The major assets shook off early jitters after Moody’s US credit downgrade, with most assets staging a late-day recovery as optimism around ceasefire talks and a UK-EU reset lifted sentiment.
The US dollar stayed under pressure, while gold, equities, and oil rebounded despite mixed global data and cautious Fed speak.
Here are headlines you may have missed in the last trading sessions!
Headlines:
- Over the weekend, Treasury Secretary Scott Bessent told CNN News tariff rates will soon return to a “reciprocal” level if countries don’t reach trade agreements during the 90-day pause
- Moody’s downgrades JPM, BofA and Wells Fargo after US credit rating cut
- New Zealand services NZ PSI for April: 48.5 (48.9 forecast; 49.1 previous)
- New Zealand PPI output for Q1 2025: 2.1% q/q (0.5% q/q forecast; -0.1% q/q previous); PPI input at 2.9% q/q (1.0% q/q forecast; -0.9% q/q previous)
- China unemployment rate for April 30: 5.1% (5.2% forecast; 5.2% previous)
- China retail sales for April: 5.1% y/y (5.6% y/y forecast; 5.9% y/y previous)
- China industrial production for April: 6.1% y/y (6.2% y/y forecast; 7.7% y/y previous)
- China fixed asset investment (YTD) for April: 4.0% y/y (4.6% y/y forecast; 4.2% y/y previous)
- SNB Chairman Martin Schlegel expects lower growth this year and for inflation to turn negative in some months
- Euro area consumer prices final for April: 2.2% (2.2% forecast; 2.2% previous); 0.6% m/m (0.6% m/m forecast; 0.6% m/m previous); Core CPI at 2.7% y/y (2.7% y/y forecast; 2.4% y/y previous)
- The UK and the EU announce new deals and renew ties, 5 years after Brexit
- FOMC member Bostic said that he expects one interest-rate cut this year due to his worries over inflation.
- FOMC Vice Chair Jefferson said he supports a patient approach to interest rate policy, sees current policy as in a good place at “moderately restrictive”
- U.S. CB leading index MoM for April: -1.0% (-0.6% forecast; -0.3% previous)
Broad Market Price Action:
ollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major assets started the week with wild swings after Moody’s downgraded US credit from Aaa to Aa1, but most assets clawed back losses by the end of the session. Trump’s comment about his “very well” received call with Putin, which included talk of a possible ceasefire, gave markets another reason to stabilize.
The S&P 500 reversed a 1% drop to close slightly higher at 0.1%, notching its sixth straight gain. The Dow bounced back from a 300-point loss to finish up 0.3%, while the Nasdaq ended just above flat.
In Europe, stocks were mixed, though the FTSE 100 reached a seven-week high after the UK and EU agreed to a “major reset” deal covering trade, energy, security, fisheries, and travel.
Treasury yields surged early on US debt concerns but eased as bond dip buyers came in. US10Y settled at 4.46% after touching 4.55%, while the 30-year briefly broke above 5% before pulling back.
Gold caught a strong bid from safe-haven and anti-USD flows, jumping 1.5% to $3,249 before settling just under $3,230. Bitcoin saw a sharp drop below $102,500 but quickly rebounded to new notable highs near $105,500.
WTI crude initially slipped after a weak batch of Chinese data, but rebounded to around $62.60 before easing again to $62.00 as a “well-received” Trump-Putin call raised hopes for a Russia-Ukraine ceasefire.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The US dollar kicked off the week on a weak note, sliding after Moody’s downgrade and extending losses during the European session as the UK-EU trade reset deal lifted risk sentiment. While soft Chinese data and Japan’s Prime Minister warning of fiscal troubles “worse than Greece’s” offered minor support, the Greenback stayed broadly under pressure.
Fed commentary during the US session, including remarks from New York Fed’s Williams signaling rates will likely stay on hold until September, helped the dollar recover slightly.
Still, the rebound was limited as markets continued to digest the downgrade and growing concerns over US fiscal health. Mid-session EU economic forecasts added more weight, highlighting regional resilience and keeping the pressure on the dollar.
Risk-on flows dominated the day despite mixed economic headlines, with investors rotating out of the dollar in favor of higher-yielding and growth-linked currencies. FOMC member speeches later in the day failed to shift the tone. By the close, the dollar had clawed back some ground but still ended lower against all major peers, with USD/JPY underperforming despite Japan’s own fiscal red flags.
Upcoming Potential Catalysts on the Economic Calendar:
- China loan prime rate 1Y & 5Y for May 20 at 1:15 am GMT
- Australia RBA interest rate decision for May 20 at 4:30 am GMT
- Australia RBA press conference at 5:30 am GMT
- Germany producer prices index growth rate for April at 6:00 am GMT
- Euro area current account for March at 8:00 am GMT
- U.K. BoE Pill speech at 8:00 am GMT
- Euro area labour cost index (flash) for March 31 at 9:00 am GMT
- Canada inflation rate for April at 12:30 pm GMT
- U.S. Fed Bostic speech at 1:00 pm GMT
- U.S. Fed Barkin speech at 1:00 pm GMT
- U.S. Fed Collins speech at 1:30 pm GMT
- Euro area consumer confidence flash for May at 2:00 pm GMT
- New Zealand global dairy trade price index for May 20
- U.S. Fed Musalem speech at 5:00 pm GMT
- U.S. API crude oil stock change for May 16 at 8:30 pm GMT
- U.S. Fed Kugler speech at 9:00 pm GMT
- New Zealand balance of trade for April at 10:45 pm GMT
- U.S. Fed Daly speech at 11:00 pm GMT
- U.S. Fed Hammack speech at 11:00 pm GMT
- Japan balance of trade for April at 11:50 pm GMT
Traders are in for a BUSY trading day, with potential euro and pound volatility around Germany’s PPI, Euro area current account and labor cost figures, and BoE’s Pill speech during the European session. Softer prints could weigh on EUR and GBP, especially if paired with dovish central bank tones.
In the U.S., data releases are stacked with inflation data from Canada and multiple Fed speakers, which could steer expectations for upcoming Fed moves. Any hawkish tilt or hot CPI print may support the dollar, while oil and commodity-linked pairs could react to the API crude stock report and GDT auction results.
As always, stay nimble and don’t forget to check out our Forex Correlation Calculator when taking any trades!