The euro rose in European trade on Thursday against a basket of major rivals, resuming gains against the dollar after a two-day hiatus and heading once more towards four-year highs as the dollar continues to face risks. 

Chief of which are the ongoing US-China trade tensions amid mixed signals from US President Donald Trump on his plans for the China tariffs.

The Price

The EUR/USD price rose 0.4% to $1.1357, with a session-low at $1.1313.

The price fell 0.9% on Wednesday, the second loss in a row on profit-taking away from a four-year nadir at $1.1573.

The euro also lost ground after Trump’s assurances that he won’t sack Fed Chair Jerome Powell, and following grim eurozone services data.

Mixed Signals

Trump asserted the US goal of reaching a fair trade deal with China, however, he once more threatened new tariffs on Beijing if no deal is reached.

US Treasury Secretary Scott Bessent said Trump didn’t propose to unilaterally remove tariffs from China, asserting the US will not cut tariffs on China by over 100%.

Bessent said there’s no clear timeline for communications between both sides, with the process of complete trade rebalancing potentially taking two or three years.

The markets are beginning to see the Trump’s administration’s sensitivity towards the performance of the financial markets, with decisions such pausing reciprocal tariffs and backing off plans to sack Fed Chair Powell as reflections of such considerations.

European Rates

Reports indicated that several European Central Bank governors see a high chance of a rate cut in June.

President of the Deutsche Bundesbank Joachim Nagel said that German recession this year can’t be ruled out.

European Central Bank President Christine Lagarde said the impact of tariffs could be seen on the PMI and unemployment numbers.

Lagarde expects the tariffs to have more of a deflationary role on prices rather than inflationary. 

Markets are currently pricing in a 60% chance of an ECB interest rate cut in June. 

The Japanese yen rose in Asian trade on Thursday against a basket of major rivals, resuming gains against the dollar after a two-day hiatus amid renewed haven demand on the currency as investors assess trade risks between the US and China.

Global momentum took a gradual back seat after a recovery surge, amid mixed signals from US President Donald Trump on his plans with the China tariffs. 

Reports indicate the Bank of Japan will likely dismiss risks from US tariffs on the cycle of higher wages and inflation, crucial for continuing to raise interest rates.

The Price

The USD/JPY price fell 0.55% today to 142.60 yen per dollar, with a session-low at 142.60.

The yen lost 1.3% on Wednesday against the dollar, the second loss in a row, and the heftiest since December 2024, marking a week low at 143.57 as the global markets rebounded.

Mixed Signals

Trump asserted the US goal of reaching a fair trade deal with China, however, he once more threatened new tariffs on Beijing if no deal is reached.

US Treasury Secretary Scott Bessent said Trump didn’t propose to unilaterally remove tariffs from China, asserting the US will not cut tariffs on China by over 100%.

Bessent said there’s no clear timeline for communications between both sides, with the process of complete trade rebalancing potentially taking two or three years.

The markets are beginning to see the Trump’s administration’s sensitivity towards the performance of the financial markets, with decisions such pausing reciprocal tariffs and backing off plans to sack Fed Chair Powell as reflections of such considerations.

Bank of Japan

The Bank of Japan is widely expected to hold interest rates steady at this month’s policy meeting, while dismissing the impact of US tariffs on the current cycle of increasing wages and inflation.

The BOJ is likely to maintain its goal of gradual interest rate hikes in the future amid efforts to normalize the monetary policy.

Most cryptocurrencies rallied on Wednesday as the risk appetite improved in global markets as the trade tensions calmed down.

The strong gains came after a report by the Wall Street Journal about Trump’s plans to reduce tariffs on China from upwards of 245% to just 50%.

Trump admitted on Tuesday that current tariffs on China are too high and won’t stay this way and will be reduced soon, but won’t reach zero.

In another statement that calmed the markets, Trump said he doesn’t intend to fire Fed Chair Jerome Powell, asserting he’ll let him complete his term until May 2026.

It comes after a series of heavy Trump attacks on Powell, describing him as a big loser and demanding he cuts interest rates immediately. 

Earlier US data showed the combined PMI down to 51.2 in April from March’s 53.5, the lowest in 16 months.

The services PMI fell to 51.4 this month from 54.4 in March, below estimates of 52.8.

Ethereum

On trading, ethereum rallied 5.5% on Coinmarketcap as of 19:51 GMT to $1781.7, raising the currency’s two-day profit to 14%.

Oil prices fell on Wednesday after reports that OPEC+ is planning to raise output in June.

Three sources told Reuters that several OPEC+ members will propose a production hike in June for the second month in a row. 

Oil prices recently fell to four-year lows in April after the US-China trade war and the unexpected OPEC+ decision to raise output by 411 thousand bpd in May.

Reuters’ report indicated that OPEC+ might raise output by a similar amount once more in June.

Otherwise, the Energy Information Administration reported a buildup of 0.2 million barrels in US crude stocks last week to a total of 443.1 million barrels, while analysts expected a build of 0.6 million barrels.. 

Gasoline stocks fell by 4.5 million barrels to 229.5 million barrels, as distillate stocks fell by 2.4 million barrels to 106.9 million barrels.

On trading, Brent June futures fell 2% as of 15:05 GMT to $66.1 a barrel.

US crude futures due in June slid 2.2% to $62.3 a barrel.