The UK services sector experienced a downturn in April 2025, with the Final Services PMI at 49.0, down from 52.5 in the prior month. This is the first contraction in one-and-a-half years, as new work orders declined and export sales saw the fastest fall since February 2021.

Expectations for business activity have hit a two-and-a-half year low, with global financial market turbulence, such as US tariff announcements, affecting order books. Input prices rose due to increased National Living Wage rates and National Insurance contributions, marking the steepest rise since summer 2023.

final composite pmi figures

The Final Composite PMI also declined to 48.5 from 51.5 previously, indicating weaker conditions across the services and manufacturing sectors combined. Business expectations for the year are low, with 22% of firms predicting a decline in activity in the next 12 months, a rise from 14% in March. This outlook reflects concerns about prolonged global economic challenges and heightened risk of recession.

The recent contraction in the UK services sector marks a meaningful shift in sentiment, particularly as we witness a drop below the 50.0 line on the PMI scale—a threshold that separates expansion from decline. The April Services PMI sitting at 49.0 follows over a year of minor gains, suggesting that forward indicators no longer support a steady recovery. New work falling away is more than a short-term flicker. Export orders deteriorating at the fastest pace in over four years signals something deeper than seasonal variation or transient shocks.

From our point of view, the reduction in export demand has likely been intensified by instability outside Britain’s borders. The exposure to external disruptions—most evidently the tariff changes in North America—has filtered through into sentiment on both sides of the supply chain. Forward momentum has been eroded as firms struggle to predict how global trade terms will unfold heading into summer.

Cost pressures present another obstacle that can’t be ignored. Rising wages under the updated National Living Wage legislation, combined with higher employer contributions to National Insurance, are squeezing margins. These aren’t isolated or one-off adjustments; businesses must now earn more to stand still, and many of them won’t.

broad decline with shared softening

The broader Composite PMI, which incorporates both services firms and manufacturers, fell to 48.5. This mirrors a shared softening that isn’t confined to one part of the economy. The decline in this consolidated reading removes hope that industry strength might balance out the softness in consumer-facing activities. Instead, it reinforces that the contraction is not localized, but widespread.

Looking at expectations, a rising number of firms are now bracing for falling output over the year ahead—up nearly ten percentage points from the previous month. That’s an indicator we place weight on, as it implies decisions around hiring, investment and inventory are likely to recalibrate accordingly. In our experience, this aligns with a more defensive stance across operations, meaning fewer risks will be taken for growth.

So, if you operate in areas where directionality matters—such as those informed by momentum indicators or short-dated rate path expectations—this change in tone deserves attention. An uptick in volatility driven by uncertainty usually opens more frequent pricing gaps. Markets tend to reprice when forecasts shift materially. Strategic positioning might gain from applying more weight to forward-guided sectors outside discretionary services. Short-term direction in interest rate futures could point towards softening policy outlooks. But we’d watch closely to see whether central messaging catches up with this data—or continues to lean on previous assumptions.

And although some focus may cling to seasonal distortions or scheduled policy announcements, we prefer to anchor on trend data. This downward move is not a blip against a strong backdrop. It suggests there is less confidence just beneath the surface, and that market participants are now recalculating risk exposures based on more limited upside. Any models that rely heavily on optimism over real income growth may require re-tuning.

Sharp policy divergence could complicate things further. We’ve seen before how sudden headlines alter flows and crowd conditions, so being ahead—or at least not caught behind—would matter here. Instruments linked to relative growth or implied rate spreads are likely to react before slower markets reprice. In that regard, it isn’t helpful to discount pessimism as a passing phase when business leaders are already adjusting staffing, spending and production plans in line with what they see just ahead.

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Lower oil prices are leading to a reduction in drilling activity in the US. The Dallas Federal Reserve Energy Survey indicates that oil producers need an average price of $65 per barrel to profitably drill new wells, while West Texas Intermediate is trading in the mid-$50s.

The US oil rig count has declined to 479 from a peak of 489 in April. Well completions and frac spread counts are also decreasing. Even if drilling continues, production is not assured as producers may delay completing wells due to the low-price environment, increasing the inventory of drilled but uncompleted wells (DUCs).

