The US markets opened strong with a Trump-Xi call, progress in US-Canada and US-EU trade talks, and an ECB rate cut lifting risk appetite. But the party ended fast when a Trump-Musk feud sent Tesla sliding 14% and flipped sentiment from risk-on to risk off.
Bitcoin fell below $101,000, gold gave up 4 week highs, and dollar weakness quickly faded as traders scrambled for safety.
Here are headlines you may have missed in the last trading sessions!
Headlines:
- Australia balance of trade for April: 5.41B (6.3B forecast; 6.9B previous)
- China Caixin services PMI for May: 51.1 (51.0 forecast; 50.7 previous)
- Germany factory orders for April: 0.6% m/m (-1.8% m/m forecast; 3.6% m/m previous)
- Swiss unemployment rate for May: 2.8% (2.8% forecast; 2.8% previous)
- Euro area PPI -2.2% m/m (-2.0% m/m forecast; -1.6% m/m previous); 0.7% y/y (0.9% y/y forecast; 1.9% y/y previous)
- U.S. Challenger job cuts for May: 93.82k (120.0k forecast; 105.44k previous)
- Euro area ECB interest rate decision for June 5: 2.15% (2.15% forecast; 2.4% previous)
- Lagarde signals ECB approaching end of easing cycle, central bank in “good position” on policy
- US President Trump and China President Xi agreed to a new in-person meeting after phone call amid trade tensions
- The Globe and Mail reported that US President Trump and Canada Prime Minister Carney are secretly holding direct talks over trade and security plans
- Canada balance of trade for April: -7.14B (0.1B forecast; -0.51B previous)
- U.S. initial jobless claims for May 31: 247.0k (243.0k forecast; 240.0k previous)
- U.S. balance of trade for April: -61.6B (-66.6B forecast; -140.5B previous)
- Feud between US President Trump and Elon Musk escalated in public view, weighed on risk sentiment
- Canada Ivey PMI s.a. for May: 48.9 (48.2 forecast; 47.9 previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major assets were all over the charts on Thursday. There was a sense of calm in early US trading after President Trump said he had a “very positive” 90-minute call with Chinese President Xi Jinping, sparking fresh hopes for progress on trade. Risk assets took the cue and started the session in the green.
But the good vibes didn’t last. Things quickly turned south after a very public feud broke out between Trump and Elon Musk over the president’s latest tax bill. Trump fired back at Musk’s criticism by threatening to pull government contracts and subsidies from his companies. That sent Tesla shares into a tailspin, down 14%, and wiped roughly $153 billion off its market value. The selloff rattled broader markets, flipping sentiment from risk-on to risk-off in a hurry.
By the closing bell, the S&P 500 was down 0.53%, the Nasdaq lost 0.83%, and the Dow slipped 0.25%. Bitcoin took a hit too, falling below $101,000.
In Europe, stocks closed modestly higher with the Stoxx 600 gaining 0.16% despite signals of a potential summer pause in ECB rate cuts.
Gold had a good run in European trading, touching a four-week high before bumping into resistance near $3,400. It gave back some gains to close around $3,350, with dollar strength adding to the pullback. Oil managed to hold modest gains on the Trump-Xi trade call optimism, while U.S. 10-year yields rose despite weaker US labor market data that had supported potential Fed rate cuts.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Majors Chart by TradingView
The dollar spent most of the Asian session trading in tight ranges but came under steady pressure in Europe as risk appetite picked up. Hopes for an ECB rate cut and a bit of profit-taking ahead of key events likely pushed the safe haven Greenback lower, and the move gathered steam as markets priced in the widely expected cut.
Trade news added more fuel to the fire. Trump and Xi finally got on the phone, with both sides calling the conversation “constructive” and agreeing to fire up a fresh round of talks. At the same time, reports surfaced of renewed efforts to settle U.S.-Canada disputes, while EU trade officials sounded upbeat about progress with Washington.
In early US trading, the ECB delivered the expected 25 bps rate cut, but President Lagarde’s press conference hinted the easing cycle could be winding down. Shortly after, higher U.S. jobless claims stirred up fresh labor market worries. The dollar tried to claw back losses during U.S. hours, with the Trump-Musk blow-up over tax legislation drawing some demand for the safe haven dollar.
By day’s end, USD/JPY, USD/CHF, and USD/CAD closed higher. USD/CAD likely found some support from higher oil prices and U.S.-Canada trade hopes, but safe-haven flows and potential pre-NFP report profit-taking eventually took the wheel.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany balance of trade for April at 6:00 am GMT
- Germany industrial production for April at 6:00 am GMT
- U.K. Halifax house price index for May at 6:00 am GMT
- France industrial production for April at 6:45 am GMT
- France balance of trade for April at 6:45 am GMT
- Swiss foreign exchange reserves for May at 7:00 am GMT
- Euro area GDP growth rate 3rd est for Q1 2025 at 9:00 am GMT
- Euro area employment change final for Q1 2025 at 9:00 am GMT
- Euro area retail sales for April at 9:00 am GMT
- U.K. BBA mortgage rate for May at 9:00 am GMT
- Canada employment change and unemployment rate for May at 12:30 pm GMT
- Canada average hourly wages for May at 12:30 pm GMT
- U.S. nonfarm payrolls and unemployment rate for May at 12:30 pm GMT
- U.S. average hourly earnings for May at 12:30 pm GMT
- U.S. consumer credit change for April at 7:00 pm GMT
European traders will have a lot to chew on early, with Germany’s trade and industrial production numbers possibly setting the tone for EUR demand. Later, euro area GDP and retail sales could move the euro if growth signals come in hot or cold.
For U.S. traders, it’s all about the US NFP report. Nonfarm payrolls, unemployment rate, and average hourly earnings are key to gauging whether the labor market is holding up or cracking. A strong report could revive dollar bulls, while a weak one could fuel Fed rate cut expectations and pressure the dollar lower. Canada’s jobs data will also be in the mix, especially for those watching CAD pairs.
As always, stay nimble and don’t forget to check out our Forex Correlation Calculator when taking any trades!
