The recent bear steepening suggests a decreased likelihood of a US recession soon. This change can impact how businesses hire, how consumers spend, and influence the broader economy.

The S&P 500 is back in positive territory for 2025, which implies reduced chances of a market-driven slowdown in economic activity. This shift indicates the ongoing relevance of the Trump administration’s focus on equity market performance as a measure of success.

The Concept Of Bear Steepening

The concept of a “bear steepening” involves long-term yields increasing faster than short-term yields. This steepening of the yield curve often reflects expectations of stronger economic growth or higher inflation.

What we’ve seen in markets recently is a marked change. A bear steepening, by definition, signals that investors are demanding more yield to hold longer-dated debt. In plain terms, they think growth prospects or inflation risks may be on the rise. That may sound counterintuitive given how cautious sentiment had been earlier in the year. Nevertheless, the upward move in long-dated yields suggests investors are rethinking how durable the expansion is—perhaps also questioning how soon the Federal Reserve could start to change its tone.

With equity indices back in the green for 2025, it’s apparent that broader fears of a dramatic slowdown have started to take a back seat. It’s not just the level of gains that matters here—it’s the timing. Recovering earlier than expected may feed into higher corporate confidence. This kind of movement typically filters through to lending standards, credit spreads, and ultimately how risky assets are priced in the months that follow.

Upcoming Inflation Data And Rate Paths

What matters more now is what the next few weeks bring in terms of inflation data and wage pressures. These will shape upcoming decisions on rate paths. The acceleration in long-end yields might be read as the market pre-empting firmer inflation prints or stronger payroll data. This could lead us to adjust how we deal with rate-sensitive positions.

Powell has not given strong clues about a near-term pivot, and recent wording has leaned slightly more hawkish. That alone helps explain why volatility has ticked up. If we take a step back, this all points to a far more two-sided market. It’s becoming less about binary recession or not, and more about the pace of growth and how persistent price pressures prove to be.

We’ve had to reassess how various instruments might behave in an environment where long-term rates rise but the front end stays more grounded. It changes implied volatilities, reshapes relative value, and forces a closer look at curve trades that had performed well in flatter regimes. There’s more emphasis now on managing risk across tenors, rather than taking outright direction.

As investors start to shed old positioning based on recession themes, bid-offer has widened modestly across some contracts. That’s not unusual when narratives flip quickly. Importantly, it limits short-term liquidity in rates and credit derivatives, which could affect hedging efficiency. It’s worth being selective here—identifying where the old pricing models no longer apply and recalibrating accordingly.

Yellen’s comments earlier last month reinforced the Treasury’s comfort with rising long-end yields so long as they reflect real growth expectations rather than disorderly markets. That provides some degree of policy clarity, which is helpful. Nonetheless, we need to stay alert to any surprise communication shifts, especially from mid-tier Fed speakers.

For now, implied correlations have broken down in some sectors, meaning standard hedges aren’t working in quite the same way. That applies primarily in rate-vol and FX-linked exposures and may require us to take a more bespoke approach.

Some are starting to rebuild steeper curve positions that had been unprofitable for much of the prior year. However, entry timing remains everything. We might want to be tactical rather than thematic here—avoiding structure-heavy trades that over-rely on backward-looking vol assumptions.

The focus in the nearer term is whether this yield curve move becomes self-reinforcing. If investors believe stronger growth is ahead, they’ll demand even more term premium. That feeds back into financing costs, and eventually into corporate and sovereign bond issuance strategies. As such, trade entries should factor in both direction and velocity of yield movement.

The wider takeaway is that fixed income pricing is no longer anchored by recession certainty. It’s now more responsive to marginal data. That might sound straightforward, but for those of us allocating capital across durations and geographies, it demands we reassess which part of the curve still provides asymmetry.

Our approach has had to become both more flexible and faster. Static positioning won’t work when one employment report can reset the forward path. We’ve had to rely more on intra-week options and shorter gamma expressions. That seems prudent now, given how rate expectations are swaying more from data than from FOMC nods.

Seeing the positive year-to-date equity return also reinforces this: investors aren’t just moving out of defensive exposures—they’re doing so with higher risk tolerance in mind. That makes sense. A rising equity market alongside a steepening curve can still be consistent with a more difficult macro backdrop. It merely shows the path getting longer, not easier.

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Japan’s Producer Price Index (PPI) for April met expectations, registering a 4% increase year-on-year. This growth aligns with market forecasts, suggesting stable producer prices in the country.

