Global markets stayed choppy despite the U.S. market closure on Thursday for Juneteenth, as traders reacted to conflicting headlines on the Iran-Israel conflict and U.S. trade talks with major partners. U.S. President Donald Trump’s comment that he would decide on striking Iran “within two weeks” eased fears of immediate conflict. However, Iran’s missile attacks on Israel and Israel’s vow to target Iran kept geopolitical risks high. Leaders from Europe, Russia, and the U.S. worked to prevent a wider war in the Middle East and potential energy supply disruptions.
On trade, the EU and Japan expressed disappointment with U.S. negotiations, while Canada prepared for possible tariffs in the event that talks failed. In central bank news, the Swiss National Bank cut rates by 0.25%, while the Bank of England and China’s central bank held policy steady. Bank of Japan minutes highlighted concerns about inflation and hesitancy regarding further rate hikes, although strong inflation data supported the yen due to its safe-haven appeal.
In the UK, consumer confidence hit a yearly high, and BoE officials maintained a positive economic outlook despite persistent service inflation. Meanwhile, Russia’s Deputy PM Novak called for more oil output, but prices held firm on Middle East supply concerns.
The U.S. Dollar Index (DXY) ended a four-day winning streak the previous day, extending pullback from weekly highs by the press time. Still, gold fell the most in five weeks and is set for a weekly loss in that time, pressured by a strong dollar and typical late-spring consolidation.
Among currencies, EURUSD and GBPUSD recovered weekly losses, USDJPY hovered near three-week highs, and AUDUSD and NZDUSD bounced. USDCAD ended a three-day rally, pulling back from weekly highs. Oil stayed mildly positive, heading for a third straight weekly gain, while cryptocurrencies, stocks, and bond yields remained under pressure.
US traders returned from the Juneteenth holiday to a consolidating market, as talk of a possible pause in US plans to strike Iran triggered a pullback in the U.S. dollar. This came on top of weak early-week US data and the Fed’s decision to hold rates steady. As a result, EURUSD and GBPUSD extended their rebound from weekly lows, both staying firm for a second day.
EURUSD climbed despite EU concerns over the proposed 10% US tariff, cautious ECB comments, and economic uncertainty linked to both US trade policies and Middle East tensions.
GBPUSD staged a strong recovery from a one-month low, supported by the BoE holding rates, continued economic optimism, persistent service inflation concerns, trade hopes, and a record-high GfK Consumer Confidence reading for 2025. It should be noted that the downbeat UK Retail Sales might have stopped the Cable pair’s run-up of late.
Meanwhile, BoJ meeting minutes revealed mixed views on future rate hikes, with some policymakers worried about US-driven global growth risks. Still, strong Japanese inflation data released Friday strengthened the case for further tightening. This helped pull USDJPY down from a three-week high, though the pair remains volatile due to Japan's safe-haven yen demand and uncertainty over US-Japan trade relations.
The Australian, New Zealand, and Canadian Dollars all recovered and reduced weekly losses against the US Dollar, thanks to a shift in market sentiment after Trump’s two-week warning on Iran.
While NZDUSD saw limited movement due to New Zealand’s holiday, it still showed signs of a bounce. AUDUSD rebounded with cautious optimism, and USDCAD pulled back from the week’s highs, driven by rising Crude Oil prices (Canada's main export) and the US Dollar’s retreat.
However, uncertainty around Canada’s retail sales and mixed US-Canada trade talks continues to challenge USDCAD traders.
Gold is on track for its biggest weekly loss in five weeks, even as geopolitical tensions in the Middle East and trade deal uncertainties weigh on the market. This pullback is mainly driven by a rebound in the US Dollar Index (DXY), which is set for its first weekly gain in three weeks.
Seasonal factors, such as typical May-June price pullbacks and a lack of increased physical demand from China and India, also contributed to gold's dip. However, it's important to note that this is just a temporary pullback, not a reversal of the overall bullish trend for gold.
Rising Middle East tensions, falling oil inventories, and China’s stimulus plans are all pushing crude oil toward a third straight weekly gain.
On the flip side, Bitcoin (BTCUSD) and Ethereum (ETHUSD) struggle amid growing geopolitical fears and a major wallet theft, though strong ETF inflows and real-world crypto adoption efforts are limiting the downside.
Friday’s focus will be on Canadian Retail Sales and speeches from mid-level central bankers, following weak UK retail data and strong inflation from Japan. However, the key drivers will be updates on possible U.S. involvement in the Israel-Iran conflict and trade talks with major economies.
If the U.S. enters the war, risk aversion could surge, boosting the U.S. Dollar, pushing Gold below $3,350 and possibly toward $3,300. In that case, major currencies, Antipodeans, and cryptocurrencies may drop, while crude oil could climb further.
May the trading luck be with you!
