US stock index futures edge higher

Geopolitical tensions in the Middle East appear to have cooled for now. The ceasefire between Israel and Iran is in effect and holding. Despite the truce, President Trump continued to criticise both nations for allegedly violating the agreement and made it clear he remains “not happy” with either party.

Nevertheless, the ceasefire has held so far, offering markets a reprieve. A planned US meeting with Iran next week now takes centre stage, and investors will be closely watching for signs of meaningful diplomatic progress.

Traders are turning their attention to Friday morning’s personal consumption expenditures (PCE) price index - the Federal Reserve’s preferred inflation gauge. Fed Chair Jerome Powell indicated earlier this week that headline inflation is expected to rise to 2.3%, with the core rate, which excludes food and energy, forecast to tick up to 2.6%.

Both would mark an increase from April’s levels. Powell reiterated the Fed’s stance on keeping inflation in check, though he repeated that tariffs added to uncertainty and were likely to be inflationary. 

European stock indices were relatively steady in early trade on Thursday. The major indices hovered below all-time highs but lacked fresh upside momentum. The UK’s FTSE 100 eked out a modest gain, while the German DAX led the advance, buoyed by strength across US stock index futures.

Source: TN Trader

Shell issued a statement squashing speculation from yesterday that it was ready to make a bid for troubled rival BP. Having declared its lack of interest, regulations now prevent Shell from returning with a bid for six months.

Asian Pacific stock indices ended Thursday’s session mostly in the red, as geopolitical and trade concerns continued to weigh on sentiment. While the ceasefire has helped calm broader nerves, investors remain cautious with Trump’s July 9th tariff deadline fast approaching. 

Hong Kong’s Hang Seng and the Shanghai Composite led the declines, ending the session down 0.6% and 0.2% respectively, while Australia’s ASX 200 lost 0.1%. The Japanese Nikkei bucked the trend, jumping 1.7%. 

Japanese rice prices, a major reason for rising inflation, dropped back, taking pressure off the Bank of Japan to raise rates, even as the country struggles with tepid economic growth.

Across the region, traders grappled with the economic implications of further trade disruptions. The day’s tone remained mostly defensive, with concerns over trade and tariffs trumping fears of escalating hostilities across the Middle East.

The EUR/USD surged above the 1.1700 to hit its highest level since September 2021 as broad dollar softness continued to play out across FX markets.

Source: TN Trader

The Dollar Index dropped below 97.00 to hit lows last seen over three years ago, while cable rallied sharply, causing the GBP/USD to smash above 1.3700 and trade at highs last seen in October 2021. 

Pressure on the greenback intensified after President Trump publicly stated his intention to replace Fed Chair Jerome Powell by September or October - a move that spooked currency markets and added fuel to an already weakening dollar.

Mr Powell has repeatedly warned that the Trump administration’s tariff plans will stoke inflation while boosting uncertainty. Hence, his reluctance to commit to near-term rate cuts with markets pricing in the September meeting as the most likely one for a 25 basis point reduction. 

This uncertainty, along with the US’s burgeoning national debt, continues to undermine the US dollar, along with its status as the world’s reserve currency.

Crude oil prices have continued to consolidate this week. This follows a sharp rally which was triggered by Israel’s air attacks on Iran two weeks ago, and which topped in early trade on Sunday when the US joined in. 

Prices quickly reversed when it became apparent that Iran’s retaliation was severely limited, and that neither side targeted oil resources. It also helped that the Strait of Hormuz remained open throughout. Front-month WTI has found some support around $64.50-$65.00, and the daily MACD shows signs of pulling back from seriously overbought levels.

Source: TN Trader

While ceasefire headlines have helped calm immediate fears of supply disruption, the market remains vulnerable to fresh developments. For now, traders appear to be reassessing both supply risks and demand expectations as geopolitical tensions temporarily ease.

Shell confirmed it will not proceed with a bid for BP, citing regulatory constraints that bar further attempts for the next six months. The announcement clarifies recent speculation around potential energy sector consolidation in the UK. The market response has been muted, with the news largely expected. Investors will now look elsewhere for M&A catalysts in the space.

Markets are preparing for a wave of US economic data releases. Today, the latest revision to first-quarter GDP, along with Durable Goods and weekly Unemployment Claims, will be released. Tomorrow, the May update on Core Personal Consumption Expenditures, the Fed’s preferred inflation measure, will be released.

Markets are showing signs of stability, with US stock index futures inching higher and volatility contained. Oil continues to consolidate around levels last seen prior to attacks on Iran’s nuclear facilities. 

The US dollar remains under pressure, thanks in part to President Trump’s criticism of the Federal Reserve, although his tariff policy must also take some blame. The tariff deadlines are fast-approaching. But as far as investors are concerned, they expect trade agreements to be announced soon.