The EUR/USD pair strengthened to near 1.1200 during Asian trading hours. This movement results from a weakening US Dollar after lower-than-anticipated US April inflation data.

GBP/USD maintained its position above 1.3300 after recent gains. Despite strong performance, potential for further rise is limited due to factors like cooling employment and moderating wage growth in the UK.

Gold Price Trends

The price of gold maintained a downward bias amid trade optimism. However, it remains stable above $3,200 as geopolitical risks continue to influence its market behaviour.

Solana’s price experienced a slight decline, trading at $180. Recent weeks saw a change from bearish to bullish sentiment, driven by broader market confidence.

As the US and China paused their trade conflict, markets experienced revitalisation. This pause fostered a mood shift, encouraging a move back into riskier assets with the belief that previous challenges are waning.

With Japan’s Producer Price Index showing a 4% yearly increase, exactly as predicted, it reflects that input costs for manufacturers are not veering wildly from expectations. This steadiness can tell us a great deal about inflationary pressure in the pipeline—not high enough to scare central banks, yet not soft enough to suggest contraction creeping in. For us, it points to a phase of price stability, where cost assumptions in medium-term contracts can remain broadly unchanged. Any hedging or exposure planning tied to Japanese output pricing would not require urgent adjustment.

Currency Markets Overview

Over in the currency markets, the softening tone in the US Dollar, nudged along by a weaker-than-expected April inflation print, has given room for the euro to press upwards. The pair’s rise to near 1.1200 signifies a broader shift in sentiment—investors are pricing in potential pauses or even cuts on the US side, while the Eurozone shows no urgent signs of doing the same. From where we’re sitting, this is the kind of setup that might invite near-term long interest in euro-linked options, particularly targeting range extension. Carry should also be watched, as rate differentials don’t work in the dollar’s favour here.

Sterling holding above 1.3300 deserves a closer look, although the surface strength masks some internal weakening. Cooling UK employment figures and slower wage expansion don’t immediately threaten a breakdown, but they lower the floor for any aggressive upward runaway. If we’re considering positioning, this area feels less asymmetric than others. Option premiums could remain stubborn, but pricing in lower realised volatility could prove worthwhile in forward structures.

Gold’s price behaviour, while drifting lower, is still sticky above $3,200. It’s a tug-of-war between optimism in global trade and lingering geopolitical dangers, which clearly haven’t gone away. That said, the metal’s resilience is informative; when markets feel just safe enough to back away from havens, gold steadies instead of collapsing. This puts us in a quadrant where directional conviction remains soft, but skew positioning, based on tail risk management, becomes more effective than outright directional bets.

On the digital asset front, Solana slipping to $180 isn’t a dramatic shift in itself—it follows a recent rally that had turned sentiment more constructive. The market seems to be transferring confidence from broader tech sentiment into selected crypto tokens. While there’s no immediate technical breach worth panicking over, tighter stop levels might make sense in the short term, particularly as volume cools slightly. Best to avoid overextending positions until firmer support confirms.

As tensions between Washington and Beijing temporarily ease, we’ve watched a palpable return to higher-beta assets. Equities and growth currencies have responded fastest, feeding into cross-asset optimism. In the short horizon, this lifts implied volatility expectations slightly lower, and we’ve observed credit spreads pulling in modestly too. For us, this is a natural moment for option sellers to adjust delta exposures but remain nimble. Moves like this can flip quickly if policymakers change narrative or external triggers reintroduce caution. Stretching exposures too far based on peace signals alone carries obvious risk.

So for now, it’s about selectively opening exposure where the risk-reward tilts most attractively—markets are not shouting in any direction, but they are offering hints. Spread trades in currency pairs with clear rate divergence, theta-friendly positions in less directional commodities, or cautiously revived longs in select crypto assets feel better than sticking to blunt directional calls.

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Trading isn’t just about charts, indicators, or market timing — it’s about the person behind the screen. The real challenge for many traders isn’t spotting setups. It’s managing themselves.

Fear, greed, impatience, and overconfidence are all natural human responses to market movement. But when you let those emotions drive your decisions, your trades stop being strategic — and start being reactive. Understanding the psychology behind your trades is what separates short-term guesses from long-term growth.

Here’s how to develop emotional discipline and take back control of your trading.

Stick to the Plan, Not the Panic

Every successful trader has a plan — and follows it. That means setting clear entry and exit rules, defining risk, and avoiding impulse trades.

