Although a ceasefire agreement between Ukraine and Russia, along with weak US data and fading hawkish Fed expectations, initially boosted sentiment on Tuesday, risk appetite faded later. This was due to President Trump’s tariff comments and warnings from significant rating agencies about the US economic outlook.
The US and Russia agreed on a peace plan for the Black Sea, but disappointing US economic data, including Consumer Confidence and manufacturing indices, weakened the US Dollar Index (DXY). Trump’s tariff rhetoric, along with concerns over the US economy, led the DXY to regain momentum near its three-week high.
As a result, Gold pulled back from support, Crude Oil lost momentum, and EURUSD, GBPUSD, and USDJPY saw pressure. However, AUDUSD, NZDUSD, and USDCAD saw mixed moves, and cryptocurrencies like BTCUSD and ETHUSD stalled after their previous run-ups. Equities rose slightly, while bond markets remained stable.
The EURUSD saw a five-day decline, pressured by the US Dollar's rebound, ECB officials defending rate cuts, and weak German IFO sentiment. The Euro also faced additional downside pressure from anxiety about the Ukraine-Russia ceasefire and US tariff concerns.
Meanwhile, comments from the Bank of Japan (BoJ) Governor failed to defend the USDJPY sellers. He remained dovish and didn't strongly confirm potential rate hikes despite inflation concerns. However, the US Dollar's recovery and expectations of Japan defending the Yen helped push USDJPY back towards a three-week high after a previous pullback.
The GBPUSD experienced its first daily loss in three days as mixed UK inflation data cast doubt on the recent optimism expressed by Bank of England (BoE) Governor Andrew Bailey. Additionally, expectations of significant spending cuts in the UK Spring Budget added to the downward pressure on the Pound. The overall sentiment remains cautious, with worries about the UK's ability to maintain growth amidst ongoing trade and political challenges, further weighing on the currency.
The Australian, New Zealand, and Canadian Dollars have managed to hold onto their recent gains despite the US Dollar’s rebound, supported by optimism around China’s stimulus measures and hopes for slight relief in US trade tariffs. Australia's Monthly CPI provided additional strength to the AUDUSD, helping it extend its three-day uptrend. Similarly, NZDUSD rose for the second consecutive day, despite the absence of major domestic drivers.
Meanwhile, USDCAD continued its three-day losing streak, shrugging off weaker crude oil prices—Canada’s key export—due to the concerns that the US is adopting a more relaxed stance on reciprocal trade tariffs.
Gold struggles to defend the previous day’s recovery from the key support confluence surrounding $3,008, comprising an 11-month-old previous resistance and a 9-day Exponential Moving Average (EMA). On the same line, Crude Oil also lacks clear directions after posting a Doji candlestick for Tuesday. That said, easing supply-crunch fears due to the Russia-Ukraine ceasefire jostle with the US Dollar’s rebound and higher-than-expected US inventory draw, per the API readings, challenge the Gold and crude oil prices of late. It’s worth noting, however, that the market’s uncertainty might help the gold buyers to retake control if the US Dollar fades recovery, whereas crude oil may witness downside pressure on OPEC+ supply increase concerns and likely build in the official US crude oil inventories.
The approach of Trump’s "Liberation Day" for cryptocurrencies, along with mixed updates on Bitcoin (BTCUSD) and Ethereum (ETHUSD) ETFs, is creating uncertainty for traders. Institutional interest remains unclear and the skepticism about Trump’s ability to defend the industry's interests amid rising trade and political tensions add pressure. As a result, BTCUSD is posting mild gains, shrugging off Tuesday’s Doji candlestick, while ETHUSD remains under pressure after ending its three-day winning streak.
After consolidating earlier optimism and witnessing mixed UK inflation data, traders are now focusing on the British Spring Budget and US Durable Goods Orders for fresh direction. Additionally, developments on US tariffs, the Russia-Ukraine ceasefire, and speeches from central bank officials in the US, Europe, and the UK will keep momentum traders busy.
The potential UK spending cuts and weak inflation could weigh on GBPUSD, unless the US Dollar’s recovery fades due to disappointing data and improved risk appetite. EURUSD may continue to face downward pressure, while the Australian and New Zealand Dollars, along with Crude Oil, could experience pullbacks. USDJPY buyers might pause as sentiment remains mixed.
Gold could continue to rise amid market uncertainty, which could dampen sentiment for cryptocurrencies and equities. However, the US Dollar's strength will largely depend on Friday's US Core PCE Price Index, the Fed’s preferred inflation gauge, more than any data before that.
May the trading luck be with you!
