Sterling Surges on Retail Sales Surprise as Trump Budget Plan Weighs on Dollar

Economic

Summary:

The Pound surged to a three-year high against the US Dollar after strong UK retail sales and inflation data reduced the likelihood of a BoE rate cut, while Trump’s controversial budget bill raised US fiscal concerns and pressured the Dollar.

BUY GBPUSD

Close Time

CLOSED

1.34898

Entry Price

1.37000

1.33400

1.33175 -0.00030 -0.02%

69.1

Pips

Profit

1.33400

1.35589

Exit Price

1.34898

Entry Price

1.37000

The British Pound advanced sharply in Friday's European session, outperforming most major currencies and climbing to a fresh three-year high against the US Dollar. The rally came in response to stronger-than-expected UK retail sales data for April, which bolstered market confidence in the resilience of British consumer spending and dimmed the prospect of a rate cut from the Bank of England in the near term.

Data released by the Office for National Statistics showed that UK retail sales grew by 1.2% month-on-month in April, far exceeding economists’ expectations for a 0.2% rise. The previous month’s reading was revised down to 0.1% from 0.4%, making April’s rebound even more striking. On an annual basis, retail sales were up 5%, also ahead of forecasts, with notable gains in food stores, department stores, and household goods retailers, reflecting broad-based strength in consumer demand.

This sharp acceleration in household spending, coupled with April’s hotter-than-expected inflation print, has led markets to reassess the outlook for the Bank of England’s June policy meeting. Traders are increasingly skeptical that the BoE will proceed with a rate cut, given the combination of sticky inflation and resilient consumption. Analysts believe that unless data deteriorates markedly in the coming weeks, policymakers are likely to maintain the current interest rate levels in order to anchor inflation expectations.

Adding further optimism was the latest UK flash Purchasing Managers’ Index report from S&P Global. The composite PMI rose to 49.4 in May, improving from April’s 48.5 and slightly beating expectations. While the reading still indicates contraction, the pace of decline in business activity has moderated, largely driven by a rebound in the services sector. The services PMI climbed to 50.2, re-entering expansionary territory, while manufacturing activity weakened further, with the manufacturing PMI falling to 45.1, below the consensus forecast of 46.0.

The robust domestic data helped propel the Pound to a session high of 1.3535 against the US Dollar, the strongest level since 2022. This move was compounded by broader weakness in the Dollar, which has come under pressure as investors digested the implications of a new budget bill introduced by President Donald Trump. The legislation, which includes sweeping tax cuts, increased military and border spending, reductions in Medicaid, and expanded subsidies for green energy, has already passed the House of Representatives and now faces a more contentious battle in the Senate.

According to the nonpartisan Congressional Budget Office, the proposed bill would expand the US fiscal deficit by an estimated $3.8 trillion over the next decade. With the national debt already standing at $36.2 trillion, the plan has stoked fears about the sustainability of America’s fiscal position. These concerns were underscored last week when Moody’s downgraded the US sovereign credit rating to Aa1 from Aaa, citing persistent budgetary pressures and heightened political risk.

Market participants are now bracing for potential turbulence as the bill moves to the Senate, where opposition is expected from both sides of the aisle. Republican Senator Ted Cruz signaled that revisions are likely, telling Reuters, “I expect there will be considerable changes in the Senate.” Nonetheless, even the prospect of a moderately watered-down version of the bill has been enough to weigh on the US Dollar and push the Dollar Index (DXY) down to a two-week low around 99.30.

Complicating the outlook further is the Federal Reserve’s cautious stance on interest rates. Policymakers have reiterated the need for patience amid a backdrop of lingering inflation and uncertain fiscal policy. While recent data suggest the Fed is likely to maintain its current rate range of 4.25%–4.50% for the time being, Trump’s expansive fiscal agenda could add upward pressure on inflation and force a re-evaluation of that stance.

Technical Analysis

Technically, the GBP/USD pair has broken decisively out of its long-term descending trendline and consolidative range. The rally beyond 1.3500 has confirmed the bullish breakout, with support levels near 1.3389 and 1.3333 holding firm during recent pullbacks. Market momentum suggests that the pair is likely to continue climbing toward the psychologically significant 1.3700 level in the coming sessions, provided price remains supported above 1.3250. A brief dip toward the 1.3400 to 1.3450 area may offer fresh buying opportunities, but the broader trend remains constructive for bulls.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3490

STOP LOSS: 1.3340

TAKE PROFIT: 1.3700

Risk Warnings and Disclaimers

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Eva Chen

Central Bank

Forex

Summary:

On Tuesday, the Reserve Bank of Australia (RBA) cut interest rates by 25 basis points, in line with market expectations, leading to a decline in AUDUSD.

