ADP Non-Farm Employment Change, BOC Rate Statement, ISM Services PMI

The euro fell sharply against the U.S. dollar on Tuesday, with the EUR/USD pair retreating 0.60%, after reaching a six-week high earlier in the session. The reversal came as stronger-than-expected U.S. labor market data bolstered the greenback, halted its recent slide.

The U.S. Dollar rebounded on the back of the April Job Openings and Labor Turnover Survey (JOLTS), which pointed to continued strength in the labor market. This data eased concerns about a broader economic slowdown and underpinned renewed demand for the dollar.

However, the bounce in the greenback was tempered by disappointing U.S. factory orders, which fell sharply in April. The decline highlights mounting pressure on the manufacturing sector, partially driven by elevated tariffs.

On the trade front, geopolitical uncertainty remains a key theme. According to Reuters, President Donald Trump is expected to speak with Chinese President Xi Jinping this week, a development that could influence market sentiment. In parallel, the White House announced plans to double tariffs on steel and aluminum, effective today, intensifying global trade tensions and contributing to market volatility.

Meanwhile, eurozone inflation data disappointed, with May’s Harmonized Index of Consumer Prices (HICP) falling below the European Central Bank’s (ECB) target.

Investors will be closely watching Thursday’s ECB monetary policy announcement and the subsequent press conference by President Christine Lagarde for further guidance.

Looking ahead, U.S. labor market data remains in focus. Wednesday will bring the ADP National Employment Report for May, followed by Thursday’s weekly initial jobless claims and Friday’s key Nonfarm Payrolls report.

Gold prices retreated on Tuesday, giving back a portion of Monday’s gains as stronger-than-expected U.S. labor market data boosted the dollar and weighed on demand for the non-yielding metal.

The latest Job Openings and Labor Turnover Survey (JOLTS) for April surprised to the upside, showing job vacancies rose to 7.39 million—well above the expected 7.10 million and higher than March’s revised 7.2 million.

The stronger dollar weighed heavily on gold and rising U.S. Treasury yields further pressured bullion, as the 10-year note rose two basis points to 4.462%, while real yields also ticked up to 2.132%.

Market sentiment was also influenced by geopolitical developments. Reports suggest a potential phone call this week between U.S. President Donald Trump and Chinese President Xi Jinping. The news follows Trump’s accusation that China violated a trade agreement brokered in Switzerland, prompting him to announce a steep hike in steel and aluminum tariffs—from 25% to 50%—effective June 4.

While heightened geopolitical risks and inflation concerns tied to tariffs could support gold in the medium term, a stronger U.S. dollar and rising yields are likely to cap further gains in the short run. Market participants will closely monitor incoming labor data and central bank commentary for further direction.

Oil prices surged on Tuesday to hit a two-week high, fueled by persistent geopolitical tensions and tightening supply outlooks. However, prices edged lower later in the day, as traders locked in profits after the recent rally and positioned themselves ahead of potentially tighter crude supplies in the coming months.

Russia, the world’s second-largest crude producer in 2024 after the U.S., remains a pivotal member of the OPEC+ alliance. Moscow signaled that peace talks with Ukraine remain “extraordinarily complex,” with no imminent decisions expected, as it awaits a formal response from Kyiv to recent proposals.

Meanwhile, Iran—OPEC’s third-largest producer behind Saudi Arabia and Iraq—is reportedly poised to reject a new U.S. nuclear deal proposal, further dashing hopes of a quick return of Iranian barrels to the global market.

On the macroeconomic front, eurozone inflation unexpectedly fell below the European Central Bank’s (ECB) target in May, driven by softer services prices. The data has strengthened expectations for further monetary easing by the ECB—a move that could support oil demand by stimulating economic activity.

In contrast, U.S. policymakers remain focused on inflation risks stemming from import tariffs. Chicago Fed President Austan Goolsbee warned that inflationary pressures from tariffs could emerge quickly, even if broader economic effects take longer to materialize.

Traders are also eyeing U.S. inventory data due this week. Analysts estimate crude stockpiles declined by approximately 1.0 million barrels last week, marking a second consecutive weekly draw. This compares to a build of 1.2 million barrels during the same period last year and an average draw of 2.3 million barrels over the past five years.

U.S. equities closed higher on Tuesday, led by a surge in semiconductor stocks fueled by ongoing enthusiasm for artificial intelligence. The US 500 rose 0.82% while US Tech 100 surged almost 1% supported by optimism over upcoming AI-related earnings and investor anticipation of progress in U.S. trade negotiations. However, the market remains watchful as the White House’s Wednesday deadline for trade offers approaches.

Semiconductor stocks led the charge, with NVIDIA Corp.  climbing over 2% as investors continued to price in strong earnings momentum. Shares of the AI chipmaker have gained 25% in the past month and are nearing record highs.

Looking ahead, attention turns to Broadcom Inc., which is set to report quarterly results on Wednesday. Analysts remain upbeat. J.P. Morgan reiterated its confidence in Broadcom’s AI pipeline, citing robust demand for its custom ASICs and networking solutions, along with stabilizing trends in non-AI segments like broadband and wireless.

Economic data released Tuesday further bolstered market sentiment. The April Job Openings and Labor Turnover Survey (JOLTS) showed 7.39 million job openings, surpassing expectations of 7.11 million and signaling continued strength in the labor market ahead of Friday’s key nonfarm payrolls report.

Despite tariff-induced uncertainty, the broader U.S. economy continues to show signs of resilience.