The major assets saw a tug-of-war as U.S.-China trade talk optimism and Trump’s plans to ease AI chip restrictions battled against Powell’s cautious Fed stance and global demand concerns.
U.S. stocks managed to close higher after a volatile session, while gold retreated from record highs and oil surrendered most of its previous day’s gains despite mixed economic signals.
Here are headlines you may have missed in the last trading sessions!
Headlines:
- New Zealand saw 0.1% quarterly uptick in jobs, unemployment rate steady at 5.1%
- RBNZ Financial Stability Report noted that U.S. tariffs have led to “higher financial market volatility, and are likely to lead to a slowdown in major economies“
- Treasury Secretary Scott Bessent tones down U.S.-China meeting expectations, saying “this will be about de-escalation, not about the big trade deal“
- China halted purchases of U.S. crude in March as trade tensions between the two countries ramped up
- China rolled out stimulus measures, including an RRR cut, 10bps reduction in the 7-day reverse repo rate, and targeted liquidity injections
- Germany factory orders for March: 3.6% m/m (0.3% m/m forecast; 0.0% m/m previous)
- France balance of trade for March: -6.2B (-5.1B forecast; -7.9B previous)
- U.K. S&P Global construction PMI for April: 46.6 (46.0 forecast; 46.4 previous)
- Euro Area retail sales for March: -0.1% m/m (0.0% m/m forecast; 0.3% m/m previous); 1.5% y/y (1.9% y/y forecast; 2.3% y/y previous)
- U.S. EIA crude oil stocks change for the week ending May 2: -2.03M (-2.7M previous)
- U.S. President Trump plans to rescind Biden-era AI chip curbs as part of a broader effort to revise semiconductor trade restrictions
- FOMC kept rates unchanged, flagged raised odds of higher inflation and unemployment, said costs of waiting for more data are “fairly low”
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major assets took cues from individual catalysts on Wednesday, with U.S. stock indices closing higher after a volatile session. A late rally in semiconductor stocks helped lift markets after reports that Trump would ease AI chip export restrictions.
European equities closed lower, likely pressured by weak eurozone retail sales data and uncertainty surrounding U.S.-China trade talks. Investors remained cautious following German Chancellor Friedrich Merz’s narrow election victory, though positive German factory orders (up 3.6%) provided some support.
Oil prices pulled back sharply, giving up most of Tuesday’s surge. WTI crude fell 1.95% to $57.93 after the EIA reported a smaller-than-expected inventory draw, and demand concerns persisted.
Gold dropped 1.99% to $3,369 as traders possibly took profits from recent record highs following the announcement of US-China trade talks in Switzerland. Some investors may have also reduced positions ahead of the Fed decision.
The 10-year Treasury yield fell further to 4.27% after the Fed kept interest rates unchanged but warned of increasing risks of both higher unemployment and inflation. Bitcoin showed strength amid the uncertainty, with a move to $97,200.
Markets remain cautious as investors assess the Fed’s statements and await weekend U.S.-China trade talks in Switzerland, which Treasury Secretary Bessent characterized as preliminary “de-escalation” efforts.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar started the day showing broad gains in early Asian trading following the announcement that U.S. Treasury Secretary Bessent and Trade Representative Greer would meet China’s Vice Premier He Lifeng for trade negotiations in Switzerland this weekend.
The dollar maintained most of its strength after New Zealand’s better-than-expected employment report, then chopped around after China announced comprehensive stimulus measures. The plans include a 50bp RRR cut, a 10bp reduction in the 7-day reverse repo rate to 1.4%, and targeted liquidity injections totaling 800 billion yuan. USD’s limited reaction pointed to uncertainty over their impact on the upcoming trade talks.
USD saw brief downticks following Germany’s strong factory orders data, but mostly chopped around until the U.S. session trading. The most dramatic move came after the FOMC decision, which kept rates unchanged at 4.25%-4.50% while acknowledging “increasing risks of higher unemployment and inflation.”
Dollar strength accelerated during Powell’s press conference as he emphasized the Fed was in “no hurry” to cut rates despite uncertainties. Powell noted the economy remained “solid” but required greater clarity before policy adjustments. This cautious stance prompted broad dollar strength, particularly against JPY, AUD, and NZD, with gains exceeding 1%.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany industrial production for March at 6:00 am GMT
- Germany balance of trade for March at 6:00 am GMT
- U.K. Halifax house price index for April at 6:00 am GMT
- BOE monetary policy decision and meeting minutes at 11:00 am GMT
- U.S. initial jobless claims for the week ending May 3 at 12:30 pm GMT
- U.S. nonfarm productivity and unit labour costs for Q1 2025 at 12:30 pm GMT
- Canada financial stability report at 2:00 pm GMT
- U.S. wholesale inventories for March at 2:00 pm GMT
- Japan household spending and cash earnings for March at 11:30 pm GMT
The European session will likely be dominated by the BOE possibly cutting its interest rates, with Germany’s industrial data and U.K. house prices offering early cues for euro and pound traders.
In the U.S. session, jobless claims, productivity data, and wholesale inventories could influence Fed expectations, while Canada’s financial stability report and Japan’s household data are likely to stay in the background unless they see notable hits or misses.
As always, stay nimble and don’t forget to check out our Forex Correlation Calculator when taking any trades!