When the market moves quickly, emotions try to hijack the wheel. You might feel the urge to close a trade too early out of fear, or hold on too long out of hope. But the market doesn’t reward emotions — it rewards consistency.

Pro tip:Write down your trade plan before you enter a position. If a move tempts you outside your rules, pause. Re-read your strategy before you act.

Control What You Can — Accept What You Can’t

The market will never be fully predictable. But your reaction to it can be.

The best traders accept that losses are part of the game. What matters more is how you manage them. Chasing losses or doubling down to “win it back” rarely ends well. You can’t control the market — but you can control how much you’re exposed and how you respond when things go wrong.

Pro tip: Use stop-losses not just as a technical tool — but as a psychological boundary. They take the emotion out of the decision by deciding it in advance.

Learn to Recognize the Triggers

Just like athletes or performers, traders have emotional “triggers” that impact performance — and most don’t even notice them.

Do you overtrade after a winning streak? Do you hesitate after a big loss? Awareness is the first step to control. Keep a trading journal, not just of your entries and exits — but how you felt, what your mindset was, and what made you act.

Pro tip: Review your journal weekly. Patterns will appear. Over time, you’ll learn your psychological weak spots — and build discipline around them.

Don’t Let P&L Dictate Your Mood

Watching your open profit and loss (P&L) fluctuate can stir up a rollercoaster of emotions — especially if you stare at it all day.

The CFA Institute notes that emotional decision-making often spikes during periods of uncertainty and volatility — exactly when clear thinking is most crucial.

Remember, trading isn’t about what your trade is doing right now — it’s about the process. Checking your P&L every minute doesn’t help the trade — it often hurts your psychology.

Pro tip: Set alerts at your key trade levels and walk away. Trust your plan to do the work, not your nerves.

Process Over Outcome

The truth is: You can do everything right and still lose a trade. That’s part of the market. But the inverse is also true — you can get lucky on a bad decision.

Mindfulness and self-awareness can give traders a measurable edge, as Dr. Brett Steenbarger often says: “The mind is the most important market we trade.”

Focus on improving your process, not just your results. The goal is to become the kind of trader who wins because of skill, not chance.

Pro tip: After every trade, ask yourself: “Was this a good trade because it worked? Or because I followed my process?”

Mind Over Market

If trading were just about numbers, bots would always win. But trading is about people — and people bring emotions. The more you can separate instinct from impulse, the more control you’ll have over your outcomes.

Master the market by mastering yourself.

Goldman Sachs has adjusted its forecast for the benchmark US S&P 500, setting a three-month target of 5,900, up from a previous 5,700. They believe the current advance will stall in the short term, due to market optimism about economic growth and uncertainty about a potential slowdown.

Their 12-month outlook predicts the S&P 500 will reach 6,500, rising from an earlier forecast of 6,200. Previous reductions in their forecasts were due to heightened recession risks and tariff uncertainties. These concerns have lessened following a US-China agreement, although they note ongoing unevenness in the broader earnings outlook.

Forecast Adjustments

Despite improvements in growth prospects, Goldman Sachs speculates that tariff rates might be higher in 2025 compared to 2024, which could affect profit margins. Other analysts have also revised their expectations, leading to varied responses on social media. The article concludes by considering the validity of updating forecasts with new information, despite contrasting viewpoints shared online.

What’s being said here, in plain terms, is that the team at Goldman has moved its short-term and longer-term expectations for the S&P 500 index upward. They now project a three-month target of 5,900 and a twelve-month mark of 6,500. That’s up from their previous numbers, indicating a shift in confidence about how the economy will behave and what that means for share prices.

The lifted estimates stem from signs that the US economic picture is still firm, especially now that recession worries aren’t topping every investor’s list. A cooling of tensions between the United States and China has helped too. But while trade concerns have faded—for the moment—there’s an important caveat about corporate earnings. There’s no clean recovery across all sectors. Businesses aren’t all delivering the same pace or even direction of results. So optimism isn’t spread evenly, which could dampen the stronger market narrative over time.

Then there’s the issue of tariffs. Policymakers may well apply higher duties next year, not lower. That could squeeze company margins, which in turn can drag on index growth. So while valuation multiples have moved higher, they are not immune to pressure if operating costs rise again. It’s worth bearing in mind that forward expectations hinge not only on cyclical indicators like GDP or retail spending, but also on policy choices that often respond to political rather than economic logic.

