US-Iran Ceasefire Optimism and Soft PCE Data Trigger Broad Risk-On Rally, Pressuring Oil and the Dollar

Market Wrap-up: Macro & Geopolitical Drivers

Friday's session opens with strong risk-on sentiment driven by reports of a potential 60 day US-Iran ceasefire. Under the negotiated terms, Iran would clear mines from the Strait of Hormuz within 30 days, followed by resumed nuclear discussions.

Although President Donald Trump has yet to formally approve the terms and Vice President J.D. Vance flagged uncertainties regarding finalization, markets are aggressively front running the de-escalation narrative.

WTI crude plunged to $87/bbl, marking its lowest level since early May. Oil prices have now shed over 10% since mid May, when Trump paused a large scale airstrike plan to allow for negotiations.

Compounding the geopolitical relief, the Fed's preferred inflation gauge aligned closely with expectations. April headline PCE printed at 0.4% MoM, below the 0.5% consensus, while the annual rate stood at 3.8%. The softer monthly reading sparked hopes of cooling price pressures, despite annual inflation remaining above the Fed's 2% target.

Consequently, markets are repricing a dovish pivot, heavily favoring a rate pause over the hawkish hike expectations seen earlier in the week. This macro cocktail dragged the DXY down to a two week low of 98.97, fueling broad-based rallies across the Euro, Pound, Aussie, Kiwi, and Yen.

Gold also capitalized on the shifting tides. After an early session dip to a late March low of $4,366, the combination of positive sentiment and a softer dollar drove a sharp recovery toward the $4,500/oz handle.

Looking ahead for today, the docket is light on top-tier data. Focus will shift to the Goods Trade Balance, Chicago PMI, and a slew of FOMC speakers for intraday flow.

Gold: Fed Dovish Repricing

Key takeaway:

Gold rebounded toward $4,500 following reports of a preliminary US-Iran ceasefire and in-line April US PCE data. The softer inflation print provided critical fundamental support, triggering a dovish repricing that favors a Fed hold over further tightening. However, downside risks persist. Even if geopolitical tensions ease entirely, structurally high energy prices could continue to challenge the broader macro landscape.

Technical Outlook:

Daily Bias: Bullish.Support: 4,417  Resistance: 4,580

WTI: Geopolitical Risk Premium Fades

Key takeaway:

WTI crude faced heavy selling pressure amid reports of a temporary 60-day ceasefire extension between the US and Iran, aggressively pricing out transit risks in the Strait of Hormuz. While President Trump has not yet signed off and VP Vance warned that a final agreement remains uncertain, traders are already liquidating geopolitical risk premiums. A bearish US crude inventory draw of 3.3 million barrels, which fell short of analyst estimates, exacerbated the downside momentum.

Technical Outlook:

Daily Bias: Bearish.Support: 81.87  Resistance: 92.00

DXY: PCE Data Sinks Greenback

Key takeaway:

The Dollar Index retreated sharply as softer PCE data fueled a dovish recalibration of Fed policy. According to the CME FedWatch Tool, traders have downgraded the probability of a 25 bps hike by year-end to 36.6%, down from 41%. Furthermore, the broader risk-on tone spurred by US-Iran ceasefire reports drained safe-haven demand from the greenback, even without formal Presidential approval.

Technical Outlook:

Daily Bias: Bearish.Support: 98.80Resistance: 99.40

EUR/USD: Euro Rallies on ECB Rate Hike Bets

Key takeaway:

The euro rallied on the back of broad based USD weakness, driven by in line US PCE data and advancing US-Iran ceasefire negotiations. The pair is further underpinned by aggressive hawkish pricing for the European Central Bank (ECB). Interest rate trackers indicate a 91% probability of a 25 bps deposit rate hike to 2.25% at the June 11 meeting, a view heavily supported by recent hawkish rhetoric from ECB officials.

Technical Outlook:

Daily Bias: Bullish.Support: 1.16029  Resistance: 1.16619

USD/JPY: Yen Gains on Soft Dollar & Tokyo CPI

Key takeaway:

The Japanese Yen strengthened against a broadly weaker dollar, further supported by Tokyo CPI data printing in line with forecasts. May Tokyo headline CPI registered at 1.6% YoY, while core CPI excluding fresh food held steady at a four-year low of 1.5% YoY, matching April's reading. The core-core metric excluding fresh food and energy remained stable at 1.9% YoY, keeping Bank of Japan normalization expectations anchored.

Technical Outlook:

Daily Bias: Bearish.Support: 158.83  Resistance: 159.45

Broadly speaking, cross-asset dynamics are entirely dictated by the confluence of two macro drivers: the de-escalation of geopolitical tensions and peaking US inflation. Capital flows clearly reflect a structural rotation as investors aggressively reprice risk premiums.

WTI crude is facing heavy sell-offs as supply disruption fears in the Strait of Hormuz evaporate. Meanwhile, the USD is under broad based pressure as markets dial back Fed tightening expectations following the softer PCE print.

Conversely, capital is rotating heavily into risk assets and precious metals, driving a strong recovery in the EUR, JPY, and Gold on the back of retreating bond yields and a weaker greenback. Currently, risk-on sentiment dictates price action, anchored by the dual narrative of cooling inflation and dissipating war risks.

Looking ahead, market focus will pivot to upcoming FOMC speakers for policy validation, alongside concrete updates from the US-Iran negotiations to confirm whether the ceasefire agreement will be officially ratified.

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