Impact On Natural Gas Supply

A decline in US oil activity impacts natural gas supply, as much of it is associated with oil production. This could pose a challenge, particularly with the expected rise in US LNG export capacity and stronger gas demand.

Lower oil prices have begun to impact drilling activity across the US. Based on the Dallas Fed’s latest figures, most producers require around $65 per barrel to make new wells financially feasible. With West Texas crude currently pricing in the mid-$50 range, firms are left operating below breakeven. This disconnect between market prices and drilling economics has now translated into fewer rigs running—standing at 479, which is down from the 489 rigs logged back in April.

The slowdown doesn’t just stop at rig counts. The number of well completions is tapering off, and fracture spread data suggests a similar slowdown on the service side. Even where wells continue to be drilled, companies appear more reluctant to finish them immediately. Delaying completions—the final steps needed to push a well into production—adds to the inventory of DUCs (drilled but uncompleted wells), effectively deferring output into a later time horizon. From our perspective, the shift here is less about halting activity, and more about shifting timing in response to thin margins.

There’s an added layer here. A reduction in oil drilling doesn’t just restrict crude output. Because a substantial portion of natural gas in the US is co-produced during oil extraction (what’s known as associated gas), this pullback has implications for natural gas supply. That connection becomes even more relevant when considered alongside rising demand expectations—particularly from the liquefied natural gas export segment, which is slated to expand. Project timelines for new LNG facilities suggest a ramp in gas consumption by the latter half of next year, which means any constraints in associated gas output may tighten the market before then.

Changing Natural Gas Market Dynamics

What’s more, this dynamic shifts the calculus for natural gas exposure. If associated gas volumes decline and demand climbs as expected, spot and prompt month contracts could begin to reflect tighter fundamentals, especially through winter strip pricing. From where we stand, this isn’t just a transient adjustment—it’s a change in the supply curve that merits close attention over the next several weeks.

On the options side, skew may begin to reflect increasing interest in upside gas exposure, particularly in calendar spreads and risk reversals that are positioned to benefit from tightening supply into seasonal demand peaks. Those with open interest in the front months may want to examine price sensitivity in blocks correlating with updated LNG commissioning schedules.

Given that drilling economics are unlikely to improve quickly under current price levels, the likelihood of a swift rebound in rig activity seems low. That provides a more stable underlying environment for directional trades, at least in the near term. If well completion slowdowns continue, gas markets may start to respond earlier than consensus currently suggests. As always, pricing disconnects tend to correct themselves more sharply when traders are caught off guard.

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The New Zealand Dollar (NZD) is likely trading between 0.5930 and 0.5980 against the US Dollar (USD). In a longer-term perspective, the NZD is anticipated to fluctuate within the range of 0.5890 to 0.6005.

The resistance level at 0.6000 was not breached during the recent advance. Given current momentum, the NZD is expected to remain within the 0.5930 to 0.5980 range for now.

Short Term Outlook

In the 1-3 weeks outlook, NZD is seen as part of a consolidation phase. If it does not drop below 0.5890, it might retest last month’s high, near 0.6030.

The information provided includes forward-looking statements with associated risks and uncertainties. It should not be construed as a recommendation to buy or sell the assets mentioned. Conduct thorough research before making any financial decisions. Investing carries significant risks, including possible loss of the principal amount.

What we’ve seen recently in NZD/USD price action is a period of low volatility, with price respecting a tight band between 0.5930 and 0.5980. The upper resistance level at 0.6000 held firm during the last push higher, suggesting that upward momentum hasn’t been strong enough — yet — to trigger a breakout. On the daily charts, attempts to gather pace above 0.5980 have been consistently met with selling pressure, which tells us that traders are holding back from aggressive long positions until cues are clearer.

We can interpret this as a market in pause mode, where buyers aren’t particularly enthused, but sellers haven’t gained enough confidence to break it down either. Essentially, pressure is building, but the direction remains undecided in the short term.

