U.S. GDP, Jobless Claims, BOE Bailey Speaks

The EUR/USD pair retreated below the 1.1250 mark on Wednesday ending the session 0.94% lower pressured by firm US bond yields and hawkish Fed signals.

The latest Federal Reserve meeting minutes, released Wednesday, revealed that policymakers remain concerned about persistent inflation and the growing risk of stagflation, particularly amid lingering uncertainties tied to U.S. trade policy.

Committee members noted that difficult trade-offs might arise if inflation remains elevated while the outlook for growth and employment deteriorates,” the minutes stated. The Fed is expected to remain patient as it assesses the cumulative effects of government policy changes. Notably, the meeting occurred prior to President Trump’s decision to reduce tariffs on Chinese imports from 145% to 30%.

On the data front, US Consumer Confidence surged to 98.0 in May, marking its highest reading in four years. The upbeat sentiment helped offset a sharper-than-expected 6.3% month-over-month drop in April Durable Goods Orders, which remain impacted by volatile trade policy developments.

Meanwhile, in Europe, the European Central Bank’s April Consumer Expectations Survey showed inflation expectations rising to 3.1%, up from 2.9% in March and significantly above the ECB’s 2% target. Despite this, dovish remarks from ECB officials have bolstered market expectations for a rate cut at next week’s meeting.

Looking ahead, markets are pricing in a 25-basis-point cut to the ECB’s Deposit Facility Rate, currently expected to fall to 2.00% during the June policy meeting.

Gold prices extended their decline on Wednesday, pressured by the release of the Federal Reserve’s latest policy meeting minutes.

Notably, the minutes revealed a growing awareness of stagflation threats, with policymakers noting that the Committee “might face difficult trade-offs if inflation proves to be more persistent while the outlooks for growth and employment weaken.”

Gold’s rally, which gained momentum earlier this month, appears to have stalled as US Treasury yields recovered some of their recent losses, strengthening the US Dollar and weighing on bullion. However, should the Fed adopt a more dovish tone than expected in the coming weeks, it could revive upward momentum for gold.

Elsewhere, optimism around US-India trade relations added to broader market risk appetite. The ongoing Russia-Ukraine war and continued conflict in the Middle East, particularly between Israel and Hamas, continue to support safe-haven demand.

Looking ahead, investors will turn their attention to key economic data releases, including the second estimate of Q1 2025 U.S. GDP and the Fed’s preferred inflation metric, the Core Personal Consumption Expenditures (PCE) Price Index, which may offer further insight into the Fed's policy trajectory.

Oil prices rose sharply on Wednesday as supply-side concerns resurfaced following the decision by OPEC+ to maintain its current output policy and a U.S. move to block Chevron from exporting Venezuelan crude. The twin developments boosted investor sentiment, pushing prices higher across major benchmarks.

Traders had previously anticipated that OPEC+—the Organization of the Petroleum Exporting Countries and its allies—might agree to increase production later this week. However, the alliance opted to leave output levels unchanged and instead agreed to create a mechanism for establishing 2027 production baselines.

Adding to bullish sentiment, the U.S. government recently revoked Chevron’s authorization to export Venezuelan crude, intensifying concerns about global supply. While Chevron has ended production, service, and procurement contracts in Venezuela, sources indicate the company intends to retain its staff in the country.

Market attention is also focused on broader geopolitical developments, including U.S.-Iran relations. On Wednesday, Iran’s nuclear chief, Mohammad Eslami, suggested Tehran might allow U.S. inspectors access to nuclear sites if ongoing negotiations with Washington progress positively.

Meanwhile, weekly data from the American Petroleum Institute (API) showed a drawdown in U.S. crude inventories, with stockpiles falling by 4.24 million barrels last week. Investors now await official government data from the U.S. Energy Information Administration (EIA), due Thursday, for confirmation.

U.S. stock index futures surged on Wednesday, driven by strong quarterly results from Nvidia and a favorable court ruling that cast doubt on former President Donald Trump’s sweeping tariff agenda. The upbeat momentum offered relief to markets that had stumbled earlier in the day amid growing concerns over U.S.-China trade tensions.

Shares of NVIDIA Corporation jumped in after-hours trading after the chipmaker posted stronger-than-expected fiscal first-quarter earnings. The results underscored resilient demand for its AI chips and data center products, particularly from large institutional clients heavily investing in artificial intelligence infrastructure.

The broader market rally also gained traction following a U.S. Court of International Trade decision that invalidated Trump’s so-called “liberation day” tariffs. The court ruled that the former president exceeded his authority by invoking the International Emergency Economic Powers Act to impose reciprocal tariffs on U.S. trading partners.

Earlier in the session, major U.S. indices traded lower as concerns about escalating trade restrictions weighed on sentiment.

Markets had been rattled by reports that the U.S. government was preparing new restrictions on chip software exports to China—an announcement that pulled chip stocks lower before Nvidia’s earnings reversed the tone.

Adding to the uncertainty, the Federal Reserve’s May meeting minutes, released Wednesday, highlighted policymakers’ unease over the inflationary and growth-related consequences of ongoing tariff policies.