Morning market review for 29.05.2025

EUR/USD

The euro is actively declining during the Asian session, continuing the correction trend formed at the beginning of the week, when the EUR/USD pair was at local highs from April 29. The quotes are testing the 1.1235 mark for a breakdown while traders are analyzing macroeconomic publications. Recall that at the end of April, the number of unemployed citizens in Germany increased from 4.0K to 34.0K, significantly higher than the market expectations of 11.0K, while the overall unemployment rate, considering seasonal fluctuations, consolidated at the previous level of 6.3% at the end of April. The attention of American investors yesterday was focused on the minutes of the latest meeting of the US Fed on monetary policy, where the authorities pointed out significant uncertainty regarding economic forecasts against the aggressive trade policy of the White House, which makes a cautious approach to changing the parameters of monetary policy quite justified. Meanwhile, President Donald Trump said on the Truth Social network that European authorities are insisting on holding consultations on tariffs as soon as possible and expressed hope that EU markets will soon open to American goods. Experts believe that a full consensus is unlikely to be reached before July 9. However, it will probably be possible to develop a framework version.

GBP/USD

The pound is losing ground during the morning session on May 29, developing the corrective impulse formed at the beginning of the week when the instrument was located near the local highs of February 23, 2022. The quotes are testing 1.3435 for a breakdown while investors are assessing macroeconomic statistics from the UK and the US. Thus, yesterday, their attention was focused on the minutes of the US Fed meeting on May 7, during which, we recall, the regulator kept the interest rate unchanged at 4.25%. The document emphasizes the significant increase in uncertainty about the economic outlook amid the aggressive trade policy of the Republican White House and that if consumer prices continue to rise, as does the share of the unemployed population, the authorities will have to determine priorities within the framework of their so-called dual mandate and decide whether to adjust the cost of borrowing to combat elevated inflation or reduce it to ensure high employment and stimulate the service sector and manufacturing. The minutes also indicate that volatility in the bond market in the weeks leading up to the meeting requires close monitoring, as it has the potential to affect financial stability, and the change in the status of the dollar as a shelter asset and the rise in US Treasury yields could have long-term consequences for the economy. Today at 14:30 (GMT+2), the focus of market participants will be on preliminary statistics on the US Q1 gross domestic product (GDP) – the main indicator reflecting the state of the national economy and considering domestic consumption, investment, government spending, and exports. It may follow that it will consolidate at –0.3% QoQ, the deflator will increase from 2.3% to 3.7%, and sales within GDP will remain at –2.5%. At 21:00 (GMT+2), investors will focus on the speech of the Governor of the Bank of England, Andrew Bailey, who may comment on the regulator’s plans regarding further steps to adjust monetary parameters. Meanwhile, analysts at the International Monetary Fund (IMF) have raised their forecast for British economic growth from 1.1% to 1.2% this year. However, they believe that trade uncertainty and the White House’s plans to introduce import tariffs may negatively affect the situation, and by 2026, the gross domestic product (GDP) may fall 0.3% below the potential level.

AUD/USD

The Australian dollar has entered an upward correction in the AUD/USD pair, trying to recover from a moderate decline earlier in the week, and is currently testing the 0.6425 mark for a breakout, as the US currency’s positions remain under pressure again following the publication of the minutes of the US Fed’s May monetary policy meeting. Officials indicated a high level of concern about the national economy’s prospects in the context of sharply increased uncertainty associated primarily with the Republican administration’s trade policy, as well as increased protectionist sentiment. Recall that last week, President Donald Trump proposed introducing a 50.0% tariff on goods from the EU as early as June 1, justifying this by the fact that negotiations with Brussels are leading nowhere. However, later, the parties agreed to postpone this initiative for a month: the tariffs will come into force on July 9, along with other previously postponed measures. In turn, the White House claims that the year’s US foreign trade deficit with the EU has reached 250.0B dollars, calling it unacceptable. Macroeconomic statistics published yesterday were ambiguous: the Mortgage Bankers Association of America (MBA) Mortgage Applications Index fell 1.2% last week after an even more aggressive 5.1% drop earlier, while the Redbook Retail Sales Index adjusted from 5.4% to 6.1% MoM, while the Richmond Federal Reserve Bank’s Manufacturing Activity Index fell from –13.0 to –9.0, in line with analysts’ forecasts. Meanwhile, the Australian dollar received moderate support from consumer inflation data, which held steady at 2.4% YoY, beating expectations of a slowdown to 2.3%. This, in turn, could push the Reserve Bank of Australia (RBA) to maintain a neutral stance on interest rates for a longer period. Today, traders also paid attention to the fall in Q1 private capital expenditure by 0.1% after –0.2%, although experts expected an upward trend to 0.5%. Tomorrow at 03:30 (GMT+2), April data on the dynamics of retail sales, building permits, as well as on the volume of lending to the private sector will be presented.

