The latest data from the United States API weekly crude oil stock shows an increase of 2.499 million barrels. This is much higher than the expected decrease of 1.85 million barrels reported on May 16. The AUD/USD rose towards 0.6450, driven by less demand for the US Dollar amid trade tensions with China. Meanwhile, the USD/JPY fell below 144.00 as the US Dollar continued to weaken due to anticipated Federal Reserve rate cuts.

Gold Prices On The Rise

Gold prices are increasing, looking to stay above $3,300 as geopolitical tensions and a weaker US Dollar boost demand. In the UK, a rise in CPI inflation to 1.1% monthly and 3.3% annually is expected. China’s economy slowed down in April amid trade war uncertainties. Retail sales and fixed-asset investment fell short of expectations, but manufacturing performed better than anticipated. The recent API data showed a surprising increase of 2.499 million barrels in oil inventories. Markets had expected a reduction of about 1.85 million barrels. This larger stockpile suggests weaker demand or a potential change in supply dynamics. For those trading energy contracts, this indicates a slightly bearish sentiment in the short term, at least until more data from the EIA is available. Keeping an eye on backwardation or contango in the futures curve could be useful in the coming sessions, especially with OPEC+ decisions approaching. Regarding currency movements, AUD/USD’s rise towards 0.6450 was mainly due to lower demand for the US Dollar, influenced by escalating tensions with China. A strong performance in the Aussie usually requires macroeconomic stability in Asia. However, with weakening activity figures from China, this pairing may become more sensitive to economic data. It would be wise to monitor upcoming Employment and CPI data from Australia, as these could impact the broader USD weakness.

Currency Moves And Inflation

The drop of USD/JPY below 144.00 indicates growing expectations that the Federal Reserve will take a less aggressive approach. As the Dollar weakens and speculation about rate cuts increase, the Yen may find it difficult to weaken further without help from local policymakers. Traders will likely focus on US 2-year Treasuries and FX options volatility in this currency pair. If the Bank of Japan hints at policy normalization, it could lead to more pronounced moves in either direction. Gold continues to thrive in this market. With prices rising above $3,300, safe-haven investments are driven by geopolitical risks and a weaker Dollar. In our experience, when the Dollar weakens, gold often rallies with limited resistance, especially if inflation expectations remain in check. Keeping an eye on real yields, particularly in 10-year inflation-protected securities, helps assess how attractive gold is when considering opportunity costs. In the UK, inflation’s rise to 1.1% month-on-month and 3.3% annually is garnering attention. These figures are higher than previous forecasts and may lead the Bank of England to adopt a more cautious stance. Those managing risk in sterling pairs or contracts tied to UK rates might reconsider their positions before the next monetary policy report. Forward guidance may become more aggressive if wage growth remains stubborn. China’s mixed economic data last month, where retail sales and investment were soft while manufacturing performed better than expected, presents a complicated situation. Trade tensions are clearly impacting domestic consumption. For those tracking commodity-linked currencies or industrial metals, weaker Chinese consumer activity may indicate declining demand, while relatively stable factory output supports selective asset classes. Observing policy responses from Beijing is essential, as past stimulus announcements have rapidly moved markets. In summary, these data points suggest that while global rate and macro adjustments are happening, the path ahead is complex. Careful allocation, tightened trading stops, and shorter position windows may be beneficial in this environment. Create your live VT Markets account and start trading now.

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