Impact of Macroeconomic Factors

There’s also a note to be made about the way forecasts are being handled. The increase in targets is not a reaction to short-term price action or online commentary—it follows new information, particularly a softening in global recession assumptions and firmer economic signals. Some have taken to social feeds with pushback or their own predictions, but that doesn’t change the broader direction of the equity call. It’s a reminder that for many of us observing or participating in these markets, consistency and recent macro shifts matter more than sentiment pulses.

In practical terms, the implication is that gains in broader equities may begin to slow as valuations push near stretched levels—especially if profit growth fails to keep pace. That doesn’t suggest an immediate reversal, but it does mean pricing becomes more sensitive to underwhelming results or hits to margin guidance.

From our view, this reminds us to manage exposure with clearer attention to index composition and forward earnings trends. High beta areas may come under pressure sooner than slower-moving consumer or health-linked plays. While broader growth is still supportive, missing earnings or guidance downgrades could be met with sharper reactions due to current price levels.

This is not just an exercise in watching the indexes move higher or lower. It’s a case of tracking what is behind those movements—how much strength is driven by actual earnings, and how much by adjustments in expectations as broader fears ease. If valuations are riding on goodwill and optimism, then shifts in either could challenge what seem like solid levels.

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Impact of Oil Prices on the CAD

Optimism regarding a US-China trade agreement could prevent further losses for the USD in the short term. Crude Oil price increases support the CAD, as Canada, a major US oil supplier, benefits from high oil prices.

Interest rates set by the Bank of Canada are crucial for the Canadian Dollar’s value. Higher interest rates tend to support the CAD.

Oil prices significantly impact the CAD due to Canada’s heavy oil export reliance. Rising oil prices generally lead to a stronger Canadian Dollar.

Economic data, such as GDP and employment figures, influence the CAD’s value. A robust economy can lead to a stronger CAD by attracting investment and potentially prompting higher interest rates.

The dip to 1.3925 during the early Asian session reflects a clear response to the softer inflation print in the US. April’s Consumer Price Index rising at 2.3% on an annual basis—slightly under the previous month’s 2.4%—signalled reduced pressure for the Federal Reserve to act aggressively on monetary policy. The 0.2% gain in both headline and core CPI on a monthly basis, though steady, wasn’t strong enough to shift expectations substantially towards a rate hike.

The Role of Bank of Canada and Economic Data

We’re likely to see traders continuing to reduce exposure to the greenback in the near term, especially in pairs where the opposing currency finds support through strong fundamentals. That has appeared to be the case here. With Canada also gaining backing through firm crude oil gains, this has created a scenario where pressure on the US Dollar is magnified in this cross.

Policymakers at the Bank of Canada, having maintained relatively firm rhetoric on rates, could now benefit from having conditions that support the currency through mechanisms beyond rate differentials. Energy prices are particularly influential in this regard. As one of the leading exporters of oil to the United States, any movement in crude tends to funnel directly into expectations around Canada’s trade income and broader economic strength.

Especially now, as West Texas Intermediate crude continues to test upward resistance above $80 per barrel, we anticipate further resilience in the CAD should those levels hold. This kind of trend, even within a sideways market, can provide tactical opportunities for positioning if we stay attuned to hourly and daily chart patterns over reaction-based trading.

With regards to scheduled releases, attention pivots to Canadian GDP and labour figures over the coming fortnight. Strong domestic data would support the recent CAD momentum, especially if oil prices remain buoyant. Any disappointment, however, would shift focus back to monetary policy signals, particularly if inflation data elsewhere adds to the view that rate divergence is narrowing.

It becomes less a question of whether interest rates alone will move the needle, and more about the cumulative weight of data pointing in favour of the loonie. We expect short-term interest in derivatives to pick up in volatility-linked strategies as traders recalibrate around both raw materials and inflation signals.

In moments like this, longer-duration contracts may be less appealing unless supported by strong directional conviction. It’s in the near-term expiries, where macro surprise risk is priced, that premiums may show the most change. Watch those one-week and two-week implieds closely for clues on market leanings ahead of any dominant breakout or retracement pattern.

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Iran insists on concrete guarantees before reaching any agreement with the US, as per a statement from the Iranian Foreign Ministry. This stance is communicated before an upcoming meeting in Istanbul with the E3 – Britain, France, and Germany – to prepare for potential US-Iran talks.

The primary goal of these discussions is for Iran to cease its nuclear activities, a key demand from the US. The oil market is closely monitoring the situation, anticipating a potential increase in Iranian oil supply if agreements are reached.

