Weekly Preview: Core PCE, GDP, and Tech Earnings Take Center Stage

The euro maintained its early gains against the US dollar on Monday, with the EUR/USD pair trading near 1.1640 during the European session as optimism surrounding a potential US-Iran agreement boosted appetite for risk-sensitive assets.

Market sentiment improved after indications that Washington and Tehran are close to finalizing a deal, reducing demand for traditional safe-haven assets such as the US dollar.

Investor confidence strengthened after US President Donald Trump stated over the weekend on Truth Social that an agreement with Iran had been “largely negotiated.” According to Trump, the proposed deal would include the reopening of the Strait of Hormuz among other provisions, with final details still under discussion. However, in a later post, Trump added that there was “no rush for the deal,” noting that time remained on Washington’s side.

Hopes for a US-Iran agreement also triggered a sharp decline in oil prices, which in turn softened expectations for additional Federal Reserve interest rate hikes this year. Market participants have slightly reduced their hawkish outlook on US monetary policy, with traders reassessing the likelihood of further tightening by the Fed.

At the same time, expectations for tighter monetary policy in the Eurozone have increased after several European Central Bank officials warned of mounting inflationary pressures. ECB policymaker and Belgian central bank chief Pierre Wunsch recently said the ECB would eventually need to act, warning that the region may be “at the beginning of an inflation problem.”

Gold prices gave up part of their early gains early on Monday but continued to trade firmly above the $4,550 mark as a weaker US dollar and ongoing geopolitical uncertainty supported demand for the precious metal.

The metal initially climbed toward the $4,580 region during Asian trading after renewed optimism over a possible US-Iran peace agreement weighed on the dollar. However, gains remained limited as investors balanced improving geopolitical sentiment against expectations that the US Federal Reserve could maintain a hawkish monetary policy stance.

Reports over the weekend suggested that Washington and Tehran are nearing an agreement that could include a 60-day ceasefire extension and the reopening of the Strait of Hormuz.

Lower oil prices helped ease inflation concerns, triggering a decline in US Treasury yields and placing additional pressure on the US dollar. The weaker greenback provided support for gold, which is priced in dollars and typically benefits when the currency loses value.

Despite the optimism, investors remain cautious as major disagreements between the US and Iran persist, particularly over Tehran’s nuclear program.

At the same time, expectations that the Federal Reserve could raise interest rates again in 2026 continue to support the dollar and limit stronger gains in non-yielding assets such as gold.

Oil prices plunged to two-week lows early on Monday, with both Brent crude and US West Texas Intermediate (WTI) falling as growing optimism over a possible US-Iran peace agreement eased concerns about global supply disruptions.

Market sentiment improved after US President Donald Trump said over the weekend that Washington and Tehran had “largely negotiated” the framework of a peace agreement that could lead to the reopening of the Strait of Hormuz.

The prospect of restored energy flows through the strait triggered a broad selloff in crude prices, with investors increasingly betting that supply risks could ease in the coming months. Analysts, however, warned that uncertainty surrounding the negotiations remains high.

Although diplomatic progress appears to be underway, the United States and Iran continue to disagree on several major issues. Trump also stated on Sunday that he had instructed US negotiators not to rush into a final agreement.

Analysts noted that even if a deal is reached, a full return to normal oil flows through the Strait of Hormuz could take months as damaged energy infrastructure would still require repairs.

In the United States, energy producers responded to previously higher domestic prices by increasing drilling activity. Baker Hughes reported that the number of active oil and gas rigs rose by seven to 558 in the week ending May 22, marking the fifth consecutive weekly increase and the highest level since June 2025. Despite the rise, the total rig count remains slightly below levels recorded a year ago.

US stocks closed higher on Friday, with the US 30 reaching a record closing high as investors welcomed signs of diplomatic progress in the Middle East and another strong round of corporate earnings.

The upbeat sentiment helped extend Wall Street’s rally, with the US 500 posting its eighth consecutive weekly gain — its longest winning streak since late 2023.

Investor optimism was supported by developments surrounding negotiations between the United States and Iran. US Secretary of State Marco Rubio said Washington had made progress toward a potential agreement with Tehran, although significant work remained. Iranian officials, however, indicated that major differences between the two sides were still unresolved.

Market participants also continued to respond positively to corporate earnings, which have broadly exceeded expectations. Technology and semiconductor shares remained a major driver of market gains. The Philadelphia Semiconductor Index moved higher, led by a 12% surge in Qualcomm shares, while Nvidia slipped nearly 2%.

Among the major US 500 sectors, healthcare, utilities, industrials and technology stocks recorded the strongest gains, while communication services and consumer staples lagged behind.

Computer manufacturers also rallied sharply after China’s Lenovo Group reported stronger-than-expected quarterly results. Dell Technologies jumped almost 17% to a record high, while HP Inc gained 15%.

Bond markets also provided support for equities as Treasury yields retreated from recent highs. The yield on the benchmark 10-year US Treasury note fell to 4.558%, easing concerns about borrowing costs and financial conditions.

In another major development, Kevin Warsh was officially sworn in as chair of the Federal Reserve on Friday, taking charge at a time when policymakers are balancing inflation concerns tied to higher energy prices against signs of slowing consumer confidence.