Markets rejoice as tariff tensions ease

FX markets were relatively quiet this morning, with little overall movement, in sharp contrast to yesterday’s volatile session. The US dollar is a tad weaker across the board, giving back some of its gains from the previous session. The Dollar Index continues to trade above 101.00 but has run into a patch of resistance around 101.20/30—an area that acted as support in early April.

The Japanese yen and Swiss franc are both a touch firmer this morning, regaining some of yesterday’s lost ground after investors shifted out of safe-haven currencies.

Gold stabilised overnight following yesterday’s sharp sell-off. Once again, investors rushed to exit perceived safe-haven trades after the US and China revealed the significant progress made in their first round of trade talks. It has only been three weeks since gold hit a record high of $3,500 per ounce. This means that establishing new areas of likely support and other significant levels is a work-in-progress.

Yet it looks as if $3,200 is establishing itself as the first area to watch on future pullbacks. Gold has only tested it twice so far. But it has held above here on both occasions.

Meanwhile, silver’s performance yesterday was noteworthy. While it sold off hard in the first hour of the European trading session, it subsequently recovered, bouncing back over $32 on all pullbacks. It rallied sharply higher in this morning’s Asian Pacific session and is currently retesting $33 as support.

Could it soon be silver’s turn to shine? Maybe. Although it has had so many opportunities to set off and challenge old record highs, yet has shown no inclination to do so, so far.

Crude oil is another market which is finally pulling its socks up. As investors responded to the positive US-China trade news, front-month WTI pushed above $63 per barrel yesterday, hitting its best levels in a fortnight. Prices have pulled back from their best levels.

Now investors must assess their outlook for oil over the near and middle term. This will involve balancing the possibility that demand growth could pick up on a quick end to the US-China trade dispute, with the fact that the market is dealing with a large supply glut. But there are signs that supply could soon start to reduce in the near-future. Some US producers have said that they won’t be looking to increase output with oil trading near multi-year lows.

Meanwhile, Natural Gas prices remained stable, seeing a slight overnight bid and holding near 360 BTU, suggesting a steady underlying tone even as broader commodity markets shift.

Crypto markets experienced a notable reversal following recent strong upside momentum. Profit-taking emerged after Bitcoin broke above $105,000 for the first time since January. The selling took it down towards $100,000 before prices found some support.

Bitcoin is back in a consolidation phase. If it can continue to hold above $100,000 on any pullback, and if overall market sentiment continues to be positive, then there’s a fair chance that it can take out its all-time high, just below $110,000, from earlier this year.

Ether is also consolidating around $2,500 following last week’s surge higher. Coinbase shares jumped 8% in after-hours trade following the announcement that it will join the S&P 500 index on May 19, when it replaces Discover Financial Services.

The VIX added 1% this morning but remained below the 19 mark. This continued its overall downtrend in recent sessions. The small move higher contrasts with the broader market calm and signals that volatility expectations are still subdued.

The reduced fear environment reflects improved investor confidence following the tariff reprieve, with equities continuing to draw support as risk appetite increases.

On the data front, today is relatively quiet aside from a few notable releases. The UK jobs report came in as expected and had little market impact. Germany’s ZEW sentiment survey bounced back sharply into positive territory, indicating an encouraging improvement in sentiment across German businesspeople. This afternoon’s key focus is on the US CPI report.

Markets are looking for an uptick in the monthly inflation print, while the annual rate is expected to hold steady at 2.4%. The release could be pivotal in shaping short-term rate expectations and broader risk sentiment.

US Treasury Secretary Scott Bessent confirmed that additional meetings with Chinese officials are expected in the coming weeks, ahead of the current 90-day pause. China has presented the deal as a significant win, bolstering domestic sentiment and prompting questions about the US’s negotiating stance. Some interpret the move as another retreat by Trump, while others suggest it could be a calculated move as part of a longer-term strategy.

Another US climbdown on tariffs has ignited a global equity rally, with Beijing quick to claim victory. But it’s worth remembering that this is only a temporary 90-day suspension, not a final agreement. Whether this is a tactical move by Trump or the start of something more meaningful remains to be seen.

The strength of the US dollar, gold’s decline, and the continued compression in volatility reflect the market’s broad relief. However, the sharp pullback in crypto reminds traders that not all risk assets react in lockstep. With CPI data due this afternoon, the focus now shifts to inflation. For now, the bulls remain in charge.