Insights 
The S&P 500 experienced a turnaround following recent data, with markets reacting positively. The focus is on whether this trend will continue or if a pullback could occur in the coming days.
The euro is under pressure, with EUR/USD slipping to 1.1130. The US Dollar remains supported by higher inflation expectations, despite a weaker U-Mich index reading.
The GBP/USD fell back to 1.3250 due to increased US Dollar strength. This was supported by rising consumer inflation expectations in the US, based on recent U-Mich data.
Gold’s Recent Decline
Gold saw a downturn, dropping below $3,200 after a previous rally. The decline is attributed to a stronger US Dollar and reduced geopolitical tensions, hinting at its largest weekly loss this year.
Ethereum maintains levels above $2,500, following a remarkable near 100% rise since early April. The recent ETH Pectra upgrade indicating positive uptake in the market.
President Donald Trump’s upcoming Middle East visit has seen numerous deals, aimed at boosting US trade and reinforcing leadership in defense and technology exports.
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Market Reaction to New Data
The prior section indicates a perceptible shift in sentiment across asset classes. Following the release of fresh data, the bounce in the S&P 500 suggests that market participants responded favourably, perhaps interpreting the figures as either less damaging than feared or as hinting at a pause, or even reversal, in policy tightening. The move higher, however, could be fragile. Thin liquidity into the summer months, particularly with earnings season looming, can amplify swings in both directions. We’ve noticed that traders are increasingly pricing optionality around short-term moves—with skew rebalancing towards puts—possibly reflecting caution rather than outright optimism.
Turning to FX, euro weakness continues to dominate discussion. The dip in EUR/USD to 1.1130 reflects firm US Dollar demand rather than disarray in the eurozone. Dollar strength has persisted, driven in part by rising inflation expectations, which were reaffirmed despite a softer University of Michigan consumer sentiment release. The disconnect between sentiment and inflation outlook points to a public unconvinced by current disinflation efforts. For those dealing with short-dated euro options, implied volatility remains tepid, but there is a small uptick in risk reversals favouring the downside.
Sterling slipped as well, with cable retreating to 1.3250. Again, the driver wasn’t UK-specific weakness but the pervasive strength of the dollar. From where we sit, GBP/USD remains highly sensitive to yield differentials. Rate traders have barely moved the BoE curve recently, reinforcing the notion that FX spot moves are being driven exogenously. In the options space, skews across tenors remain relatively balanced, suggesting no strong directional conviction in either direction—yet there is modest accumulation of downside protection among institutional accounts.
The move in gold deserves closer inspection. The metal’s brief rally above $3,200 was compelling, but its swift retraction underlines how detached it can be from textbook hedging narratives in today’s market. A combination of a stronger dollar, falling tensions abroad and reduced safe-haven demand have pushed bullion lower. The recent drawdown, now shaping up to be the worst single-week performance this year, has caught out traders who had rotated into long positions after prior commodity weakness. We’ve seen implied volatilities rise modestly, with front-end calls being unwound, suggesting that the bullish thesis may have been premature.
In digital assets, Ethereum shows resilience, hovering above $2,500 following a powerful surge over the last two months. The nearly twofold climb since April is unlikely to continue uninterrupted, yet the Pectra upgrade has been welcomed, particularly by validators and developers. This development has translated into a visible reduction in ETH gas costs, and while we’ve observed speculative interest surge, there’s also a growing layer of activity in staking and infrastructure—suggesting more than just short-term positioning. Late long call buyers have entered the fray, though volume profiles indicate that the smart money may be taking a breather.
Elsewhere, geopolitical headlines have returned to the fore, with Trump’s expected visit to the Middle East generating interest in defence and tech-linked equities. The appearance of fresh commercial and strategic accords bolsters the view that Washington is recommitting to export-heavy partnerships. Risk-assets in the region, particularly cyclicals and aerospace stocks, have gained accordingly. Traders tied to futures in defence subsectors should take note of increased open interest on both the long and short sides—reflecting contrasting views on whether these policy shifts will outlast political cycles.
Lastly, for those navigating EUR/USD next year, broker selection continues to matter. Fast execution and competitive spreads are not merely luxuries in volatile conditions—they are prerequisites. As we approach a year likely to be punctuated by further policy divergence and election-driven volatility, having infrastructure that can endure that stress is key. We routinely monitor execution quality and slippage, particularly around events, and would caution against relying on fixed-spread platforms when liquidity dries up.