USD/JPY

The American dollar is developing a “bullish” momentum in the USD/JPY pair, formed at the beginning of the week, testing a strong resistance level of 146.00 for a breakout while investors are assessing the minutes of the US Fed meeting of May 7, published yesterday. The document emphasizes the significant increase in uncertainty of economic forecasts against the aggressive trade policy of the Republican White House administration, as well as the fact that if the rate of consumer prices continues to grow, as does the share of the unemployed population, the authorities will have to determine priorities within the framework of their so-called dual mandate and decide whether to adjust the cost of borrowing to combat elevated inflation or reduce it to ensure high employment and stimulate the service sector and production. The regulator expects the rate of consumer prices to accelerate this year. However, in 2027, the indicator may fall to the target of 2.0%. Moderate growth in the consumer confidence index in Japan provides minor support to the yen the quotes in the morning: according to the results of May, it was corrected from 31.2 points to 32.8 points, which was higher than the market expectations of 31.8 points. Today at 14:30 (GMT+2), the focus of market participants will be on preliminary statistics on the Q1 US gross domestic product (GDP) – the main indicator reflecting the state of the national economy and considering domestic consumption, investment, government spending, and exports. It may consolidate at –0.3% QoQ, the deflator will grow from 2.3% to 3.7%, and sales within GDP will remain at –2.5%. In addition, the personal consumption expenditure index is due – a key indicator for the US Fed in assessing inflation, which, according to experts, will grow from 2.4% to 3.6% QoQ and from 2.60% to 3.50% in the baseline.

XAU/USD

The XAU/USD pair is testing 3270.00, developing a strong “bearish” impulse formed at the beginning of the week. However, the prospects for the current correction trend remain uncertain: the positions of the American currency are still quite poor, and the minutes of the May meeting of the US Fed on monetary policy published yesterday provided only minor support to its rate. Thus, officials noted the instability of forecasts against the aggressive trade policy of the White House, which makes a cautious approach to changing monetary parameters quite justified. At the same time, the regulator positively assesses the dynamics in the labor market and the stability of the national economy, which allows it to continue a wait-and-see attitude at subsequent meetings without putting additional pressure on businesses and households. Thus, May data on the consumer confidence index recorded a recovery in the indicator from 85.7 points to 98.0 points, which exceeded expert estimates of 87.11 points. At the same time, preliminary estimates of inflation dynamics were revised: its rate may accelerate in 2025. However, next year, this momentum may stop, and in 2027, the indicator will drop to the target of 2.0%. Today at 14:30 (GMT+2), the focus of trading participants will be on preliminary statistics on the US Q1 gross domestic product (GDP) – the main indicator reflecting the state of the national economy and considering domestic consumption, investment, government spending, and exports. It may consolidate at –0.3% QoQ, the deflator will grow from 2.3% to 3.7%, and sales within GDP will remain at –2.5%. In addition, the personal consumption expenditure index is due – a key indicator for the US Fed in assessing inflation, which, according to experts, will grow from 2.4% to 3.6% QoQ and from 2.60% to 3.50% on a baseline.

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