However, over the next week or so, unless the pair dips clearly below 0.5890, that consolidation structure is still holding up. That’s likely why last month’s high around 0.6030 remains a valid potential point of focus. So long as that lower threshold is maintained, we could easily see a renewed attempt toward testing those upper marks.

Market Sentiment and Analysis

From a derivatives angle, keeping option strategies balanced might be warranted — straddles or strangles could benefit if a movement out of the current compression begins. On the other hand, directional bets would need tight stops given the whippy, range-bound nature of recent trading.

We recognise that the market is watching for broader macro signals, especially from offshore economic releases and central bank commentary. Those clues could wear heavily on the NZD, especially in thin sessions. That risk heightens the need to monitor how global rates or commodity sentiment — often influential for antipodean currencies — shift in the days ahead.

There’s also a psychological level forming near that 0.6000 area. Having failed to hold above, it may deter new longs from entering with confidence. It will take a clear and sustained breakout to make that zone support, rather than resistance.

From where we stand, most of the activity appears to be short-term positioning and rotation. No broader theme has taken over just yet. Until we see a decisive move on either side of 0.5890 or 0.6005, it’s difficult to justify aggressive exposure without hedging.

That said, we’re keeping a close eye on implied volatility moving forward. It has compressed noticeably, and when that happens following a tight trading range, we often get an expansion phase right around the corner. Whether that expansion fuels a bullish or bearish leg is unclear at present, so positioning selectively becomes essential.

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The chairman of the Swiss National Bank (SNB), Martin Schlegel, stated that the possibility of reintroducing negative interest rates has not been dismissed. He acknowledged that negative rates are generally unpopular, but emphasised that the SNB is ready to implement them if needed.

Schlegel also mentioned expectations for a decrease in Swiss inflation. The implication of these remarks suggests a potential move towards negative interest rates by the SNB.

The Central Bank’s Strategy

Schlegel’s remarks, while measured, offer a clear signal about how the SNB may respond if inflation does not settle near its target in the near term. From our perspective, the phrase “ready to implement” goes beyond posturing—it lays a technical and psychological foundation for investors to begin modelling future rate scenarios that include negative territory. We would note that such forward guidance, though carefully worded, tends to have a tangible effect on forward rate pricing and optionality skew.

What this tells us, in simple terms, is that the central bank is not looking to surprise the market with abrupt decisions, but would prefer tightening or easing to occur via expectations. That said, there’s a strong argument that Swiss policymakers are signalling flexibility in order to retain control over the franc, especially should global disinflationary trends strengthen. While inflation in Switzerland has remained relatively subdued compared with European peers, the readiness to act pre-emptively shows a bias towards stability over higher core returns.

Given this positioning, we are likely to see increased pricing of optionality around the zero lower bound in Swiss rate derivatives. Euro-Franc cross-currency basis spreads may begin to reflect a mild premium for downside protection. That sort of movement—if observed in the coming sessions—could be interpreted as dealers trying to reduce exposure to a steeper front-end cut curve.

We should point out that talk of pushing rates below zero again, even nominally, will not sit well with all investors. However, what matters more right now is not whether the policy is well-liked, but that it is part of the SNB’s viable toolkit. With that in mind, short-dated vols in CHF-linked contracts warrant a closer look, as they are priced quite benignly at present which may not fully reflect tail risks introduced by Schlegel’s comments.

Potential Market Impact

In practical terms, those managing CHF interest rate structures may need to reassess existing flatteners. There’s a non-negligible combination of event risk linked to both the SNB’s upcoming meetings and external rate paths, particularly from the ECB. It’s also worth noting that when central bankers float policy shifts in interviews or panel discussions rather than official minutes, it’s often a soft form of forward guidance. That means it should be weighted accordingly in our models.

Positioning shifts may occur quietly at first. We’ve already seen similar prior episodes when forward guidance alone triggered repricing without any actual change in policy. As rate curves adjust, and as long as inflation expectations remain anchored, the return of negative policy rates—even if only modestly discussed—should push attention to hedging against downward yield surprises.

