Inflation Data and Fed Vote Lead Crucial Week Ahead

The Euro (EUR) advanced against the US Dollar (USD) on Friday, with the Greenback remaining under pressure after the release of mixed US labor market figures.

Fresh data from the US Bureau of Labor Statistics (BLS) showed Nonfarm Payrolls (NFP) rose by 115,000 in April, surpassing market expectations of 62,000. However, the figure marked a slowdown from March’s revised increase of 185,000. Meanwhile, the unemployment rate remained unchanged at 4.3%, matching analysts’ forecasts.

Wage growth data painted a mixed picture. Average Hourly Earnings increased by 0.2% month-over-month in April, below the expected 0.3% rise and unchanged from the prior reading. On an annual basis, wage growth accelerated to 3.6% from 3.4%, though it still came in under the 3.8% market forecast.

The latest labor market indicators are likely to reinforce the Federal Reserve’s cautious stance on monetary policy. Investors increasingly expect policymakers to delay additional rate cuts as inflation risks remain elevated, particularly amid higher.

At the same time, market sentiment has been supported by cautious optimism surrounding a possible diplomatic breakthrough between the United States and Iran. Despite reports of renewed clashes near the Strait of Hormuz, investors continue to hope that both sides could eventually reach an agreement to ease regional tensions.

The easing of safe-haven demand has weighed on the US Dollar, pushing the currency closer to levels seen before the recent escalation in geopolitical tensions.

Gold prices extended their decline on Monday, slipping toward the $4,650 level during the European session as renewed demand for the US Dollar (USD) weighed on the precious metal. Growing geopolitical tensions involving the United States and Iran strengthened the Greenback’s safe-haven appeal, while expectations of a more hawkish Federal Reserve further pressured the non-yielding asset.

The recent optimism surrounding a possible US-Iran peace agreement faded after fresh hostilities emerged near the Strait of Hormuz. Tensions escalated after both Washington and Tehran rejected each other’s proposals aimed at ending the conflict and reopening key shipping routes in the region.

According to reports from the Wall Street Journal, Iran dismissed US demands to dismantle its nuclear infrastructure and halt uranium enrichment activities for the next two decades. US President Donald Trump responded sharply, describing Tehran’s stance as “totally unacceptable,” keeping geopolitical uncertainty elevated and supporting demand for the US Dollar.

At the same time, escalating tensions in the Middle East triggered another rise in Crude Oil prices, reigniting concerns about inflationary pressures. Higher energy costs, combined with stronger-than-expected US employment data released last week, reinforced expectations that the Federal Reserve could maintain a tighter monetary policy stance for longer.

Despite the recent pullback, traders remain cautious about taking aggressive bearish positions ahead of key US inflation data due later this week. Investors are closely watching the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports, scheduled for release on Tuesday and Wednesday, respectively, for further clues on the Fed’s policy outlook.

Oil prices surged on Monday after US President Donald Trump described Iran’s response to a recent American proposal as “unacceptable,” intensifying concerns over supply disruptions as the Strait of Hormuz remained largely closed.

The sharp rebound followed last week’s losses, when both benchmark contracts fell roughly 6% amid expectations that the 10-week conflict involving Iran could soon ease, potentially restoring oil flows through the strategically vital Strait of Hormuz.

Investor focus is now turning to President Trump’s scheduled visit to Beijing later this week, where discussions with Chinese President Xi Jinping are expected to include the ongoing Iran crisis. Market participants are increasingly hopeful that China could use its influence to encourage a ceasefire and help ease disruptions to global energy supply chains.

Supply concerns have also been reinforced by comments from Saudi Aramco CEO Amin Nasser, who warned on Sunday that the global market has lost nearly one billion barrels of oil over the past two months. He added that energy markets may require considerable time to stabilize, even if shipping routes fully reopen.

Shipping data from Kpler also highlighted growing risks to regional exports, showing that two additional crude tankers recently passed through the Strait of Hormuz with tracking systems disabled in an apparent attempt to avoid potential Iranian attacks.

Wall Street ended Friday’s session at record highs, recovering from the previous day’s losses as strong gains in chip stocks and a better-than-expected US jobs report boosted investor sentiment.

Investor attention remained focused on developments in the Middle East, particularly around the Strait of Hormuz, where renewed clashes between US and Iranian forces continued to fuel geopolitical uncertainty.

Economic data also remained in focus, with the April Nonfarm Payrolls report offering fresh insight into the strength of the US labor market.

Following the jobs report, expectations for additional Federal Reserve interest rate hikes eased slightly.

Away from geopolitical concerns, corporate earnings continued to support investor confidence. Strong quarterly results, particularly from technology and artificial intelligence-related companies, helped fuel the broader market rally.

Airbnb shares rose 0.85% after the company posted better-than-expected quarterly revenue and issued optimistic guidance for the current quarter. Coinbase Global also reversed earlier losses to finish 4.3% higher, despite reporting a quarterly loss linked to declining cryptocurrency prices.

In contrast, CoreWeave shares dropped 11.67% after the AI-focused cloud computing company missed profit expectations and issued weak revenue guidance.

Market strategists noted that enthusiasm surrounding artificial intelligence and strong corporate earnings continues to outweigh geopolitical risks for now, helping sustain the ongoing bull market despite heightened uncertainty in global energy markets.