EUR awaits ECB’s 25bps move

Asian

A former chief economist at the Bank of Japan suggests that interest rates might climb to 2%, with a potential hike on the horizon in July. This prospect has sparked discussions about Japan's monetary policy direction and its implications for financial markets.

Europe

The European Central Bank is anticipated to announce a 25 basis point rate cut during today's meeting. Markets are closely watching for signals on future policy direction. Earlier in the day, EUR/USD edged up towards 1.0820 given a softer US Dollar and optimism around Germany's fiscal policies, but then retraced to just below 1.0800 as traders weighed the ECB's potential guidance.

Tariffs and Commodities

Canada could scale back its tariff measures if the US retracts some of its own. Recent reports hint at the Trump administration considering tariff exemptions for Canada and Mexico. This development has bolstered the broader "risk-on" sentiment, tempering gains in NATGAS due to reduced concerns over fixed energy tariffs between Canada and the US.

Oil prices are recovering following significant declines, with WTI crude rising above $66.50 per barrel. This rebound comes after WTI dropped over 3%, hitting its lowest point since 2021, pressured by US tariff strategies, OPEC+'s production plans, and potential peace talks in Ukraine that could ease Russian sanctions.

Gold prices remain steady near a one-week high, with the XAU/USD pair finding support from concerns over trade tensions, potential Fed rate cuts, and a weaker US Dollar. A generally positive market sentiment, however, is capping gains for the precious metal ahead of Friday's US Non-Farm Payroll report.

Key Economic Data Releases

• 01:15 PM GMT - Eurozone: ECB decision expected at 2.5%, down from 2.75% previously.
• 01:30 PM GMT - US: Unemployment claims forecast at 235k, compared to 242k previously.