Markets entered Friday with a cautious yet stabilizing tone, reflecting investor reaction to a flurry of geopolitical and macroeconomic developments. Chief among them was the announcement of a preliminary U.S.-UK trade agreement by President Donald Trump—hailed by some as a diplomatic win, but viewed by markets as limited in scope and impact.
Gold Bounces but Sentiment Remains Fragile
Gold futures rose 0.8% to $3,331.50 per ounce after shedding 1% on Thursday. The rebound was driven by a softer U.S. dollar and mild safe-haven interest ahead of U.S.-China trade talks scheduled for the weekend in Switzerland. However, despite the initial excitement surrounding the U.S.-UK trade agreement, investors remain wary.
While the announcement prompted a short-lived risk-on reaction, analysts quickly questioned its depth. Many note that key tariffs, including the 10% baseline duties, remain in place, limiting the deal’s economic impact and failing to signal substantive progress for upcoming negotiations with other major trade partners.
Dollar Softens Slightly After Surge
The DXY index edged 0.1% lower to 100.493 after reaching a one-month high in Asian trading. Trump’s comments suggesting tariffs on China might be eased “depending on how talks go” injected a layer of hope, though most analysts advise caution given the administration’s pattern of reversals.
Yen Weakens Amid Risk-On Shift
The Japanese yen fell past 145 per dollar, hitting a one-month low. Safe-haven flows ebbed as Trump hinted at possible tariff relief for China. Meanwhile, Fed Chair Powell’s firm stance against preemptive rate cuts further buoyed the dollar. On the domestic side, Japanese personal spending data beat expectations, although a continued decline in real wages added complexity to the outlook.
AUD and NZD Falter as Dollar Strengthens
The Australian dollar slipped below $0.64 while the New Zealand dollar dropped to $0.588, extending losses into a third straight session. Both currencies were pressured by Trump’s trade rhetoric and Powell’s hawkish tone. Additionally, dovish expectations for the RBA and RBNZ continued to weigh, with markets pricing in further rate cuts in the months ahead.
Conclusion
While headlines suggest progress, markets remain unconvinced of any true breakthrough. Trump’s hints at further deals, and potential tariff relief for China, have yet to translate into policy clarity. Until then, expect volatility to persist—driven more by sentiment than substance.
