📊 Sterling strengthens as U.S.–China talks take spotlight

On Monday, the British pound (GBP) rose by 0.16% against the U.S. dollar (USD).

👉 Possible effects for traders

U.K. unemployment edged up towards 4.6% in the three months to April 2025, aligning with market expectations and marking the highest rate since the three months to August 2021. The uptick from 4.5% reflects growing labour market slack, primarily due to increases in both short-term unemployment (up to six months) and long-term joblessness (over one year).

The data highlights underlying structural pressures in the labour market, suggesting a slower pace of reabsorption for displaced workers amid persistent economic headwinds. Although the overall unemployment rate didn't surprise the market, the rise in long-term joblessness may lead policymakers to reconsider how they balance job support with controlling inflation, especially as the Bank of England plans its next policy move.

GBPUSD fell during the Asian and early European trading sessions. Although markets remained relatively quiet, traders should stay vigilant for any updates related to global trade tariffs. If the U.S. and China adopt a more conciliatory stance on tariffs, GBPUSD could correct sharply lower as improving risk sentiment reduces demand for safe-haven currencies. Key levels to watch are resistance at 1.35000 and support at 1.36000.

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📊 USDJPY weakens on lower U.S. CPI data

The U.S. dollar (USD) declined by 0.43% against the Japanese yen (JPY) as softer-than-expected U.S. inflation data increased market expectations of a potential Federal Reserve (Fed) rate cut by September.

👉 Possible effects for traders
May's Consumer Price Index (CPI) report revealed a slower pace of price growth than anticipated, reinforcing expectations of monetary easing and placing downward pressure on the U.S. dollar. With the prospect of lower U.S. interest rates, the dollar became less attractive relative to other currencies like the yen.

On the Japanese side, domestic economic data pointed to moderating inflationary pressures. Producer prices rose 3.2% year-over-year in May—the slowest pace in eight months, suggesting that input cost growth is moderating. However, Bank of Japan (BoJ) Governor Kazuo Ueda maintained a cautiously hawkish tone. He stated that the central bank remains ready to raise interest rates again if there is sufficient confidence that core inflation is nearing or stabilising around the 2% target. This divergence in policy outlook between the Fed and the BoJ has added to the strength of the JPY.

USDJPY declined during the Asian trading session. Today's U.S. Producer Price Index (PPI) data release at 12:30 p.m. UTC could significantly influence USDJPY. Stronger-than-expected PPI figures could support the U.S. dollar by reducing expectations of imminent rate cuts. As traders adjust their positions, heightened volatility may emerge, potentially shaping the short-term direction of USDJPY. Key levels to watch are resistance at 143.500 and support at 144.500.

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📊 Euro rises on Trump's inconsistency

The euro (EUR) rose by 0.56% against the U.S. dollar (USD) on Wednesday, following indications that U.S. President Donald Trump may adopt a more conciliatory tone in ongoing trade negotiations.

👉 Possible effects for traders
On Wednesday, Trump indicated he might extend the 8 July deadline for finalising trade agreements, potentially delaying the implementation of higher tariffs. This move was interpreted by markets as a sign of flexibility, easing immediate concerns over escalating trade tensions. Simultaneously, growing expectations of a Federal Reserve (Fed) rate cut added further downward pressure on the U.S. dollar. Softer economic data and dovish signals from Fed officials have reinforced market belief that monetary easing could be on the horizon. The prospects of delayed tariff hikes and lower interest rates have shifted investor sentiment away from the greenback. Thus, demand for risk assets and alternative currencies increased, lifting the euro.

'It's hard to tell whether there is a masterplan behind this, but common sense would suggest that President Trump is trying to create a level of urgency in terms of trade negotiations', said Rodrigo Catril, Senior Currency Strategist at National Australia Bank. 'I think the market, in terms of the size of the moves, is becoming a little bit more sanguine about what this all means... the market is also very wary that the picture could change quite dramatically in a week's time or two weeks' time'.

EURUSD rose during the Asian and early European trading sessions. Today's focus is on the U.S. Producer Price Index (PPI) report, due at 12:30 p.m. UTC, and the handful of speeches by the Fed officials. The market expects a 0.1% rise in monthly core PPI. If the figures exceed expectations, EURUSD could rise towards 1.15780.

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📊 Gold rises on U.S. inflation report

The gold price (XAU) surged by 0.96% on Wednesday, driven largely by cooler-than-expected U.S. inflation data that bolstered expectations of a more dovish Federal Reserve (Fed) stance.

👉 Possible effects for traders
The latest Consumer Price Index (CPI) report showed that annual consumer prices rose towards 2.4% in May, up from April's 2.3%, but still below market forecasts of 2.5%. Meanwhile, core inflation held steady at 2.8%, slightly below the consensus estimate of 2.9%. These figures reinforced the view that the Fed could begin cutting interest rates as early as September, providing a favourable environment for non-yielding assets like gold.

Geopolitical developments also supported gold. U.S. and Chinese officials announced a tentative trade framework to revive their bilateral economic cooperation. A key agreement component includes China easing export restrictions on rare earth elements, a move welcomed by global manufacturers. However, the agreement remains preliminary and requires formal approval by both governments, leaving room for market volatility if negotiations stall.

XAUUSD continued to rise during the Asian and early European trading sessions. The market remains focused on the trade tariff tensions. Today's U.S. macroeconomic statistics may additionally fuel volatility and influence investors' expectations of the U.S. interest rate path. Investors should pay attention to the U.S. Producer Price Index (PPI) report, due at 12:30 p.m. UTC, which may influence both the U.S. dollar and gold prices.

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📊 Gold rises due to escalating Middle East tensions

The gold price (XAU) surged by 0.93% on Thursday, supported by weaker U.S. inflation data and renewed geopolitical tensions between Israel and Iran.

👉 Possible effects for traders
Both U.S. Consumer and Producer Price Index (CPI and PPI) reports came in below market expectations, increasing the likelihood of the Federal Reserve (Fed) easing monetary policy. This dovish outlook has diminished the opportunity cost of holding non-yielding assets such as gold, boosting investor demand.

In addition to economic factors, safe-haven buying strengthened amid increasing geopolitical risks. Gold rally continues today, driven primarily by heightened concerns over Middle East tensions following Israel's preemptive military strike against Iran. The move significantly raised fears of a broader regional conflict, prompting a flight to safety. Israeli Defense Minister Israel Katz declared a special state of emergency, warning of an imminent missile and drone assault targeting civilian areas. The announcement added to market anxiety and prompted a flight to safety.

XAUUSD surged past $3,436 during the Asian and early European trading sessions, reaching its highest level in over a month. The formal macroeconomic calendar is light today. Still, traders should continue to monitor Middle East tensions. Key levels to watch are resistance at $3,500 and support at $3,400.

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