Crude Oil Inventory Report

In related news, a private survey shows a build in headline crude oil inventory contrary to the expected draw. Iranian Deputy Foreign Minister Abbas Araghchi addressed these issues in a conversation with Japanese media outlet NHK on Friday.

What’s been said so far, plainly put, is that Iran isn’t moving forward on any agreement with the US unless it’s backed by something firm, legally or otherwise. We know this comes just ahead of diplomatic sessions in Istanbul with Britain, France, and Germany—the so-called E3—which essentially serve as a planning table to map out what US-Iran negotiations might look like if they happen at all. From Iran’s view, verbal promises aren’t worth the paper they’re not written on; they’re after binding commitments.

The American demand remains what it has been: Iran must halt its nuclear enrichment far beyond commercial energy needs. This, if met, would presumably ease sanctions or at least open conversations around them. For the oil market, this creates a moving target. If diplomacy wins the day, and Iranian barrels return to global supply lines, that’s more oil on the table—potentially millions of barrels per day—putting downward pressure on prices.

Added to this is something more immediate. A private industry survey has shown that overall US crude oil inventories actually went up, whereas most traders were expecting a draw. These sorts of surprises tend to stir intraday pricing more than macro trends do. It’s not uncommon for traders using calendar spreads or options structures to reprice their position assumptions when inventory forecasts miss by this sort of margin. It does leave short-dated volatility screens looking enriched, at least over 1- to 2-week timeframes. Premiums appear to be getting backed into near-term contracts.

Araghchi, when speaking with NHK, wasn’t giving the usual soft diplomatic lines. He made it fairly plain, not only maintaining Iran’s expectations but tying them to broader international efforts. He also appeared to frame the US position as inconsistent over time, likely as a nod to prior deal commitments and their abandonment. It suggests that any resolution, if one is reached at all, won’t emerge overnight. That ambiguity alone can drag on sentiment for those holding structured derivatives tethered to Brent or WTI pricing benchmarks.

Market Reaction and Strategy

Right now, we can say with certainty that implied volatility in the front-month crude contracts has reacted more sharply to inventory changes than diplomacy headlines. That said, if the Istanbul meetings produce even a baseline framework, the politicking might start to overtake the barrels again. Possibility of increased supply, even months out, begins to get priced in through longer-dated future spreads—especially along the 6- to 12-month curve, where open interest has started shifting.

As a group, our own models are beginning to flag dislocations between historical risk premiums and current market structure, notably in the back-end of the curve. Steepening or flattening there can open opportunities for leveraged roll strategies or even arbitrage across regional grades. There’s also a noticeable shift in positioning within the options market, especially around $75 strike calls expiring next quarter. That sort of activity tends to reflect growing sentiment that either supply will weigh on prices or that macro pressures will subdue long-risk.

We’re watching intraday reaction to unexpected inventory builds much more closely now, particularly how they interact with volatility surfaces. It informs us where short-term traders see risk actually playing out, versus positioning just for geopolitical noise. The materials quoted earlier set a tone—it’s hard, it’s conditional, and it’s not moving fast. Those waiting on clarity should plan for delay, not resolution.

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GBP/USD experienced volatile trading as the market reacted to varied economic indicators. The pair rose above 1.3300 due to a weaker US dollar, with a muted response to US inflation data and focus on US trade deal developments.

UK labour statistics revealed a rise in unemployment to 4.5% and minor increase in claimant counts, contributing to market steadiness. April’s US Consumer Price Index showed a small decline, reaching a three-year low, raising questions about trade policies.

Uk Gdp Growth Figures

Upcoming UK GDP growth figures expect a 0.6% quarterly increase, alongside a year-over-year decline to 1.2%. The GBP/USD pair anticipates congestion amid fluctuating trading patterns and uncertain market sentiment prior to major economic data releases.

The Pound Sterling, the UK’s currency, ranks as the fourth most traded in the world, influenced by Bank of England decisions on monetary policy to maintain around a 2% inflation. Economic indicators like GDP and employment significantly affect its value, with a robust economy boosting the currency and a poor outlook causing depreciation.

A positive Trade Balance, reflecting more exports than imports, generally strengthens the GBP. Comprehensive research and an understanding of the associated risks are essential when trading currencies.

With the Pound briefly pushing beyond the 1.3300 level, much of the move can be attributed more to limited dollar strength than direct optimism around the UK economy. The US inflation data released recently failed to trigger any meaningful movement, partly because the figures aligned with expectations but also due to wider concerns surrounding ongoing trade policies. This filtered through to lower market engagement and a drift into technical ranges for the GBP/USD pair.