We’d be remiss not to evaluate whether carry trades involving Swiss instruments are still offering favourable asymmetry. With Schlegel describing negative rates as still “on the table,” a number of FX-linked expressions may begin to tilt towards defensive positioning. Watch two-year OIS differentials in particular.

All of this, taken together, suggests that an active reassessment of low-rate sensitivity may be prudent. Not because we expect an immediate decision, but because the cost of protection now versus potential repricing later creates a fairly explainable incentive to start buying optionality early. Even subtle changes in tone from officials have a tendency to cascade through the rate space in a slow but relentless way.

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OPEC+ is set to implement another aggressive supply increase. Effective from June, this move marks a shift in their policy. Recent decisions suggest further supply increases may be likely in the upcoming months. This change has prompted a revision of oil forecasts, predicting a reduction in prices.

Saudi Arabia is leading the charge for larger supply increases, aiming at members producing above their targets. OPEC+ surprised the market in April with an unexpected increase of 411k barrels per day for May. Recently, they announced a similarly bold increase for June. Originally, OPEC+ aimed to bring back 2.2 million barrels per day over an 18-month timeline.

Supply Dynamics Affected By Tariff Risks

Demand uncertainties persist due to tariff risks, adding to supply-side unpredictability. The group will determine future output levels on a monthly basis. Saudi Arabia’s tolerance for low prices over time is a key factor. With current prices below their fiscal breakeven of US$90 per barrel, Saudi Arabia might need to adjust their budget or seek debt solutions. The increasing gap between their fiscal needs and market prices suggests potential spending cuts or debt market engagement.

What this means is that the wider group of oil-exporting nations, together with key Gulf producers, is no longer holding back supply in the way we became used to. More oil is coming to the market, and it’s happening faster than previously communicated. The original plan was to add 2.2 million barrels per day in stages over a year and a half—but decisions taken in April and recently in May have brought that forward. In plain terms, there’s more oil sloshing around than people were expecting even a few weeks ago.

The market felt the impact of that surprise. We noticed downward pressure on crude prices almost immediately after the early signals of stronger-than-expected output. A fresh bout of supply from key exporters into a market still navigating weak demand data left little room for pricing strength. Brent futures drifted lower, and implied volatility in options markets has picked up. The forward curve flattened. In short, the floor under prices got a bit weaker.

It’s not just the volume of new barrels that matters—it’s the pace and timing of these decisions. The monthly nature of these updates keeps uncertainty alive, especially for short-duration contracts and those positioned in the front end of the curve. For traders watching implied vol levels or looking for hedging signals, this kind of pacing creates sharp micro-adjustments in expectations. With each monthly review, the potential for another change in supply sits in the background, influencing risk pricing.

Impact Of Tariff Risks On Demand Side

Tariff risks on the demand side are also noticeable. Unclear trade terms, especially between major economies like the US and China, are making end-user demand in certain sectors look shakier. That’s feeding into a murky demand outlook, which, when combined with more barrels—and from members previously not compliant with production limits—leans bearish. It’s not about fear, but recalibration. Price forecasts have already responded and implied options skew has shifted slightly more neutral after spiking in late Q1.

Looking at Saudi Arabia more deeply, the endurance of lower prices is something we’re watching closely. With prices anywhere near current levels, they are flirting with a fiscal shortfall. Their state budget assumes oil at around US$90 a barrel, and anything shy of that implies a widening deficit. This becomes even more relevant if they remain committed to holding production high. That balance—supporting broader OPEC+ output while managing domestic financial stability—forces choices. They can either trim spending or increase debt issuance. Either option carries implications for oil policy.

For those of us positioning over the next few weeks, especially in derivatives tied to prompt delivery, we are factoring in this shorter cycle of policy direction. The era of long phases of supply consistency appears to have changed. Now, we must watch announcements more frequently and prepare for fast pivots. Curve positioning is adjusting accordingly. Call skew in medium-dated options has eased back, while put interest is growing modestly as traders attempt to guard against a further leg lower in flat price.

