As you’ll recall, Friday was a crazy day across the foreign exchange and commodities markets. As the United States Non-Farm Payroll (NFP) data release approached, trading trends were immediately affected. The EUR/USD currency pair dropped through the 1.1400 level, with the GBP/USD still on the back foot, trading below 1.3550. At the same time, interest in gold was fading, with gold prices trading just under $3,350. Market participants are looking closely at the upcoming May Consumer Price Index (CPI) report. We hope this report will tease out especially valuable insights into the overall inflation trend as tariffs increase.
Later on in the day, the EUR/USD currency pair started to lose steam. It fell through the important psychological barrier of 1.1400. The drop follows the release of the strong U.S. jobs report. This information painted a picture of how well the labor market was doing and its influence on monetary policy. Extremely bearish sentiment is building against the euro/dollar. Yet, increasingly, analysts are raising the alarm on an economic downturn in the Eurozone, leading the way for a larger, and darker, trend.
At the same time, GBP/USD witnessed some turn selling pressure during the American trading hours on Friday. The duo drove their way back above the 1.3550 level. Market participants very keenly judged how the U.S. employment report would impact the likelihood of future moves by the Federal Reserve. The ups and downs point to a great deal of continued uncertainty in both the UK and U.S. economies, keeping traders on edge.
Gold, considered by many as the safe-haven asset, has fallen under $3,350. This decline occurred despite the ongoing global strengthening of the U.S. dollar. The precious metal’s run of downward pressure continues. Amid roaring inflation, investors have increasingly begun to parse through disparate economic indicators and bet on their effects to future monetary policy. These latest leaps in the price of gold are the market’s manifestly reaction to changing sentiment on macroeconomic pressures.
Market watchers will be highly focused on the May CPI release. They expect it to have a relatively limited upward effect on headline inflation. Most economists are predicting a 0.27% jump in core CPI for May. We get hints from core CPI that inflation remains a serious risk, if not yet a runaway threat. The demand-side inflationary effects are a bit more alarming and are projected to grow significantly in the next months, largely due to an ongoing high tariff environment.
The May CPI report should be coming under the national spotlight any day now. That’s going to show how quickly and steeply the impact of higher, new tariff rates are hitting consumers’ wallets. Economic uncertainty exacerbated by trade tensions are changing the economic terrain. Traders are eagerly waiting for clues from this report to forecast where the market will move next.
The current market sentiment indicates that that EUR/USD and GBP/USD are both making bearish moves. This unexpected reversal underscores the new worries about global growth and financial stability. Many growth stocks in recently favored sectors such as internet, e-commerce, and high-tech are currently subjected to increased margin maintenance levels. For some types of projects, initial and maintenance requirements can exceed 70%! This environment of uncertainty will continue to weigh on market sentiment as investors look through these lenses of complexity.