Uk Employment Data

By contrast, UK employment data painted a more mixed picture. There was a noticeable increase in the unemployment rate, nudging to 4.5%, paired with a modest rise in claimant counts. Despite these figures, the reaction across GBP pairs remained relatively subdued. This steadiness may have stemmed from market participants positioning tactfully before the next set of UK growth data.

We now have expectations forming around a 0.6% quarter-on-quarter rise in GDP, though annual growth is forecast to slow to 1.2%. These figures will likely be the next major catalyst for direction in sterling-related positioning. Within that, weaker consumer spending or underperformance in equities linked to vulnerable sectors could reinforce bearish sentiment among swing and options traders.

Many participants remain cautious, as the recent low CPI print from the US—coming in at a three-year nadir—raised speculation over whether central banks might pivot earlier than expected, particularly in an environment where growth concerns are intensifying. Whether this ultimately weakens the dollar further over the medium term remains open, but for now, GBP/USD looks prone to whipsawing as traders assess incoming data.

Given that the Pound tends to react quicker to changes in expectations around Bank of England policy than to one-off reports, consistent employment weakness or a lower-than-forecast GDP read would mount pressure on forward interest rate projections. That in turn could lead sterling lower unless counterbalanced by fresh signs of dollar fatigue.

Another area factoring into recent positioning has been shifts in trade balances. In the UK’s case, an improvement here is often viewed favourably by currency models. However, a stronger GBP can offset some of those benefits, especially for export-heavy sectors. The overall trade setup has become more nuanced, particularly as global supply chains recalibrate and bilateral trade flows face renewed scrutiny.

While algorithm-based strategies continue to drive short-term fluctuations, discretion remains key. Price is increasingly sensitive to even marginal shifts in economic sentiment, and we have seen this play out via rapid re-adjustments within intraday trading sessions. In such environments, deploying gamma strategies or maintaining delta-neutral positions with tighter stops may help hedge against abrupt moves.

Looking ahead, data-dependent moves will persist—especially as quarterly earnings and central bank minutes start to trickle in. Directional trades are becoming harder to hold for longer durations, and as such, skewed straddle strategies or short-dated calendar spreads may be preferable for exposure. Risk remains two-sided, and there’s little to suggest clean momentum will take hold before a clearer earnings versus macro framework emerges.

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The Dow Jones Industrial Average dipped by around 270 points, stalling near 42,130 after a strong Monday rally of over a thousand points. This pullback followed a notable rise in tech stocks which drove other equity indexes higher, leaving the Dow behind.

April’s US Consumer Price Index (CPI) saw inflation easing, with a monthly increase of 0.2% against a 0.3% expectation. Annualised CPI rose 2.3% year-on-year, below the anticipated 2.4%, marking the slowest growth in three years. Tariff effects may reverse progress from May onward, despite decreases in gasoline, apparel, used cars, and airplane ticket prices.

rising prices and wage growth

Eggs, coffee, ground beef, and other goods saw around 10% YoY price hikes, with wages rising by roughly 4%. Upcoming data includes Thursday’s US Producer Price Index and US Retail Sales figures, and the University of Michigan Consumer Sentiment Index on Friday.

The Dow Jones halted at approximately 42,300 after reclaiming over 15.5% from early April’s fall. A fresh move beyond the 200-day Exponential Moving Average near 41,500 encouraged upward momentum, hinting at potential record highs above 45,000.

Building on the softer-than-expected CPI print, relief in headline inflation sparked optimism early in the week, particularly among the rate-sensitive technology names which had already priced in a path of more stable borrowing costs. While other indices gained ground on this tailwind, the Dow’s more cyclical makeup made it more reactive to upcoming data points, which are likely to have a stronger sway on expectations surrounding consumer and wholesale price stability.

The current CPI reading—both monthly and year-on-year—matches with a gentle but sustained deceleration in price pressures. While downward moves in volatile categories such as fuel and airline fares have helped, the stickier components—particularly food items like eggs and beef—remain elevated. The yearly gain in wages, sitting at 4%, continues to outpace general inflation. This sort of disconnect keeps consumption strong while also complicating the disinflationary trend. What’s important here is not only the gap but the possible knock-on effect into services inflation, an element less affected by energy or goods cycles.

expectations from upcoming data

The PPI report expected on Thursday, followed closely by retail sales figures, will carry heavier weight this time. The former will either support or undermine the idea that input costs for businesses are falling, while the latter gives us a better sense of how resilient household demand remains after multiple rounds of tightening. Friday’s consumer sentiment reading might appear disjointed in this context, but it’s where inflation expectations embedded in public perception often give us more clarity than raw data. If average households begin to believe price pressures are going to rise again—especially alongside geopolitical or policy shifts—it becomes a self-feeding loop.

