Trump’s Trade Deal Tease Boosts Risk Sentiment

Forex markets opened with renewed optimism as U.S. President Donald Trump hinted at a “major” trade agreement to be announced Thursday, lifting appetite for risk and pushing the British pound higher. The deal is widely expected to be with the United Kingdom, a move that could mark a symbolic shift in U.S. trade policy and impact several G10 and emerging market currencies.

Futures on U.S. and European equities climbed roughly 0.8%, setting the tone for broader risk-on sentiment in early trading. Asian equity indices also erased earlier losses, with regional bourses advancing around 0.3%. In response, high-beta currencies such as the pound and commodity-linked FX gained, while safe-havens like the Japanese yen and U.S. Treasuries saw moderate outflows. Gold firmed slightly on inflationary concerns tied to broader trade uncertainty.

Technical analysis

The US500 (S&P 500 Index) is exhibiting a short-term bullish structure on the 4-hour chart, with price currently testing the key 5,670 resistance level—aligned with the 100% Fibonacci extension of the latest swing move. The index has been forming higher highs and higher lows since late April, bouncing off the WMA (5,549.89) which now slopes upward, supporting the bullish case. Momentum indicators reinforce this setup: the RSI is at 59, showing moderate bullish strength without overbought signals, while the MACD has just printed a bullish crossover with rising histogram bars, suggesting growing upward momentum. If price breaks and closes above 5,670, it may trigger further gains toward the next Fibonacci targets at 5,695 and 5,727.

However, the 5,670 level also acts as a strong technical barrier, as it coincides with the upper Bollinger Band, increasing the likelihood of short-term resistance or consolidation. Should the index fail to hold above this level, a pullback toward 5,635 or even the lower Bollinger Band near 5,592 is possible. The broader bias remains bullish as long as the price holds above the WMA, but traders should watch for any rejection at resistance or weakening momentum as a signal for a temporary correction. Overall, price action remains constructive, and a breakout confirmation would likely attract further buyers into the market.

Caution Remains Amid Broader Trade Uncertainty

Despite the upbeat tone, macro traders remain cautious as attention turns to upcoming U.S.-China trade talks in Switzerland. Earlier in the month, Trump had imposed tariffs exceeding 100% on some Chinese imports, triggering tit-for-tat moves from Beijing. Markets are watching for any de-escalation that might reduce volatility in yuan crosses and related EMFX pairs.

Fed Holds Steady, But Flags Trade Risks

The Federal Reserve kept rates unchanged on Wednesday, signaling a wait-and-see approach as trade policies remain a key variable in their inflation-growth balance. Fed Chair Jerome Powell acknowledged the dual risk of higher inflation and a softening labor market, both of which are difficult to model given the current tariff landscape.

Former New York Fed President William Dudley added: “The Fed doesn’t know where tariffs will land or how they’ll affect inflation versus growth. It’s a risk management game now.”

In FX terms, this cautious Fed stance limits upside potential for the U.S. dollar in the near term, particularly against currencies supported by improving trade dynamics like GBP, CAD, and AUD.

Crypto and Cross-Market Reaction

In a sign of broader risk appetite, Bitcoin surged 2.7% to a three-month high of $99,355. Gold prices also edged higher, reflecting a hedge against trade policy volatility and long-term inflation. U.S. Treasuries declined slightly as traders reduced safe-haven exposure.

Takeaway for FX Traders

• GBP/USD and GBP/JPY could see further upside if the U.S.-UK deal is confirmed and perceived as economically meaningful.
• Watch USD/CNH and AUD/USD around the U.S.-China talks this weekend—volatility likely if no progress is made.
• USD faces a mixed path as the Fed remains data- and trade-dependent; dovish risks remain if tariffs raise stagflation concerns.
• Stay tuned for Thursday’s announcement and Friday’s reaction in Asian session opens—headline risk remains elevated.

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