In the week ahead:  Eurozone and US Flash Manufacturing & Services PMIs, Home Depot Earnings

The EUR/USD currency pair ended the session below 1.11500 duron Friday ending the session 0.38% lower as the US Dollar regained strength after recovering from initial losses. The Greenback’s resurgence followed the release of the US consumer sentiment and inflation expectations data for May, which supported the view that the Federal Reserve may hold interest rates steady.

One of the key developments was a rise in the flash one-year Consumer Inflation Expectations, which surged to 7.3% from 6.5% in the previous report. This uptick raises concerns for the Fed, as it may delay any potential rate cuts. Federal Reserve officials have repeatedly expressed their preference to keep rates elevated, arguing that the current level of tariffs remains high enough to maintain inflationary pressures.

In contrast to inflation expectations, the Consumer Sentiment Index  fell unexpectedly to 50.8 in May, down from 52.2 in April. This marks the lowest reading since June 2022, and the fifth consecutive decline in sentiment data. Economists had anticipated an increase to 53.4.

ECB officials are voicing support for a dovish stance, with some predicting further rate reductions. ECB Governing Council member Martins Kazaks, during European trading hours, signaled that a couple of rate cuts could be on the table this year. However, Kazaks emphasized that any decision would be made on a “meeting by meeting” basis, cautioning against hasty action due to the uncertain global trade environment.

Gold prices tumbled more than 1% on Friday and closed the week with losses exceeding 4%, as a shift in market sentiment encouraged investors to move away from the safe-haven metal in favor of riskier assets.

The week started off with gold under pressure, following news of a de-escalation in the US-China trade dispute and an agreement to cut tariffs by 115%. This announcement sent gold prices sharply lower.

US economic data throughout the week provided mixed signals. The University of Michigan's May Consumer Sentiment Index showed that American households have grown more pessimistic, with inflation expectations rising sharply. Meanwhile, housing data remained mixed, and import prices increased.

Despite the negative sentiment, gold recovered some losses after market participants began pricing in the possibility of more than 55 basis points of easing from the Federal Reserve (Fed).

Looking ahead, this week’s US economic calendar will feature a series of key events, including speeches from multiple Fed officials, flash PMI data, and housing reports. These releases are likely to influence market sentiment and could provide further clues on the Fed’s future policy direction.

Oil prices posted moderate gains on Friday after sharp losses in the previous session, and ended the week on the upside, buoyed by optimism earlier in the week following a temporary easing in US-China trade tensions. The world’s two largest economies agreed to a 90-day suspension of tariff hikes, improving sentiment across energy markets.

Crude prices declined more than 2% on Thursday after US President Donald Trump signaled that the United States is close to finalizing a nuclear agreement with Iran. He noted that Tehran had “sort of” accepted the proposed terms.

If finalized, the lifting of sanctions could unlock a significant amount of Iranian oil supply, potentially disrupting the current global supply-demand balance.

Adding to supply-side concerns, the International Energy Agency (IEA) projected on Thursday that global oil supply will grow more rapidly than previously anticipated.

Market sentiment received a boost early last week when the US and China agreed to a temporary pause in their ongoing trade war, which includes a sharp reduction in tariffs over the next 90 days. As the two largest oil-consuming nations globally, the easing of tensions has helped reduce fears of a demand shock and revived confidence in global growth prospects.

U.S. equity markets advanced on Friday, capping off a strong week as easing U.S.-China trade tensions continued to buoy investor sentiment, despite disappointing consumer sentiment data.

The US 500, US 30, and US Tech 100 all posted solid gains, with momentum carrying over from Monday’s rally following the announcement of a 90-day truce in the U.S.-China trade dispute. That initial boost was further reinforced by news of a limited bilateral trade agreement between the U.S. and the U.K.

While markets rallied, data from the University of Michigan showed consumer confidence weakened in May, with the Consumer Sentiment Index falling to 50.8, the lowest level since July 2022.

In corporate news, Applied Materials fell 5.24% after missing Q2 revenue estimates. Verizon gained 1.17% following the FCC’s approval of its $20 billion acquisition of Frontier Communications. As part of the deal, Verizon agreed to discontinue its diversity, equity, and inclusion (DEI) programs.