SELL AUDUSD

Close Time

CLOSED

0.64592

Entry Price

0.62530

0.65600

0.66226 -0.00007 -0.01%

34.8

Pips

Loss

0.62530

0.64940

Exit Price

0.64592

Entry Price

0.65600

Fundamentals

AUDUSD continued its range-bound trading on Friday, remaining below the key resistance level of the MA200. Previously, the debate over whether the Reserve Bank of Australia (RBA) would cut interest rates by 25 basis points or 50 basis points weighed on the Australian dollar's positive risk tone.

On Tuesday, the RBA decided to lower the cash rate by 25 basis points to 3.85%. During the post-meeting press conference, Governor Michele Bullock revealed that the committee had briefly considered holding rates steady but quickly shifted to discussing rate cuts of 25 to 50 basis points.

Ultimately, given that inflation was within the target range and unemployment remained robust, the more cautious 25-basis-point cut was favored. Bullock emphasized that while easing was justified, "we do not rule out the possibility of further action in the future."

She also noted that the committee views the recent global trade situation as generally "deflationary" for Australia but warned that risks remain two-sided.

She stressed, "There are upside risks to inflation, and trade policies could lead to supply chain issues that may push up the prices of some imported goods, as we saw during the pandemic."

The RBA's dovish outlook, coupled with the renewed escalation of Sino-US trade tensions, has put pressure on the Australian dollar.

Meanwhile, the Westpac Bank's leading index in Australia slowed from 0.5% to 0.2% in April, indicating a weakening growth momentum.

In addition, private sector indicators in Australia showed signs of slowing in May, with the composite PMI index falling to a three-month low of 50.6 from 51.0. The manufacturing index remained stable at 51.7, but the services index dropped to 50.5 from 51.0, the lowest level in six months.

We anticipate that the above-trend growth observed in Australia earlier this year has almost dissipated, primarily due to rising global trade uncertainties and weakening commodity prices.

While external pressures have dominated, domestic factors such as a slowing labor market and modest support from rate cuts have also contributed to the loss of economic growth momentum.

Overall, the already lukewarm economic recovery is expected to stall, with GDP growth projected to reach just 1.9% by the end of 2025, significantly below the historical average.

Insufficient Upside Momentum May Trigger Correction _1

Technical Analysis

The outlook for AUDUSD remains unchanged, with continued consolidation within the range. The intraday trend remains neutral, with the support level at 0.6356 holding firm, suggesting potential for further upside. On the upside, a breakout above 0.6511 would resume the rally from 0.5913, targeting 0.6548, which is the 61.8% Fibonacci retracement level of the decline from 0.6941 to 0.5913.

However, insufficient upside momentum could trigger a correction. A breakdown below 0.6356 would initially lead to a deeper pullback, targeting the 38.2% Fibonacci retracement level of the decline from 0.6941 to 0.5913, at 0.6283.

Trading Recommendations

Trading Direction: Sell

Entry Price: 0.6480

Target Price: 0.6253

Stop Loss: 0.6560

Valid Until: June 7, 2025, 23:55:00

Support: 0.6407/0.6372/0.6320

Resistance: 0.6480/0.6514/0.6528

Risk Warnings and Disclaimers

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Alan

Forex

Summary:

UK April CPI unexpectedly rose, potentially delaying BoE rate cuts and boosting the pound. Meanwhile, improved risk sentiment has weakened safe-haven demand for the yen.

BUY GBPJPY

Close Time

CLOSED

193.257

Entry Price

199.100

191.300

207.603 -0.099 -0.05%

138.3

Pips

Profit

191.300

194.640

Exit Price

193.257

Entry Price

199.100

Fundamentals

On Wednesday, UK April CPI surged to 3.5% YoY (vs. 2.6% in March), while core CPI climbed to 3.8% (vs. 3.4%), both exceeding expectations and hitting a 15-month high. The inflation spike, driven by energy, water bills, and airfare costs, reinforced market expectations of delayed BoE easing, or even a hawkish tilt, providing solid support for GBP.

Additionally, UK May flash PMIs (manufacturing & services) remained above 50, signaling continued expansion, while Japan's April composite PMI dipped below the boom-bust line. This divergence strengthens the case for the GBP outperformance.

With U.S.-China trade tensions easing, global risk appetite has improved, reducing the demand for the Yen. Concurrent U.S. dollar weakness this week further supports GBP/JPY upside.