With monthly meetings determining future volumes, and price action increasingly driven by policy moves rather than inventory or consumption shifts, it’s essential to keep models flexible. Options markets are likely to stay active, especially near key expiry points. Continuing this trend of volume expansion, unless curtailed by internal dissent or macro shocks, should remain a pressure point for longs.

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The EU’s Trade Commissioner, Maros Sefcovic, has proposed the removal of tariffs on industrial goods. The aim is to accelerate trade discussions with countries like India.

An additional €170 billion of US exports might face tariffs, underscoring the challenges in current trade dynamics. The EU is prepared to employ all available tools for trade defence.

Zero For Zero Tariffs

This proposal of 0 for 0 tariffs is not new, having been known for weeks. However, a breakthrough has yet to be achieved in negotiations.

French Finance Minister Lombard recently discussed the idea of mutual zero tariffs with Scott Bessent. Bessent mentioned that achieving such an agreement is a realistic possibility, sustaining ongoing hopes for progress.

What the above content highlights is a potential shift in the European Union’s trade strategy. Sefcovic is suggesting the complete removal of tariffs on industrial products—something that would make it markedly easier for countries outside of Europe, such as India, to sell their goods within the EU. In return, the EU would expect equivalent access to those markets. This “0 for 0” tariff model—as it’s often referred to—has been floating around for some time now. It’s not a novel idea, and despite being broadly discussed, nothing concrete has been finalised.

We’re also being reminded of unresolved tensions, particularly with the United States. Washington may soon see €170 billion worth of its exports affected by tariffs from the EU. This large figure doesn’t just show that the issue is alive—it warns that further policy moves could happen fast. Brussels has openly stated it is prepared to use every trade measure at its disposal, meaning this isn’t just diplomatic theatre. There’s a real edge to it.

Financial Market Implications

The conversation held by Lombard and Bessent adds more shape to this picture. The French minister’s remarks during his exchange with Bessent made clear that Europe is actively seeking to keep these talks moving. Bessent, who has extensive experience in this field, said the agreement isn’t out of reach. That cannot be ignored—it doesn’t guarantee action, but it does point to a belief among major financial voices that progress is still on the table.

For those of us keeping an eye on the implications in derivative markets, these back-and-forth motions suggest volatility rather than calm ahead. When tariff regimes are left in flux, pricing models need to adjust. Trade policy shifts affect input costs, output distributions, and thereby influence corporate earnings. That then moves indexes, and so the effect is felt widely across positions, especially in contracts that are sensitive to macroeconomic flow.

We must pay very close attention to not just whether 0-for-0 tariffs advance, but also to how discussions with key Asian counterparts evolve—India being the flag bearer at this stage. If a meaningful reduction in barriers is agreed upon, models that assume friction in supply chains might have to be rebalanced. There’s also the chance that retaliatory American moves could add another layer of complexity for instruments referencing manufacturing sectors in Europe.

What matters in the short term is how protectionist or outward-facing policies look to be moving in the next fortnight. Any discernible tilt will affect pricing assumptions. The interplay between regional earnings and FX adjustments also opens up questions about hedging and risk appetite. For now, whatever open positions we carry should factor in that policies can shift on headlines. Only strategies that can still stand if negotiations stall, or if talks open unexpectedly, are worth holding.

Monitor statements from trade and finance officials with particular focus on timing. Delay is common in such matters, but not always priced in. When momentum changes, so should your exposure.

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The Taiwanese dollar recently experienced a notable surge, accompanied by modest gains in other Asian currencies. This shift is driven by concerns among Taiwan’s USD-rich corporations about a potential trade deal with the US, though Taiwanese authorities have dismissed such speculation.

Liquidity issues may have intensified movements in the tightly controlled TWD, now trading 7% above its end-of-April close. With the USD declining, some countries with USD-denominated assets like Taiwan seek increased hedging and diversification from US investments.

The Fed Meeting Highlights

In the US, the focus is on the upcoming FOMC rate announcement. Expectations suggest Chairman Jerome Powell will continue to resist cutting rates despite external pressures, with consensus predicting a rate cut not occurring before September.

