The new trading week opens with a cautious mood as global markets react to renewed trade tensions and geopolitical unrest. Former President Trump’s decision to double tariffs on steel and aluminum to 50% adds pressure, especially amid worsening US-China relations. Both countries accuse each other of violating the Geneva trade pact, with China also criticizing US arms support for Taiwan.
Elsewhere, Ukraine launched a major drone strike on Russia, while Iran warned that US threats against its nuclear facilities crossed a red line. Japan and the EU also voiced dissatisfaction with recent US trade actions.
Market sentiment is further weighed down by speculation over Fed Chair Jerome Powell’s early resignation and anticipation ahead of his scheduled speech. On the data front, manufacturing PMIs from China, Japan, and South Korea signaled continued contraction, while the Fed’s preferred inflation gauge met expectations and boosted the US Dollar last week.
In Europe, ECB officials acknowledged ongoing economic challenges but maintained a dovish outlook. The Bank of England remained indecisive, offering little direction to the market. Meanwhile, Australia reported weaker activity and inflation data, and holidays in China and New Zealand kept Asia-Pacific trading subdued.
Despite OPEC+ announcing a third straight monthly production cut, crude oil prices opened the week with gains, supported by geopolitical concerns and a softer US Dollar. Major currencies and gold trimmed last week’s gains, while stocks and cryptocurrencies faced pressure. Bond yields also ticked lower.
The EURUSD remains under pressure at the start of June, weighed down by ongoing EU-US trade and political tensions, as well as cautious comments from ECB officials and support for more data-driven rate cuts. While the Euro finds some support from a softer US Dollar and improved German inflation, Polish election uncertainty and doubts over EU trade deals with China and Japan limit recovery.
GBPUSD bounces from an eight-month-old support zone, as BoE officials highlight inflation concerns and express optimism over future trade deals. However, uncertainty around UK labor policies and its ability to regain pre-COVID economic strength, amid mixed data, challenges the bullish momentum.
Meanwhile, the Japanese Yen emerges as the second-best performer against the US Dollar, after the Kiwi, amid the Bank of Japan’s move to double provisions from loss of bond issuance, hinting at a hawkish tilt. Slightly better Japanese capital expenditure and PMI data, despite continued manufacturing weakness, combined with risk-off sentiment and the Yen’s safe-haven appeal, add pressure on USDJPY.
Ongoing US-China trade and political tensions, along with China’s second straight monthly manufacturing contraction, weigh on risk-sensitive currencies like the Australian, New Zealand, and Canadian Dollars. However, a softer US Dollar and month-start consolidation help AUDUSD and NZDUSD trim recent losses, while USDCAD drops for a third straight day.
That said, a 33-month low in Australian inflation clues and New Zealand holidays limit upside for AUDUSD and NZDUSD. Meanwhile, USDCAD bears gain momentum from strong crude oil prices—Canada’s key export—and a better-than-expected Canada GDP report.
OPEC+ announced a third straight monthly rollback of previous output cuts, alongside voluntary supply increases from eight members. Despite this, WTI Crude oil surged 3% to start the week, driven by supply concerns linked to Ukraine’s drone attacks, potential Russian retaliation, Iran’s nuclear tensions, and the ongoing Gaza conflict.
Gold rises as the softer US Dollar and safe-haven demand support the metal, though it remains range-bound with markets cautious over Trump-driven confidence and concerns about weaker physical demand from China and India.
Meanwhile, Bitcoin (BTCUSD) posts its first daily loss in three, with Ethereum (ETHUSD) also under pressure. Despite optimism around Trump and ETF inflows, last week’s pullback and slowing institutional interest weigh on crypto momentum.
Markets brace for a busy Monday as US ISM PMIs and a key speech from Fed Chair Powell take center stage. Powell’s hawkish tone and dismissal of resignation rumors could lift the US Dollar, pressuring recent gains in major currencies, cryptocurrencies, and Antipodeans.
That said, safe-haven assets like the Japanese Yen, Gold, and Swiss Franc may gain on growing concerns over US debt, trade tensions, and global political risks. Further, Crude prices may stay firm amid rising geopolitical tensions and continued supply constraints after recent inventory drops.
May the trading luck be with you!
