Insights 
VT 
China’s Consumer Price Index (CPI) for April aligns with forecasts, showing a year-on-year change of -0.1%. This reflects an ongoing period of deflation within the economy.
The EUR/USD exchange rate stabilised above 1.1250 after a two-day decline, with small weekly losses expected. A halt in US Dollar purchasing, amid anticipation of US-China trade negotiations, provided support for the pair.
Pound Advancements Against The Dollar
GBP/USD advanced towards 1.3300 during the American session, aided by a pause in the US Dollar’s upward trajectory. The Bank of England’s recent policy rate cut, paired with their cautious approach to further easing, influenced the market.
Gold prices surpassed $3,300, driven by geopolitical tensions in Russia, Ukraine, the Middle East, and the India-Pakistan region. These tensions fuelled safe-haven demand, aiding the XAU/USD price.
Looking ahead, attention centres on the US Consumer Price Index report to assess the tariff impact. Developments in US-China trade talks will also be closely monitored, coupled with key releases such as US Retail Sales and GDP data from the UK and Japan.
With China’s Consumer Price Index reflecting a 0.1% decline year over year, the persistence of deflationary pressure is now hard to dismiss. We’re seeing subdued domestic demand on the mainland, raising concerns over profit margins in China’s industrial and manufacturing sectors. This may spill into external regions with tight supply linkages, which, in turn, introduces interesting asymmetries for exposure in commodities and currency futures linked to Asia-Pacific growth.
As for EUR/USD, the pairing’s resilience above 1.1250, even after back-to-back down sessions, signals underlying support amid a temporary pause in demand for the greenback. That pause wasn’t haphazard. Rather, it coincided with shifting sentiment around fresh rounds of negotiations between Washington and Beijing. Hedging activity lightened, particularly amongst quant-driven desks, once it became evident that risk appetite remained tepid. Cross-currency volatility compressing between the euro and dollar may offer clues to range-trading strategies unless CPI momentum delivers a surprise midweek.
Sterling also saw buyer interest as it edged toward the 1.3300 threshold, largely reflecting the fallout from Bailey’s rate cut. The relief rally in cable was amplified by adjustments in short-term rate expectations, particularly as it became clearer that the Old Lady was unlikely to repeat the move in the immediate term. That fading probability of another cut—despite a softening real economy—puts attention on short-dated UK rate swaps, which have begun pricing in a more data-dependent policy stance ahead of the summer.
In the metal space, gold experienced sharp upside, with a breakout through $3,300. This wasn’t purely technical in origin. Tension from multiple geopolitical theatres—not least in Eastern Europe and South Asia—has driven volatility premiums higher. Institutional allocations into bullion were notable, especially from cash-rich pension schemes and sovereign accounts seeking alternatives to dollar-denominated liquid assets. The pace of inflows into gold ETF products also accelerated, and correlation models show relative decoupling from bond yields for the time being.
Upcoming Economic Indicators To Watch
Now, as we turn toward this week’s economic slate, the US CPI becomes the next big pivot point. After some inconsistent inflation readings earlier in the year, this release takes on added importance, particularly in light of tariff uncertainties. If month-over-month core inflation surprises to the upside, it could reprice June Fed odds across STIR curves. Tracking options on Treasury futures might give an early signal to broader rate volatility.
On the other side of the globe, GDP data out of Tokyo and London should not be overlooked. For Japan, any downward revision could influence yen carry trades, particularly against higher-yielding currencies. Meanwhile, for UK growth figures, the real interest will be in assessing whether recent consumer weakness has begun feeding into the broader services sector. That would provide directionality for FTSE-hedged derivatives and potentially reshape assumptions on Bank of England timing.
As for US retail sales – delayed consumer strength may distort the headline number. However, reading through to control group data will matter most. A softer trend here could harden market bets on cuts before year-end, particularly if accompanied by slower wage gains.
We’ll be watching liquidity into Friday’s close too. With trade talk headlines back in circulation and options expiries stacked toward the latter half of the week, it wouldn’t take a major push to trigger delta-hedging flows that extend currency or commodity moves into Monday. Stay attentive to skew adjustments in currency options, as they may clue in on where institutional sentiment is shifting—especially in event-driven weeks like this one.