The Fed meeting might not drastically affect the dollar, aligned with Powell’s recent statements. Rebounding US equities have reduced USD premium demands, although the dollar remains undervalued compared to short-term rate differentials. Future USD risks from Asia persist, emphasizing the potential for speculative shorts to influence currency movements.

What we’re observing now is a reaction not just to local politics or rumoured trade accords, but to broader shifts in capital flow and protective positioning. The recent surge in the Taiwanese dollar, particularly the speed at which it appreciated, points to a concentration of market activity — a kind of scramble to reallocate out of the greenback, possibly to lock in gains or limit exposure to US-led monetary tightening. The fact that it’s trading 7% stronger relative to where it stood in late April gives us a sense that much of this shift is speculative, likely exacerbated by low market depth.

This is something worth watching closely. When a currency under a managed regime moves this sharply, it suggests bigger constraints on the typical levers of price discovery. Taiwanese corporates sitting on large stores of USD may see this as an opportunity to repatriate or shift out of dollar risk, especially if they sense local monetary authorities are letting some degree of appreciation through, rather than actively pushing against it. While policymakers have dismissed talk of trade-linked repositioning, we consider the reaction function of corporates to be more telling than official commentary in this scenario.

Looking westward, the Federal Reserve’s June meeting dominates the US monetary calendar. While no rate cut is anticipated at this stage — and Powell has made a point of maintaining a careful stance — the dovish pricing further out into September and beyond is already well reflected in dollar forward curves. This leaves the USD vulnerable to episodes of risk reversal, particularly if domestic data softens or equity valuations begin to wobble.

Exchange Rate Management Challenges

Although equities have rallied, which in turn dampens the safe-haven premium for the dollar, it’s important to remember the currency is still not capturing the entirety of the rate advantage the US holds. This mismatch between implied rates and the spot FX level opens the door to speculators positioning for a continuation of the medium-term dollar decline, especially against currencies backed by improving trade surpluses or credible central bank tightening cycles.

Asian central banks, meanwhile, face a delicate balance. Exchange rate management is becoming more complex amid diverging paths between US monetary policy and regional macro stability. Sharp FX gains, particularly when liquidity is thin, can invite unwelcome volatility. Should we experience more episodes like the one seen in Taiwan, it’s likely to prompt increased short-term interest in FX options and volatility products across the region.

What matters now is not just the rate messaging from Powell, but how the broader risk environment evolves in response. Those active in structured products or leveraged positions will need to monitor for sudden shifts in implied volatilities, especially if the dollar begins to trade noisily post-FOMC without clear direction. We’d expect near-term price action to stay reactive to positioning imbalances, especially on days when liquidity is low or data surprises hit outside US hours.

Lastly, the way hedge demand rotates out of dollar assets into local alternatives could add momentum to this trend if regional investors begin pre-empting US rate cuts. Diversification preferences may accelerate, leading to more complex trading patterns — ones where carry and correlation no longer move in lockstep. This is especially relevant in strategies involving currency overlays or cross-market intermediation. Keep an eye on real yield spreads across Asia versus the US — that’s where the next set of clues might rest.

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Spain’s April services PMI registered at 53.4, lower than the expected 54.0, with the previous figure at 54.7. The composite PMI also decreased to 52.5 from 54.0.

This data indicates a slowdown, with diminishing new work growth over the month. Economic confidence has reached its lowest since November, and the service sector experienced weaker growth, while the manufacturing sector saw a decline in production.

International Market Tensions

Service providers faced a more challenging work environment, attributed to international market tensions impacting consumption and investment decisions. Despite the slowdown, business activity and order levels remain positive.

Operating costs for Spanish service providers are high, with trade tariffs impacting supply chains, leading to increased input prices and wages driving prices higher. Rising input costs are being transferred to customers.

Although optimism among Spanish service providers has declined to the lowest level this year due to uncertainties from US tariffs, this does not immediately affect Spanish workers. With continued order growth and increasing backlogs, service providers have expanded their workforces.

