Tariff Truce to Data Dash: Markets Face Critical Tests as May Winds Down

Tariff Truce to Data Dash: Markets Face Critical Tests as May Winds Down

Political reprieve – but for how long?

By delaying his threatened 50% levy on European Union goods to July 9, U.S. President Donald Trump merely pushed the starting gun on another bout of trade-war brinkmanship. The euro rallied and the dollar index slipped to a one-month low after Sunday’s volte-face, but traders know the next headline could arrive at any moment, undoing those moves.

Holiday-thinned bounce masks Friday’s bruising

U.S. equity futures popped 1% in Asia on Monday, recouping a slice of Friday’s broad sell-off that had wiped 1% from the main Wall Street benchmarks after Trump’s original tariff blast. Apple alone shed 3% as investors fretted over a 25% iPhone duty.

Bond vigilantes on patrol

Even without fresh tariff anxiety, the rates market looks twitchy. Moody’s recent downgrade, a soft 20-year Treasury auction and Japan’s worst long-bond sale since 2012 have driven 30-year yields in the U.S., UK, Germany and Japan to multi-month highs. Dealers will watch this week’s supply—plus month-end duration extensions—for signs the sell-off morphs into something nastier.

Macro gauntlet – from durables to the Fed’s favourite gauge

With Memorial Day behind them, investors must digest a durable-goods update, consumer confidence, the second Q1 GDP revision, weekly jobless claims, pending-home sales and, on Friday, the core PCE price index for April. Consensus looks for a tame 0.2% m/m reading, but anything hotter would fuel talk that the Fed’s first cut drifts beyond September.

Chair Powell speaks late Monday, and at least six other FOMC officials pepper the diary. After May’s minutes revealed a still-uneasy Committee, every adjective will be parsed.

Currency landscape – dollar loses leadership

A softer greenback is the default setting while policy uncertainty swirls.

• EUR/USD: Broke above 1.14; resistance at 1.1465, support near 1.1280.
• GBP/USD: Hit 1.3591 (3-year high); next level is 1.3749.
• USD/JPY: Dropped to 142.2, filling the May 6 chart gap. Next support: 141.68–140.00.
• Emerging FX: INR strengthens past 85/$ on yuan gains and softer USD.

Commodities – gold cools, oil eyes OPEC+

Spot gold eased 0.3% in early trade, trimming Friday’s 2% surge now that tariff risk is on hold; yet analysts argue the broader bid remains as central-bank diversification and a wobbly dollar continue. Brent crude added 0.6%, but Sunday’s OPEC+ meeting is key. Delegates signal another 411kbd July supply increase and a phased rollback of the 2.2mbd voluntary cut by October—likely capping prices in the mid-$60s.

Corporate corner – chips, steel and credit

• Nvidia: Earnings Thursday dominate. Any sign of weaker AI server demand could hit broader tech sentiment.
• U.S. Steel: Trump vows to keep it under U.S. control amid Nippon Steel bid, raising industrial policy risks.
• Debt markets: Senate tax-and-spend bill looms; may widen fiscal gap and pressure yields further.

Risk matrix for the week

Bottom line

Politics may dominate the narrative, but hard data and central-bank rhetoric will decide whether last week’s tariff-induced shakeout was a buying opportunity or the prologue to a broader risk-asset correction. Stay nimble, hedge headline risk—and watch Friday’s PCE print like a hawk.