Technical Analysis

Downtrend Line Broken, Short-Term Bullish Outlook_1

The daily chart shows GBP/JPY has decisively broken its prior downtrend line, suggesting a potential shift from bearish to bullish. The moving average system shows upward inflection, with the MA20 crossing above MA60 and MA144 (a golden cross), reinforcing bullish momentum.

Having breached both the downtrend resistance and the March 27 high, GBP/JPY's upside appears open, with initial targets at the psychological 200.00 level.

Trading Recommendations

Trading direction: Buy

Entry price: 193.30

Target price: 199.10

Stop loss: 191.30

Valid Until: June 06, 2025, 23:00:00

Support: 191.88/190.29

Resistance: 196.40/200.00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

If the pair once again fails to gain traction above this key technical barrier, bearish momentum could gain ground, possibly pushing the pair back toward the 0.6200 support region.

SELL AUDUSD

Close Time

CLOSED

0.64500

Entry Price

0.62000

0.65600

0.66226 -0.00007 -0.01%

4.4

Pips

Profit

0.62000

0.64456

Exit Price

0.64500

Entry Price

0.65600

At its policy meeting on Tuesday, the Reserve Bank of Australia (RBA) opted to cut its Official Cash Rate (OCR) by 25 basis points, bringing it down to 3.85% from 4.10%. The central bank attributed the decision to continued progress in reducing inflation and a more balanced risk outlook. In its statement, the RBA emphasized that “inflation has declined substantially from its 2022 peak,” and that “inflation risks have become more evenly balanced.” While the central bank acknowledged signs of improvement, it also stressed a cautious tone, noting that “significant uncertainty remains surrounding aggregate demand and supply.”

Australia’s economic activity remains relatively steady, with the manufacturing sector holding its ground and the services sector showing signs of losing momentum. This combination points to an economy that is stable but lacking strong growth drivers. The recent rate cut gives the RBA room to assess evolving conditions, with flexibility to either hold or ease further depending on how the data develops in the coming months.

In the United States, President Donald Trump has applauded the passage of what he describes as the “big, beautiful bill” in the House of Representatives. While the administration frames it as a major victory for working Americans, financial markets have responded with skepticism. The legislation, which includes major tax reductions and expanded government spending, is raising red flags among analysts due to its potential to widen the fiscal deficit significantly.

According to estimates from the nonpartisan Congressional Budget Office (CBO), the bill could increase the national debt by as much as $3.8 trillion over the next decade. This would likely lead to a notable rise in interest payments and impose greater strain on public finances.

Despite being marketed as a growth-friendly and socially supportive initiative, the bill is expected to substantially erode federal revenue. In response to the expected shortfall, the administration has floated the idea of cutting spending on crucial welfare programs such as Medicare and food assistance. This has raised concerns over the social and economic impact of shifting fiscal responsibility away from taxation and toward cuts in public support.

On the monetary policy front, Federal Reserve Governor Christopher Waller reaffirmed his position that the inflationary effect of tariffs would likely be temporary. In a Reuters report, Waller reiterated that the Fed’s policy framework typically discounts short-term price spikes driven by trade measures.

Market participants are now focused on the upcoming release of the S&P Global Flash Purchasing Managers’ Index (PMI) for May, set to be published at 13:45 GMT. The data is expected to provide an updated snapshot of U.S. business conditions, which could influence expectations for future Fed action.

Labor market data also continues to show resilience. Initial Jobless Claims for the week ending May 16 came in at 227,000—slightly below the projected 230,000 and marginally down from the previous week’s figure of 229,000. Although the improvement is modest, it reflects continued strength in employment conditions. Key Resistance May Trigger Bearish Reversal in AUDUSD_1

Key Resistance May Trigger Bearish Reversal in AUDUSD_1

Technical Analysis

AUD/USD is struggling to break above the 200-day moving average, which is currently located around the 0.6451 mark on the daily chart. Each approach to this level has been met with notable resistance, suggesting that sellers may see this as a potential zone to initiate downside moves. If the pair once again fails to gain traction above this key technical barrier, bearish momentum could gain ground, possibly pushing the pair back toward the 0.6200 support region.

The Relative Strength Index (RSI) is currently at 51.9, remaining in neutral territory. However, a bearish divergence between the RSI and price action has become increasingly evident. Should this divergence persist and the price fail to establish a new local high above 0.6516, the bearish setup would remain intact. On the other hand, a decisive breakout above that level would invalidate the current bearish bias and potentially pave the way for a new leg higher. Until such a breakout occurs, traders are likely to view the 200-day moving average as a key inflection point that could cap further gains and reinforce downside risk.