Markets, and by extension, we, tend to jump quickly to pricing in future rate decisions based on incremental releases. What gets missed in that urgency is the potential for lag effects, particularly where tariffs and external shocks delay or disrupt disinflation. When Liu announced fresh duties last week, few factored in the timing mismatch—tariffs may only visibly impact prices from May onward. That delay clouds any short-term inference from April data. We would do better to step back and question how sticky these effects will become as inventories adjust and trade patterns shift.

From a technical perspective, the Dow’s bounce through the 200-day exponential moving average gave a medium-term bullish signal. Yet stalling just below the recovery high creates a slightly ambiguous zone—we see potential for a drift higher toward 45,000, but only if hard data in the coming sessions doesn’t undo the supportive CPI reaction. We’ve noticed this before: whenever broader indices attempt to rally independently of earnings or macro confirmation, volatility tends to re-emerge with disappointing reports. For anyone trading near-term positions, especially in contracts expiring over the next two weeks, it’s worth reconsidering exposure heading into Thursday.

Positioning in options markets has flattened somewhat compared to early April, marking a small retreat in hedging activity. If PPI comes in hotter than expected, there’s room for premiums on puts to rise quickly, particularly in shorter-dated contracts. Given the uncertainty over new tariffs, directional bets below the 41,500 level may offer asymmetric reward if sentiment sours. Similarly, if retail sales continue to beat expectations, skew could flip abruptly back toward the upside. We’ve noticed that defensive names within the index are not drawing the same safe-haven flows as during late March, which hints at pockets of overconfidence in pricing directionality.

As it stands, each data point this week carries more than its surface meaning. Not for what it tells us about the past month, but whether it confirms or contests the idea that inflation is genuinely cooling beneath the surface—even as headline figures suggest as much. One weaker number may not build a trend, but it does open brief windows of opportunity. As we’ve seen with the earlier rally, when these gaps appear—before they’ve baked fully into consensus forecasts—volatility can increase rapidly in both directions. It’s a matter of being nimble, not bold.

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A private survey by the American Petroleum Institute (API) indicated a crude oil inventory increase, contrary to expectations of a 1.1 million barrel decline. The API survey, focused on oil storage facilities and companies, also expected distillates to increase by 0.1 million barrels and gasoline to decrease by 0.6 million barrels.

The official data from the US Energy Information Administration (EIA) is awaited for a complete picture. The EIA report, based on data from the Department of Energy, is considered more precise and offers additional insights into refinery operations and storage levels for various crude oil grades.

Api Inventory Update

This update from the American Petroleum Institute (API) reflects a rise in crude inventories, a move that goes against what the market had broadly forecast. Instead of drawing down around 1.1 million barrels, the API reported an unexpected build, which hints at softer-than-anticipated refinery demand or perhaps a slower pace in export activity during the surveyed period. We note that gasoline stocks were drawn down modestly, while distillates showed only a minor rise. That points to seasonal consumption shifts and possible changes in transportation fuel use—especially relevant as travel demand patterns tend to fluctuate around this time.

Given the timing of these numbers, many are now looking to the upcoming figures from the US Energy Information Administration (EIA). Unlike the API, the EIA collects its data directly from operators, providing a more comprehensive look not only at commercial storage levels, but also at refinery throughput, inputs by crude quality, and regional breakdowns. That level of granularity often influences pricing direction more sharply.

From a positioning standpoint, the misalignment between the API estimate and market expectations offers us a short-term signal. Inventory builds in this context often suggest weaker consumption or stronger domestic production. Either would weigh on prompt-month contracts and nudge the forward curve flatter. If the EIA confirms the build, the front end of the curve could soften further. In contrast, a drawdown from the EIA would likely trigger covering and rebalancing, particularly in the prompt futures.

Market Implications

Across calendar spreads, there’s a chance some short-term weakness will emerge if storage remains readily available and refineries are slower to pull. This is something we will be tracking closely. It’s also worth noting that refinery maintenance, though winding down in some regions, may still play a role in varying demand for feedstocks. That could skew the EIA numbers in ways a simple build headline doesn’t fully explain.

