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09/05/2025 - 07:40 UTCThe US dollar continued with a second day of gains climbing to monthly highs on Thursday, with the dollar index (USDX) adding 0.75% to its value crossing above the 100-point benchmark. Part of the move could be attributed to Federal Reserve Chair Jerome Powell’s indications earlier in the week that the central bank isn't in a hurry to cut interest rates due to trade uncertainty. This lack of anticipated rate cuts typically supports the dollar's value. Additionally, the new US-UK trade agreement raised hopes for more trade deals, easing worries about a damaging trade war and further boosting the dollar. Ongoing global tensions, such as the conflicts in Ukraine and the Middle East, also increased demand for the dollar as a safe haven. While these factors contributed to the dollar's rise, investors were also waiting for upcoming speeches from Federal Reserve officials for clues about future interest rate decisions.
Following the Bank of England's widely anticipated interest rate cut, the British pound weakened against the US dollar for a second consecutive day on Thursday. Market focus swiftly shifted to positive trade news from the US, where the announcement of an impending trade agreement with the UK significantly boosted market sentiment and strengthened the dollar. This deal will prevent the UK from facing steep 'reciprocal' tariffs that were set to return on July 9. Nevertheless, a 10% tariff on all UK goods entering the US remains a potential headwind for market optimism in the future.
In Asia, sentiment is overall mixed, the China SSE and the China SZSE down by 0.35% and 0.72% respectively as of 07:13 AM GMT Thursday, while the Hong Kong 50 traded almost unchanged from its previous closing price. Despite news of a US-UK trade deal framework raising hopes for broader tariff negotiations, particularly with China, Asian stock markets still saw declines. Investors are evaluating China's latest trade balance figures to understand the impact of significant US tariffs. However, the losses were limited as regional markets took positive cues from overnight gains on major Wall Street indexes, which were boosted by trade deal optimism. Data released on Friday showed China's trade surplus in April grew slightly less than expected while exports saw a smaller increase than the previous month. Similarly, the drop in imports was less severe than anticipated suggesting resilient domestic and foreign demand despite the pressure from tariffs. Looking ahead, investors are now waiting for China's consumer price index (CPI) inflation data, due on Saturday.
On Thursday, US stock markets rallied, with the US 30, the US 500, and the US Tech 100 all closing moderately higher. This surge followed President Trump's signing of a trade deal framework with the United Kingdom, sparking optimism that his administration's previously unpredictable trade policies might be stabilizing. Analysts at ING noted that this deal provided the 'sense of flexibility' markets desired, as evidenced by rising equity prices, a stronger dollar, and higher Treasury yields. However, they remained cautious about whether this UK deal signaled a broader easing of global tensions, especially with upcoming US-China trade talks.
In company news, Arm Holdings saw a 6.2% drop after issuing weak guidance, while Boeing shares reached a 52-week high, climbing 3.41%. The VIX, a measure of S&P 500 volatility, fell 4.5% to its lowest point in a month.
Today's investor attention is likely to center on a series of speeches by key FOMC members, including Barkin, Williams, Goolsbee, and Waller. Additionally, some markets could be influenced by the release of Canada’s unemployment rate as well as a speech by Bank of England Governor Bailey.
The EUR/USD pair edged lower on Thursday, briefly testing the 1.1200 level as the US Dollar gained traction across the board. The move followed market optimism surrounding a potential trade agreement between the United States and the United Kingdom, which, while not yet officially confirmed, has sparked renewed appetite for the greenback.
Investors are eyeing possible tariff relief as part of the deal, hoping it will mark a step toward de-escalation in ongoing trade tensions. As it stands, the proposed agreement could enable the UK to avoid steep “reciprocal” tariffs scheduled to take effect on July 9, following a temporary postponement by the Trump administration. Despite this, a blanket 10% tariff on UK imports into the US remains on the table, potentially capping risk appetite in the near term.
On the data front, US initial jobless claims fell to 228,000 for the week ending May 3, slightly beating expectations and down from the prior week’s unchanged reading of 241,000. The seasonally adjusted insured unemployment rate held steady at 1.2%, reflecting a relatively stable labor market. However, the four-week moving average ticked up to 226,000, suggesting a modest softening in underlying trends. Continuing claims declined by 29,000 to 1.879 million for the week ending April 26.
Across the Atlantic, the Euro remains under pressure amid growing speculation that the European Central Bank (ECB) may begin cutting interest rates as early as its June meeting.
Bitcoin posted huge gains on Thursday, rising over 6% and surging past key psychological levels amid renewed risk-on sentiment. The move came after former U.S. President Donald Trump announced a trade deal with the United Kingdom and hinted at potential tariff reductions on Chinese imports, fueling optimism across global markets. Bitcoin is on track for a strong weekly closure and is poised to notch its third consecutive week of gains, continuing a bullish trend that began in late April.
Bitcoin’s gains mirrored broader market strength, with risk assets rallying on Trump’s announcement of the UK trade agreement and his suggestion that tariffs on China could be slashed—possibly from 145% to 50%—pending ongoing discussions. U.S. officials are reportedly set to meet with their Chinese counterparts in Switzerland over the weekend, adding to market optimism.
Though Bitcoin is not directly affected by global trade policies, its price often correlates with broader risk sentiment.
The broader crypto market rallied in tandem with Bitcoin on Thursday. Ethereum led gains among major altcoins, surging 21.85% after successfully deploying its long-anticipated Pectra upgrade—its most significant protocol update since the 2022 Merge.
Oil prices surged on Thursday, buoyed by optimism over a potential breakthrough in U.S.-China trade negotiations that could ease tensions between the world’s two largest oil consumers and help stabilize global demand.
Markets were encouraged by news that U.S. Treasury Secretary Scott Bessent is scheduled to meet with China’s top economic official in Switzerland on May 10. The renewed dialogue raises hopes of progress in resolving the trade dispute that has weighed heavily on global economic growth and, by extension, energy demand.
Further bolstering sentiment was the announcement of a trade deal between the U.S. and the UK.
On the supply side, mixed signals emerged. A Reuters survey found that OPEC’s oil output edged lower in April, despite a scheduled production hike, driven mainly by reduced flows from Venezuela amid renewed U.S. sanctions, as well as modest declines in Iraq and Libya. Still, the OPEC+ alliance is expected to gradually increase output, which may weigh on prices in the near term.
U.S. stocks advanced Thursday, buoyed by fresh trade optimism after former President Donald Trump announced a trade framework with the United Kingdom, describing it as the “first of many.” The deal sparked hopes for a broader easing in trade tensions and helped lift market sentiment.
The newly signed trade framework maintains a 10% universal U.S. tariff on UK goods but includes a UK commitment to lower its own import tariffs to 1.8% from 5.1%. Notably, UK steel and aluminum exports to the U.S. will be exempt from Washington’s 25% sectoral tariffs. The agreement offers expanded access for American goods and marks the first major trade announcement following Trump’s earlier tariff escalation in April.
The Federal Reserve, as expected, held interest rates steady on Wednesday but signaled increased uncertainty tied to the economic impact of tariffs. Chair Jerome Powell noted that risks of both higher inflation and rising unemployment have intensified, though he emphasized the underlying resilience of the U.S. economy.
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