenge recent bullish breakouts in EURUSD and GBPUSD. Traders now eye key EU inflation data, an ECB speech by Christine Lagarde, and US JOLTS and Factory Orders for the next market cues.
USDJPY bounces back after three days of losses, supported by the BoJ Governor’s concerns over US tariff-driven growth risks and Japan’s stalled trade talks with Washington. Policy division over bond tapering and rate hikes—especially as weak Japanese data raises doubts about sustained wage growth, a key factor for the BoJ’s hawkish stance—adds to the uncertainty. Meanwhile, a mild US Dollar rebound and mixed market sentiment help the pair trim recent losses during early-month positioning.
The Aussie, Kiwi, and Loonie give up recent gains in Tuesday’s Asian session, pressured by weak Chinese PMIs, rising US-China trade tensions, and downbeat local data.
AUDUSD pulls back after its biggest daily jump in over a week, weighed by cautious RBA Minutes and comments from Assistant Governor Hunter, despite support from rising wages, business inventories, and hopes for Chinese stimulus.
NZDUSD also retreats from a seven-month high, tracking the Aussie after a long weekend.
USDCAD rebounds, ending a 3-day losing streak as crude oil eases from its strongest rally in three weeks. Despite a slight pickup in Canadian activity data and Q2 GDP, PMIs remain in contraction, limiting CAD strength.
After a strong start to the week driven by geopolitical tensions and US tariff fears, WTI Crude Oil and spot Gold edged lower early Tuesday, pressured by a stronger US Dollar.
Oil prices face additional headwinds from market doubts over OPEC+ supply plans and reports of Trump aiming to lift drilling bans in Alaska.
Meanwhile, Gold holds above its 21-day EMA despite the pullback, keeping the $3,430 resistance level in sight.
Bitcoin (BTCUSD) posts its first daily loss in four sessions as ETF outflow concerns weigh on sentiment. Ethereum (ETHUSD) struggles against sellers despite a stronger USD, supported by rising ETF interest and a positive nod from the US SEC on ETH staking.
Tuesday’s calendar features inflation figures from Switzerland and the Eurozone, US Factory Orders, JOLTS Job Openings, and a speech by ECB President Christine Lagarde. While these events may not offer clear market direction, they could support the US Dollar’s rebound, pressuring EURUSD but limiting USDCHF and USDJPY gains due to haven flows.
More impactful could be headlines around US tariffs, trade talks, Iran negotiations, and Ukraine-Russia tensions. Markets also await the White House’s response to China’s criticism and future trade moves.
Despite the Dollar’s recent strength, slow progress in Trump-era trade deals and growing fiscal concerns could soon weigh on the USD. This keeps sentiment mildly positive for Gold, JPY, and CHF, even after their recent pullbacks.
May the trading luck be with you!
