The US dollar fell against major currencies. It declined by 0.92% against the Japanese yen (JPY) and Swiss franc (CHF), 0.7% against the British pound (GBP), and 0.50% against both the Australian dollar (AUD) and New Zealand dollar (NZD). However, the US dollar against the Canadian dollar (USDCAD) stayed steady due to a sharp 5% drop in crude oil prices, which decreased by over $10 in just two trading days. Fed Chair Powell’s testimony grabbed attention as he discussed the strength of the US economy and labor market. He mentioned that a rate cut could happen as early as July, depending on economic data. He also warned that inflation might increase due to new tariffs and indicated that the Fed is ready to pause interest rate changes for now.

Stock Market Response

In the stock market, Powell’s comments and news of a ceasefire between Israel and Iran led to gains. Major indices rose over 1.1%, with Nasdaq leading at a 1.43% increase. US debt yields also fell, with the 10-year yield dropping by 3 basis points to 4.292%. Crude oil prices decreased by 5.41% to $65.01, gold fell by 1.31% to $3,323.06, while Bitcoin increased by 0.39% to $105,870. We observed a broad but uneven decline of the US dollar. Its strength notably weakened against the yen and Swiss franc, both down by nearly a full percentage point. The British pound also gained, though not as sharply, and the Australian and New Zealand currencies advanced as well. The Canadian dollar (loonie), however, remained steady since oil prices dropped dramatically, which typically slows the Canadian dollar’s movement. This situation, where the dollar declines but the loonie stays firm, may seem odd. However, when crude oil drops more than $10 in a few days, it impacts all currencies. The 5% reduction in oil not only affected commodities but also influenced inflation expectations and market sentiment.

Market Volatility and Economic Data

Powell’s testimony created significant market movement. He assured strong job market fundamentals while hinting that rates might decrease soon. However, he emphasized that this depends on forthcoming data. There is a clear tension between a strong job market and the potential return of inflation risks from possible tariffs. He indicated there’s no urgency to change the current interest rate unless the data suggests otherwise. This uncertainty gave equity markets a sense of stability, preferring a delay rather than acceleration on rate changes. This calm was further aided by news of a ceasefire abroad, easing some geopolitical worries. It wasn’t just stock traders who reacted; bond markets softened as well, seen in the slight decline of Treasury yields. A 3 basis point drop to 4.292% shows increasing confidence that we’ve seen the peak in rates. However, those dealing with rate-sensitive investments need to stay alert. The focus right now isn’t on overall direction, but rather on how events unfold weekly. One unexpected inflation report or a weak non-farm payroll number can shift market trends. Traders involved in short-term strategies should closely watch upcoming CPI figures and employment reports, ready for intraday fluctuations as Fed speakers return to the spotlight. Gold’s drop of over 1.3% indicates that expectations for looser policies are still uncertain. This might also reflect some last-minute dollar short-covering. Conversely, Bitcoin’s small rise shows a continuing interest in alternative risk assets, although trading volumes were likely low due to overall market caution. At this point, investment positions should consider not just scheduled economic events, but also potential commodity shifts, especially in oil, and their secondary effects. Volatility isn’t increasing sharply, but there is enough tension to impact prices with any new developments. Create your live VT Markets account and start trading now.

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