The recent data out of Spain, showing both services and composite PMIs slipping, paints a clear picture of moderation rather than contraction. What we are seeing is not a collapse in demand, but rather a gentle loss of speed—something more akin to a vehicle gradually decelerating than slamming on the brakes. The services PMI has inched beneath forecasts, while the composite has followed that downward drift, reinforcing the overall tone.

Falling Confidence Levels

A key point here is the mention of confidence levels falling to the lowest since November. That sort of timeline matters. Markets remember that period well—characterised not by chaos, but quiet hesitation amid global uncertainty. It suggests decision-makers have become more wary and less inclined to elevate risks in their portfolios. This change has not paralysed operations; ongoing order inflows and hiring underscore this. Yet a cautionary mood has clearly taken hold, and the numbers do not lie.

We should also keep a close eye on cost structures here. Service firms in Spain aren’t simply experiencing ordinary inflation. These pressures are notably tied to external frictions—most prominently, trade measures that have a direct influence on the price of inputs. As a result, providers are burdened with higher operational expenses, and because margins are not infinitely elastic, these costs are being passed along through price hikes. We cannot ignore this, particularly when monitoring longer-term inflation expectations.

Despite what appears to be a shift in forward sentiment, hiring has gone up. That detail should not be glossed over. Rising backlogs often lead to increased staffing, not out of expansionary ambition—but as a means of coping with work that continues to outpace current staffing levels. It’s a timing issue, where supply must rise to meet persistent though softening demand.

From our position, the data prompts a constructive reassessment of positions across duration-sensitive strategies. Yield sensitivity becomes critical when cost-push dynamics combine with slower activity, and even a mild slackening in service demand affects valuations. The weakening of manufacturing output, meanwhile, adds to the broader narrative that while domestic engines are running, they’re increasingly doing so against a backdrop of dampened global momentum.

Finally, if one reads between the numbers, there is no indication of systemic panic. Firms are hiring. Orders are growing. But the mood has cooled. Not frozen. Not fearful. Measured. That tone is the fulcrum on which expectations must now pivot.

We will watch for any divergence between pricing power and wage commitments in future releases, as that will influence not just inflationary pathways, but also profitability cycles for companies where input sensitivity remains high.

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The USD/CAD pair may find support near the 1.3800 level as the 14-day Relative Strength Index hovers above 30, indicating bearish momentum. Currently trading around 1.3820, the pair shows a descending channel pattern on the daily chart, maintaining a bearish sentiment.

The USD/CAD is below the nine-day Exponential Moving Average, suggesting weak short-term momentum, though more price movement is needed to confirm a trend. If the pair breaks below the 1.3800 support, it could retest the seven-month low of 1.3760, close to the lower boundary of the channel.

Potential Support And Resistance Levels

A breach of the descending channel could push the USD/CAD towards the 1.3419 level, with more support near the channel’s lower boundary at 1.3320. On the upside, initial resistance lies at the nine-day EMA of 1.3837, with a breakout leading towards the 50-day EMA at 1.4058 and potential gains towards 1.4415.

The Canadian Dollar showed the strongest performance against the Australian Dollar compared to other major currencies. Against the USD, CAD increased by 0.02%, while against the AUD, it rose by 0.32%. Such data highlights fluctuating currency strengths.

Given the current technical setup and price behaviour, we’re seeing a pointed slowdown in bullish energy. The USD/CAD remains under pressure within a narrowing structure — a descending channel that continues to guide the directional bias. We’ve got RSI readings floating just above the oversold range, which tends to ease any panic but still reflects heavier selling interest than buying enthusiasm. We’re not in oversold territory yet, but we’re dangerously close.

Current Market Sentiment

Price action dancing just around 1.3820 suggests that any dip lower might open the gates to that 1.3800 level — a threshold we should pay close attention to. That level isn’t just a number; it’s technically loaded. It’s acted as a springboard before. If enough weight is thrown at it and it gives way, there’s little standing in the way of a retest of 1.3760. That level lines up with the lower end of the channel and would be critical in measuring how far this bearish structure still has to run.

