Market drama continues with fresh twists on Wednesday. A US federal court questioned former President Trump's authority to impose tariffs under the guise of a national emergency. Though the ruling rattled sentiment, Trump’s legal team quickly filed multiple appeals, though without immediate success. Meanwhile, the Fed’s latest minutes signaled recession risks, with a cautious tone from policymakers, even as markets still price in two rate cuts for 2025. A Fed survey for 2024 showed mixed public sentiment, reinforcing the central bank’s cautious stance.
Geopolitical tensions added to the mix as reports surfaced about Iran’s potential pause in nuclear enrichment. Tehran quickly denied the claim, briefly shaking momentum trades. Furthermore, Trump said he’s unsure whether Putin wants to end the war in Ukraine.
Elsewhere, rumors about ECB President Lagarde leaving early for the World Economic Forum were dismissed. China welcomed US financial investment despite new US export curbs on jet engine tech and chip software. Additionally, chatters also spiraled, and the US began revoking visas for Chinese students. Elsewhere, Japan criticized US trade policy and pushed for tariff reviews.
Amid these developments, the US Dollar Index (DXY) extends its winning streak to a third day, putting pressure on major currencies, gold, and commodity-linked currencies.
EURUSD dropped to a weekly low, and GBPUSD reversed its recent bullish breakout. USDJPY posted a four-day rally, while the Australian and Canadian Dollars extended their declines for a fourth session. NZDUSD also gave up gains made after the RBNZ decision.
Gold continued its pullback from earlier in the week, while WTI crude oil held steady on the back of a surprise inventory draw and OPEC’s unchanged stance. Equities and cryptocurrencies saw mixed performance, but US Treasury yields moved higher.
With legal battles, central bank signals, and geopolitical tensions all in play, market volatility remains firmly in focus.
EURUSD stays under pressure, hit by rumors of ECB President Lagarde’s early exit, mixed German and French data, cautious ECB comments, and a broad US Dollar rebound. Ongoing trade tensions with the US and political uncertainty in the Eurozone add to the drag. With this, the Euro pair has now fallen for three straight days, touching its lowest level in over a week and heading for its biggest weekly loss since early January.
GBPUSD falls for the third straight session, undoing Friday’s confirmation of an eight-month “Cup and Handle” breakout. The Cable pair is pressured by the US Dollar’s rebound and growing trader indecision, despite the UK securing major trade deals and showing signs of economic recovery.
At the same time, Japan’s economic minister Akazawa reaffirmed demands for a review of US tariff policies, echoing recent statements from other Japanese officials and underscoring stalled US-Japan trade talks. USDJPY also remains supported by speculation around reduced bond issuance from the Bank of Japan and weak domestic data, which challenge the case for future rate hikes.
Fading hopes for a US-China trade deal and fresh US actions against Beijing, along with mixed data from Australia, New Zealand, and Canada, are dragging down the AUD, NZD, and CAD. Australia's weak CAPEX report, the RBNZ's rate cut, and downbeat New Zealand business confidence add further pressure on AUDUSD and NZDUSD.
As a result, AUDUSD extends its losing streak to a fourth day, NZDUSD gives up previous gains, and USDCAD climbs for a fourth straight session, even as stronger oil prices and optimism around Canada’s new government test bullish momentum surrounding the Loonie pair.
Crude oil snaps a two-day losing streak after a sustained inventory draw reported by the API and no surprises from the OPEC meeting. Despite a stronger US Dollar and Middle East tensions, oil remains firm ahead of official inventory data.
Gold, however, continues to slide for the fourth straight day, weighed down by a broadly stronger Dollar and mixed risk sentiment—possibly due to month-end consolidation. The metal is on track for its first monthly loss in five, following its record high in April.
Rising ETF demand supports crypto, but uncertainty over US trade tariffs and their global impact, along with month-end flows and technical resistance, weigh on sentiment. Bitcoin (BTCUSD) stalls after a two-day drop, while Ethereum (ETHUSD) extends its six-day rally, briefly testing a 3.5-month resistance and hitting its highest level since late February.
Thursday's market focus will center on the Trump administration's response to the US Federal Court's tariff ruling, with added volatility from key US data, including Core PCE inflation, weekly jobless claims, and the second Q2 GDP estimate. Traders will also watch for official US oil inventory numbers, multiple Fed speeches, and a public appearance by BoE Governor Andrew Bailey.
With expectations of hotter US inflation and ongoing growth concerns, the US Dollar may take cues from broader risk sentiment. However, month-end flows and lingering uncertainty could keep the Greenback supported, pressuring major currencies and commodity-linked peers. EURUSD, GBPUSD, AUDUSD, USDCAD, and USDJPY are all set to reflect Dollar strength, while Gold may slide toward key support near $3,170. Crude oil’s recovery could stall, and cryptocurrencies, equities, and bonds are likely to trade without clear direction.
May the trading luck be with you!
