In the week ahead: US Core CPI & PPI, U.S. Retail Sales, UK GDP, Walmart Earnings

The EUR/USD pair rebounded from a three-week low on Friday, supported by a pullback in the US Dollar as traders turned cautious ahead of high-stakes US-China trade talks held in Switzerland on Saturday.

The dollar's decline allowed the euro to strengthen, supported further by its outperformance across major currency pairs.

Investors had been closely watching the outcome of the US-China trade negotiations, given China’s role as the second-largest US export market after Mexico.

On Sunday, both sides reported “substantial progress” following two days of talks in Geneva. Chinese Vice Premier He Lifeng described the discussions as “an important first step” toward stabilizing bilateral relations, while US Treasury Secretary Scott Bessent echoed the sentiment, citing “meaningful progress” in efforts to de-escalate the trade dispute. The renewed optimism provided additional support for risk-sensitive assets, including the euro. The EUR/USD pair kicked off the new week on a weaker note amid a modest US Dollar (USD) uptick, bolstered by the optimism over a US-China trade deal.

The euro also gained ground Friday due to its relative strength against major currencies, even as European Central Bank (ECB) officials struck a dovish tone. ECB Governing Council member Olli Rehn reaffirmed that disinflation is progressing and signaled that a rate cut may be warranted if June projections confirm a deteriorating growth outlook.

Gold prices rose on Friday, as the US Dollar weakened and risk sentiment soured. The precious metal found renewed support from falling US Treasury yields and growing geopolitical concerns.

Softer yields and the greenback’s pullback acted as a tailwind for gold, which remains a key safe-haven asset in times of market uncertainty.

Adding to the geopolitical risk premium, tensions between India and Pakistan escalated for a third consecutive day. Both nations have accused each other of deploying drones and artillery fire, heightening concerns of broader regional instability.

Meanwhile, several Federal Reserve officials spoke on Friday, expressing concerns over economic uncertainty and the inflationary impact of US tariffs. Policymakers noted that trade frictions complicate the Fed’s task of balancing its dual mandate of stable prices and full employment, further supporting gold’s appeal amid an unclear monetary policy outlook.

Oil prices rallied on Friday, capping their first weekly gain since mid-April as investor sentiment improved following a new U.S.-U.K. trade agreement and growing optimism ahead of high-level U.S.-China talks in Switzerland.

The market's mood was lifted after U.S. President Donald Trump announced a trade deal with the United Kingdom on Thursday, which included tariff reductions on British car and steel exports. The uptick continued early on Monday after the U.S. and China concluded two days of trade talks in Geneva, signalling a potential de-escalation in their ongoing trade dispute.

China’s trade data released Friday added to the positive sentiment. April exports rose more than expected while the contraction in imports eased.

Geopolitical developments in the Middle East also contributed to oil’s rally. Israel reported intercepting a missile launched from Yemen, just days after Oman mediated a temporary ceasefire between the U.S. and Yemen’s Houthi rebels, who claimed responsibility for the attack. Rising tensions in the region added a layer of risk premium to oil prices.

U.S. equities closed slightly lower on Friday, capping a downbeat week as investors remained cautious ahead of high-level trade talks between the United States and China held over the weekend.

Market sentiment remained fragile after U.S. President Donald Trump reignited trade tensions with a social media post hinting at a potential 80% tariff on Chinese imports. The comment, which came just before U.S. Treasury Secretary Scott Bessent’s meeting with Chinese Vice Premier He Lifeng in Switzerland, tempered hopes for a meaningful de-escalation in the long-running trade dispute.

Investors focus also remained on the Federal Reserve, with several policymakers offering divergent views on the economic outlook and monetary policy trajectory.

In corporate news, Nvidia drew attention after reports emerged that the chipmaker is preparing to launch a less-powerful version of its H20 artificial intelligence chip in China within the next two months, as it seeks to comply with stricter U.S. export regulations. Affirm Holdings, meanwhile, plunged more than 14% after issuing soft guidance for its fourth quarter and full fiscal year 2025, despite topping third-quarter earnings estimates. Expedia also came under pressure, falling more than 7% as the travel-booking platform missed revenue expectations due to weaker U.S. demand.