We therefore remain sensitive to how traders adjust in response to clarity from federal figures. Open interest trends appear stable but may shift quickly based on this week’s confirmation. Structurally, funds with a model-driven approach might need to reassess long bias if broader inventory dynamics continue in this direction.

In the short term, we continue to watch diesel margins, shipping activity along the Gulf Coast, and refinery throughput rates. Small surprises in each could move volatility higher. Energy options markets have been quiet, though risk is starting to reprice slightly at the front end. Traders holding structures close to expiry may need to consider rolling or hedging more actively depending on which way the official data goes.

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The US Dollar weakened as the Dollar Index fell to 101.50 after April’s CPI data failed to meet expectations. The Australian Dollar saw a 1.5% rise against the US Dollar, buoyed by easing US-China trade tensions and a favourable market outlook. The Federal Reserve is expected to maintain its rate policy until mid-2025, with possible rate cuts in September 2025.

The weaker inflation data in the US, with a 2.3% year-on-year rise against a forecast of 2.4%, added downward pressure on the US Dollar. Meanwhile, trade negotiations between the US and China led to a 90-day tariff suspension, lowering tariffs to 30% on US goods and 10% on Chinese imports. Market sentiment improved, supporting currencies like the Australian Dollar.

Technical Indicators And Influences

Technical indicators for the AUD/USD pair show a bullish trend, trading near 0.6500, with key resistance seen at this level. The Relative Strength Index signifies neutral momentum while the MACD indicates a potential sell signal. The Australian Dollar’s trajectory is influenced by factors such as RBA’s interest rates and Australia’s trade balance, especially with China being its largest trading partner.

The recent downward movement in the Dollar Index to 101.50, prompted by softer-than-expected inflation figures from the US, reveals shifting expectations around Federal Reserve policy. A 2.3% year-on-year increase in consumer prices—slightly below the projected 2.4%—has invited fresh speculation that US rates will hold steady for longer than previously anticipated, possibly pushing the timeline for any cuts well into the second half of next year. That delay adds weight to the notion that current US monetary settings might already be restrictive enough to rein in price growth.

For us observing derivative exposures, particularly in macro rates and FX options, this development creates short-term directionality where tail hedges on USD strength may lose value if inflation continues to undershoot. Those positioned towards USD downside, whether spot or via options skew, will likely maintain momentum—especially under current flows.

Market Impacts And Positioning

More notable, however, is the market lift handed to the Australian Dollar, which has surged around 1.5% against the greenback. That strength found support both from the broader risk-on sentiment spurred by trade progress between Washington and Beijing, and the narrowing gap between US and Australian monetary policy. A temporary tariff rollback—30% on US goods, 10% on Chinese imports—has introduced a slightly more cooperative tone, nudging equities and risk-sensitive currencies higher.

Market participants focusing on the AUD/USD pair have found support near the 0.6500 level. While this resistance presents a technical hurdle, any firm breach may target higher retracements, especially if macro tailwinds remain. Current indicators point in different directions: the MACD tilts towards a slower momentum shift with a sell hint, while the RSI remains balanced. The price isn’t overbought nor deeply oversold, suggesting the current levels are still being digested.

What matters now is how we interpret this crossing point between technical signals and macro influences. Reserve Bank of Australia policy expectations are unlikely to change quickly, but monthly adjustments in trade data—especially Chinese demand for Australian commodities—could register swiftly into FX. For those engaged in yield-based carry strategies or volatility selling, ongoing calm in trade headlines could reduce implied vol levels across the board.

With that in mind, short-term positioning in volatility markets may lean towards tempered risk appetite. However, directional plays—particularly those targeting AUD continuation—could harshly unwind if global data deviates from current projections or if import-export acceleration from China falters.

Given how the pricing of front-end US interest rate cuts has become stickier post-CPI, we may expect yield compression across AUD/USD derivatives to incrementally favour the Australian side, assuming macro conditions don’t deteriorate. The market’s openness to rate relief further down the curve still preserves convexity pricing in long-dated options, and those watching skew movements haven’t yet signalled a reversal.

We should remain attentive to any abrupt pivots in tone from the Federal Reserve or signs of recovery in US data that could reintroduce a hawkish bias. Such shifts often trigger sharp re-pricings in the front-end, particularly in futures spreads, which would ripple into spot sensitivities.

For now, capital flows appear to chase opportunities in a broader Asia-Pacific context, and with risk sentiment slightly more stable, positioning bias may continue to favour higher beta FX—just not without near-term resistance.

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