**Market Sentiment and Stability** This weekend brought disappointing news for market confidence. UK Prime Minister Starmer is expected to reveal a new Brexit deal. In Australia, Prime Minister Albanese is ready to move forward with a free trade agreement with Europe. The European Central Bank (ECB) has been active, with President Lagarde stating that the rise of the EUR/USD is linked to uncertainty about US policy. Meanwhile, ECB Board Member Schnabel is cautious about possible rate cuts in June, and Kazaks mentions upcoming rate cuts but highlights an uncertain outlook. On Friday, Moody’s downgraded the US credit rating, impacting market sentiment, especially in currency markets tied to the USD. **Market Volatility and Liquidity** The article starts by discussing how financial markets usually behave on Monday mornings. As many Asian financial centers are still opening, trading volume is low, which can lead to sharper price changes than normal. These fluctuations might give traders a misleading sense of direction, so it’s wise to remain cautious early in the day. Currency pairs are showing only small changes from last Friday’s closing rates. This indicates no major surprises occurred over the weekend, yet it doesn’t mean the situation is calm. The EUR/USD is near 1.1186 and USD/JPY is slightly above 145. The British pound is relatively strong, trading around 1.3280, while the USD/CHF pair is at 0.8367, reflecting some pressure on the dollar. Commodity-linked currencies like AUD and NZD are a bit lower, with both pairs resting below their historical averages, suggesting investors remain cautious. Political developments are happening on both sides of the globe. In Britain, Starmer’s expected Brexit initiative has sparked early conversations and raised new uncertainties. His proposals, while not fully disclosed yet, could hint at changes in trading relationships. Though the impact isn’t immediate, such changes could influence long-term expectations around the pound’s stability and its policy alignment with Europe. Meanwhile, in Australia, Albanese has expressed a desire to finalize a trade deal with Europe, which supports risk sentiment for Australian assets. Although this is just a verbal commitment right now, it could help stabilize AUD pairs during low liquidity periods. However, real impact will require specific timelines and details. In the eurozone, the ECB’s messaging is firm but somewhat divided. Lagarde linked euro gains to less clarity about the US, while Schnabel’s caution is more concerning. Her reluctance to loosen policy in June suggests differing opinions within the governing council, raising the potential for increased volatility as more board members share their views in the coming weeks. Kazaks, while acknowledging the idea of rate cuts, emphasized that the data lacks strength, indicating traders should focus on gradual signs from macroeconomic releases rather than exact timelines. Then there’s the ratings downgrade. Moody’s decision to lower the US credit outlook last week could influence the dollar’s moves, especially against safer currencies like the franc and yen. The lack of yield increases following the announcement shows underlying uncertainty, with markets taking time to process this development. If this signals a crack in broader US fiscal confidence, maintaining dollar strength in the medium term may become more difficult. Given all this, it’s important not to base strategies just on headlines or assume stability. The macro backdrop is shifting in multiple directions. Risk should be managed in shorter timeframes while waiting for clearer signals. Keep a close eye on any unexpected reactions to upcoming policy announcements or trade updates. Rates are unlikely to move without reason, and thin volumes early in the week can lead to larger shifts than data alone would suggest. Create your live VT Markets account and start trading now.

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