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05/05/2025 - 08:00 UTCThe US dollar traded moderately lower against most major currencies on friday, with the dollar index (USDX) registering small losses of approximately 0.18% on the iFOREX trading platform. The dollar is facing pressure, partly due to President Trump's advocacy for looser monetary policies. He has reiterated his view that interest rates should eventually be lowered, and confirmed he will not remove Federal Reserve Chair Jerome Powell before Powell's term ends in May 2026. US Nonfarm Payrolls data helped to curtail the dollar's losses, showing a greater-than-anticipated 177,000 job gain in April. This followed an upwardly revised 185,000 increase in March, and surpassed the projected 130,000.
With major Asian markets (Japan, China, Hong Kong, South Korea) closed for holidays, regional trading volumes were low. Investors were also keeping a close eye on upcoming Chinese economic data, particularly trade figures, to understand the impact of U.S. tariffs. Adding to the cautious sentiment, U.S. stock index futures dipped in Asian trading as the Federal Reserve prepared for its policy meeting. Recent reports indicated that both China and the U.S. are considering trade talks, potentially easing fears of a full-blown trade war, though markets are still looking for concrete developments. China's Caixin services PMI, trade balance, and CPI data are scheduled for release later this week.
Despite the momentum from strong earnings by AI leaders like Microsoft and Meta Platforms, which fueled gains in U.S. stock indices on Friday, U.S. stock futures declined Sunday evening. This pullback followed the US 500's longest winning streak in over two decades, as investors remained cautious due to potential U.S.-China trade talks and the upcoming Federal Reserve policy meeting. Friday's market gains were supported by stronger-than-expected nonfarm payrolls data, indicating resilience in the labor market despite concerns about the Trump administration's trade policies. Adding to the market dynamic, China stated last week that it was considering potential trade talks with the U.S., emphasizing that any dialogue must be based on sincerity and the removal of unilateral tariffs. This followed recent U.S. statements suggesting a willingness to engage in trade negotiations. This turn of events led to all three indices posting weekly gains ranging from 2.8% to 3.3%.
On the cryptos front, Bitcoin's price slipped slightly below $95,000 in Monday's holiday-thinned trading, as ongoing trade and economic uncertainty. While Bitcoin had gained from improved risk appetite in late April, fueled by optimism around U.S.-China trade negotiations, hitting highs last seen in mid-February, that momentum has cooled as investors wait for clearer signals on potential U.S.-China trade talks.
Investors are proceeding with caution as the Federal Reserve's policy meeting approaches later this week. The Fed is widely expected to hold interest rates steady, reflecting a cautious approach to evaluating the inflationary effects of Trump's tariffs. In addition to the Fed decision, market activity this week could be influenced by the UK interest rate decision, a speech from BOE Governor Bailey, the U.S. ISM Services PMI, and quarterly earnings reports from several key market players including Palantir, Ford, Biontech, Walt Disney, and AMD.
The EUR/USD pair traded between gains and losses on Friday, finally ending the session moderately higher, trading near the 1.130 level after US President Donald Trump confirmed he would not seek Federal Reserve Chair Jerome Powell's removal before his term concludes in May 2026, and reiterated his call for eventual interest rate reductions.
Potential trade tensions present headwinds for the EUR/USD. President Trump announced plans to instruct the US Trade Representative and Commerce Department to initiate the process of imposing a 100% tariff on foreign-produced movies. Adding to the mix, the US labor market showed strength in April. The Nonfarm Payrolls (NFP) report revealed a stronger-than-expected increase of 177,000 jobs, surpassing the market forecast of 130,000. The unemployment rate remained steady at 4.2%, with average hourly earnings holding at 3.8% year-on-year.
On the other side of the Atlantic, the Euro received some support on Friday from stronger-than-expected Eurozone inflation data. The Harmonized Index of Consumer Prices held steady at 2.2% year-over-year in April, slightly exceeding the projected 2.1%. These figures have reinforced market expectations for a total of 60 basis points of European Central Bank (ECB) rate cuts by the end of the year.
Gold prices (XAU/USD) posted modest losses on Friday hovering above $3,230 level even as geopolitical risks, stemming from the ongoing Russia-Ukraine war and the escalating Middle East conflict, are supporting the safe-haven metal. Additionally, uncertainty surrounding US President Trump's tariff plans is weighing on investor sentiment and further benefiting gold.
Expectations for an imminent start to the Federal Reserve's (Fed) rate-cutting cycle are also providing support. However, traders appear to be cautious, preferring to wait on the sidelines ahead of the two-day FOMC policy meeting that begins on Tuesday.
Speeches from key Fed officials later in the week will be closely analyzed for clues about future monetary policy and their impact on USD demand. In the meantime, the US ISM Services PMI, along with trade developments and geopolitical news, could provide further direction for the XAU/USD pair today.
WTI crude oil is currently trading around $57 (as of 08:25 AM GMT on Monday). Several factors are influencing WTI prices. On the one hand, WTI is facing downward pressure from OPEC+'s decision to boost production by 411,000 barrels per day in June. This decision follows a surprise move in April when OPEC+ agreed to a larger-than-expected increase in output for May, despite weakening prices and slowing demand. Reuters reports that these output hikes could add as much as 2.2 million barrels per day to the market by November.
In April, oil prices saw their largest monthly decline since 2021, as US President Donald Trump's tariffs raised fears of a recession and a subsequent drop in demand, occurring simultaneously with OPEC+'s accelerated production increases.
On the other hand, escalating geopolitical tensions in the Middle East are providing some support for WTI, potentially capping further price declines. Israeli Prime Minister Benjamin Netanyahu has pledged to retaliate against the Houthis after a missile strike near Israel's main airport, and Iran's Defence Minister Aziz Nasirzadeh stated on Sunday that Iran would respond to any attack by the US or Israel.
The US 500 surged by 1.7% on Friday, driven by positive comments from China regarding trade talks and a stronger-than-expected April jobs report, which mitigated concerns about the impact of tariffs on Apple and Amazon's profits. Investors are now focused on upcoming quarterly earnings reports from key market players, including Palantir, Ford, Biontech, Walt Disney, and AMD.
Palantir (PLTR) reports after Monday's close. The company develops software platforms for intelligence and counterterrorism operations. Shares are up more than 60% in 2025, and rose nearly 7% on Friday. Consensus estimates project earnings of 11 cents a share (up 38%) and revenue of $799 million (up 26%).
Ford also reports after Monday's close. Wall Street expects earnings of 2 cents a share, down from 49 cents a year ago, with revenue estimated at $35.8 billion (down from $39.9 billion). Ford has significant assets, like its pickup business, and is less exposed to Trump tariffs than GM and Stellantis. Its 7.3% dividend yield is a key attraction. Shares are up 3.8% year-to-date.
Advanced Micro Devices earnings are estimated at 93 cents a share (up 50%), with revenue projected at $7.1 billion (up nearly 30%). Tariffs and the Trump Administration's export controls on chips to China, particularly its MI308 chips, are key concerns. AMD warned of a potential $800 million charge if it cannot secure an export license. Shares are down more than 18% this year.
Walt Disney Co. reports before Wednesday's open and faces significant challenges. Earnings are estimated at $1.21, unchanged year-over-year, with revenue projected at $23.1 billion (up 4.7%). Disney faces rising steel prices for cruise ships (due to Chinese production) and potential tariffs on Chinese-made toys. Disney shares are down nearly 12% this year.
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