Trading Recommendations

Trading direction: Sell

Entry price: 0.6450

Target price: 0.6200

Stop loss: 0.6560

Validity: May 30, 2025 15:00:00

Risk Warnings and Disclaimers

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Manuel

Central Bank

Economic

Summary:

A strong close above these levels could trigger an acceleration of bullish momentum, with the next upside target seen near 0.8620.

BUY USDCHF

Close Time

CLOSED

0.83050

Entry Price

0.86190

0.81450

0.80658 -0.00019 -0.02%

22.2

Pips

Profit

0.81450

0.83272

Exit Price

0.83050

Entry Price

0.86190

U.S. President Donald Trump recently praised the approval of what he calls the “big, beautiful bill” in the House of Representatives. While the administration presents it as a major relief measure aimed at supporting working Americans, financial market participants have raised serious concerns over its long-term fiscal consequences. The bill, which includes sweeping tax cuts and expansive spending plans, is expected to significantly deepen the nation’s fiscal deficit.

According to the nonpartisan Congressional Budget Office (CBO), the newly approved legislation could add as much as $3.8 trillion to the national debt over the next decade. This increase would place additional pressure on the federal budget, particularly in the form of rising interest obligations.

Though marketed as a pro-growth, worker-friendly initiative, the bill is projected to substantially reduce federal revenues. In an attempt to offset the shortfall, the administration has proposed cuts to vital social programs such as Medicare and food assistance. This has sparked concern among analysts and lawmakers about the potential social and economic fallout of shifting the tax burden onto essential welfare services.

Meanwhile, Federal Reserve Governor Christopher Waller reiterated his stance that tariffs are likely to result in only a one-time spike in prices. According to a report from Reuters, Waller emphasized that the Fed’s conventional policy framework typically overlooks such temporary inflationary pressures.

In the economic calendar, investors are awaiting the preliminary S&P Global Purchasing Managers’ Index (PMI) data for May, scheduled for release at 13:45 GMT. This report could provide key insights into the state of U.S. business activity and help shape expectations around monetary policy.

On the labor front, Initial Jobless Claims for the week ending May 16 came in slightly below forecasts. A total of 227,000 individuals filed for unemployment benefits for the first time, compared to market expectations of 230,000 and a prior reading of 229,000. While the decline is modest, it still points to a resilient labor market.

Adding to the pressure on the U.S. dollar, credit rating agency Moody’s downgraded the country’s sovereign debt last week. The downgrade, combined with ongoing fiscal uncertainty triggered by the introduction of the “One Big, Beautiful” tax bill, has dented investor confidence in the greenback.

Elsewhere, the Swiss National Bank (SNB) has signaled its openness to deploying negative interest rates once again if global economic turbulence intensifies due to the imposition of U.S. tariffs.

SNB President Martin Schlegel recently confirmed that all monetary policy tools—including a potential return to sub-zero rates—remain on the table. While he noted a preference to avoid such measures, the market is now broadly anticipating a 25 basis point rate cut to zero at the SNB’s upcoming policy meeting on June 19. Upside Potential Builds as USDCHF Holds Crucial Support_1

Upside Potential Builds as USDCHF Holds Crucial Support_1

Technical Analysis

USD/CHF has rebounded off the 0.8218 level, a zone that appears to be acting as a short-term support. The pair recently closed above the 200-period moving average and is now approaching a potential breakout above the 100-period moving average, located around 0.8280 and 0.8308. A strong close above these levels could trigger an acceleration of bullish momentum, with the next upside target seen near 0.8620.

The Relative Strength Index (RSI) has dipped to 27, entering oversold territory. Interestingly, this move has created a bullish divergence when compared to price action from May 7, which could attract buying interest from traders anticipating a rebound. However, if the support at 0.8218 fails to hold and price breaks decisively lower, the bearish trend may resume with further downside ahead.

Trading Recommendations

Trading direction: Buy

Entry price: 0.8302

Target price: 0.8619

Stop loss: 0.8145

Validity: May 30, 2025 15:00:00

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Summary:

Silver prices retreated more than 2% from a seven-week high on Thursday, slipping from $33.70 to around $32.95 intraday.

SELL XAGUSD

Close Time

CLOSED

33.000

Entry Price

31.760

33.800

58.129 -0.188 -0.32%

80.0

Pips

Loss

31.760

33.804

Exit Price

33.000

Entry Price

33.800

Silver prices (XAG/USD) slipped sharply on Thursday following an initial rally to seven-week highs near $33.70, succumbing to renewed strength in the U.S. dollar after surprisingly firm U.S. economic data. At the time of writing, the precious metal was trading around $32.95, marking an intraday drop of over 2%, driven by a confluence of profit-taking, technical resistance, and macroeconomic catalysts.