Now, looking lower than 1.3760, if price doesn’t stabilise there, we’d likely be forced to re-evaluate the broader structural integrity of the move since January. The next stops, as we’ve mapped out in earlier weeks, would be closer to 1.3419 and possibly stretching to 1.3320 — both being historically relevant and recently active zones that have caught directional swings before.

On the resistance side, unless there’s a decisive break higher through the 9-day EMA at 1.3837, upside attempts are likely to fizzle out rather than flourish. That main dynamic resistance has curbed rallies repeatedly, and tonight’s reluctance to clear it tells us something’s still weighing. If it *does* get cleared with conviction, then the 50-day EMA becomes the next logical magnet, sitting at 1.4058. Beyond that, if bears lose further pace, longer-term sentiment will hinge on whether bulls can even dream of revisiting the 1.4415 region — last seen when USD strength dominated broadly.

Outside of charts and candles, we’ve also tracked relative currency moves — CAD has outpaced AUD more clearly than USD this week, gaining 0.32% versus a mere 0.02% against the greenback. That kind of performance matters in short-term spreads and correlation plays, especially when one currency shows strength across multiple pairings. From our side, we continue to compare cross performance in majors to layer that against the broader directional argument.

This isn’t a moment to jump the gun. Until the pair either finds firmer ground at a lower support or breaks out of this channel with real follow-through, tactical range-bound strategy remains the default. We prefer tight positioning, watching RSI, support-resistance pivots, and how price behaves near those EMAs. A busy few sessions ahead — no time for guesswork.

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Market Hesitation

European indices remained relatively stable at the start of the day. Broader markets are in a holding pattern, largely in anticipation of developments in trade discussions.

S&P 500 futures have declined by 0.3% following a recent drop. This comes after nine consecutive days of increases. Currently, markets are pausing until the next major news about tariffs and trade emerges. Prolonged uncertainty may lead to increased apprehension.

That opening summary signals a collective hesitation across markets, with risk appetite cooling slightly due to the absence of clear catalysts. European equities holding their ground implies that large investors are not rushing to reprice expectations just yet—but they aren’t leaning into fresh positions either. In simple terms, the market’s appetite for taking on more exposure is being tempered by a wait-and-see approach, tied chiefly to the next development in trade conversations.

Futures on the S&P 500 sliding by 0.3% marks a modest shift, but it carries weight when viewed in context. The decline follows an extended rally—nine straight sessions in the green—which suggests that some positioning was perhaps overly optimistic or at least dialing into an ideal scenario that hasn’t yet arrived. That stretch of gains has been interrupted not by bad news, but by a vacuum. It’s an important distinction.

Powell’s comments at the last press conference hinted at a conducting approach that remains largely patient, more reactive than predictive at this point. Thus, traders aren’t receiving firm directional cues from monetary policy either. That likely explains part of the calm, both in terms of volatility metrics and market breadth. And so, there’s little to suggest a strong conviction in either direction right now.

Market Uncertainty

From our perspective, what we’re seeing is a market temporarily trapped—slightly uneasy yet not quite alarmed. When you strip it down, there is enough geopolitical uncertainty to prevent risk exposure from climbing meaningfully higher. However, that same hesitancy is paired with the underlying resilience of recent economic data in some sectors, which continues to act as a counterbalance.

Volatility products remain subdued, but this could change quickly if trade headlines break decisively in either direction. Market makers and short-term futures participants would benefit from preparing tactical plays around headline-driven swings, especially since volumes tend to thin out during indecisive phases like this. Options order flow, if watched closely, may provide a cleaner signal than fundamentals for the next week or two.

Much of the action now hangs on timing—when negotiators will break the silence, and if there’s any real movement behind the posturing. Until then, the focus may lean slightly on incoming economic markers and forward-looking indicators tied to manufacturing and services sentiment.

We’ve seen this type of pause before. It’s not a new pattern, but a familiar lull that usually precedes either a resumption of trend or a sharp reversal. One can’t yet say which, but what’s clear is that the market isn’t going anywhere quickly until something outside the current loop breaks through. The time to observe and plan more tightly may be now.

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