The sharp reversal comes just one day after silver staged a robust upside breakout that saw prices rocket through prior resistance levels, buoyed by weakening dollar sentiment and strong demand for metals amid global inflationary pressures. However, that momentum faltered during the New York session as the greenback found fresh support from upbeat U.S. Purchasing Managers Index (PMI) readings.

According to preliminary data released by S&P Global, U.S. PMI figures for both the manufacturing and services sectors exceeded expectations, suggesting that the U.S. economy is expanding at a healthier pace than many had anticipated. This unexpected resilience provided a shot in the arm for the U.S. dollar, pulling silver lower due to their inverse correlation.

Technical Analysis

Market reaction was swift. With silver approaching the psychologically important $34.00 mark—near April’s highs—technical selling pressure emerged as traders opted to book profits amid overbought conditions. The Relative Strength Index (RSI), which had climbed deep into elevated territory during Wednesday's breakout, began flashing warning signs of exhaustion.Thursday’s retracement appears to be a natural cooling-off phase following an extended rally.

Currently, silver is hovering near an overlap resistance zone, with traders eyeing $33.62 as a critical short-term barrier. A failure to break convincingly above this level could signal a more extended consolidation phase. On the downside, immediate support is seen around $31.76, a zone defined by multiple prior swing lows.

A popular tactical setup being floated in intraday trading circles includes a short position from $33.00—where the market has repeatedly failed to hold—with a stop loss above $33.80, which represents the recent swing high. The take-profit target is set at $31.76, aligning with a multi-month support cluster.

TRADE RECOMMENDATION

SELL SILVER

ENTRY PRICE: 33.00

STOP LOSS: 33.80

TAKE PROFIT: 31.76

Risk Warnings and Disclaimers

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Eva Chen

Forex

Central Bank

Summary:

The current quote for USDCAD is 1.3877. The Canadian dollar received robust buying support overnight, driving USDCAD to a two-week low; nonetheless, the currency pair remains in a range-bound oscillation pattern.

SELL USDCAD

Close Time

CLOSED

1.38782

Entry Price

1.35400

1.40200

1.38517 -0.00052 -0.04%

110.2

Pips

Profit

1.35400

1.37680

Exit Price

1.38782

Entry Price

1.40200

Fundamentals

USDCAD rebounded significantly from the overnight low in the 1.3815-1.3810 area but showed signs of waning bearish momentum for the fourth consecutive day on Thursday.

Statistics Canada reported on Tuesday that Canada's overall annual inflation rate fell from 2.3% in March to 1.7% in April, primarily due to a 12.7% plunge in overall energy prices following the cancellation of the federal consumer carbon tax. However, two out of the three core inflation indicators closely monitored by the Bank of Canada reached 13-month highs, influenced by underlying price pressures.

The Bank of Canada had forecast last month that the overall inflation data would drop to around 1.5% due to the cancellation of the carbon tax and the decline in crude oil prices. Gasoline prices fell by 18.1% compared to April 2024, and natural gas prices dropped by 14.1% year-over-year. However, consumer spending on groceries increased by 3.8% year-over-year, up from 3.2% in March. Tourism prices rose by 6.7% year-over-year in April.

On a monthly basis, the inflation rate declined by 0.1%, compared to the analysts' prior forecast of a 0.2% drop.

The money market reacted to the inflation data, reducing the probability of an interest rate cut at the June 4 meeting from 65% before the data release to 48%. (CAD-positive)

Technical Analysis

During the day, the trend of USDCAD currently remains biased to the downside. The asset previously broke below the crucial 200-day moving average and subsequently fell through the 1.3900 level, continuing to favor bearish trades. This, in turn, indicates that the path of least resistance for USDCAD remains downward.

The rebound from 1.3749 may complete a pullback to 1.4014. If it re-tests 1.3749, further declines are likely. A break below this level would rekindle the downtrend since 1.4791. For now, as long as the 1.4014 resistance level holds, the risks remain skewed to the downside.

Trading Recommendations

Trading Direction: Sell

Entry Price: 1.3900

Target Price: 1.3540

Stop Loss: 1.4020

Valid Until: June 6, 2025, 23:55:00

Support: 1.3810/1.3752/1.3724

Resistance: 1.3902/1.3978/1.4016

Risk Warnings and Disclaimers

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