Strength Dashboard
| Symbol | Rating | Reason |
|---|---|---|
| Currencies | ||
| GBP | Strong Bearish | Political crisis dragging pound sharply lower. |
| USD | Strong Bullish | Hot CPI and rate hike bets fuel the dollar. |
| EUR | Weak Bearish | USD strength weighs despite ECB June hike bets. |
| JPY | Strong Bearish | Energy import costs keep the yen on the back foot. |
| AUD | Weak Bearish | Pulled back from four-year highs on dollar run. |
| NZD | Weak Bearish | Dollar gains weigh as RBNZ holds at 2.25%. |
| CHF | Neutral | Safe-haven demand offset by SNB intervention risk. |
| DXY | Strong Bullish | Weekly gain above 1%, near one-month high. |
| Indices | ||
| S&P 500 | Weak Bullish | Hit record 7,502 then closed the week at 7,408. |
| Dow Jones | Neutral | Briefly above 50,000, essentially flat for the week. |
| Commodities | ||
| Gold (XAU) | Strong Bearish | Lost 3.7% on hot inflation and USD surge. |
| Oil (Brent) | Strong Bullish | Surged 8% on Strait of Hormuz supply fears. |
Geopolitical Spotlight
The dominant story this week was the fragility of the US-Iran ceasefire established on April 8. Fresh Iranian strikes on the UAE rattled markets late in the week, with analysts warning that a full ceasefire collapse is looking increasingly likely. The Strait of Hormuz remains effectively closed to normal commercial traffic. The IEA reported that crude and fuel flows through the strait fell by around 4 million barrels per day in March and April, and warned the global oil market could stay materially undersupplied through October even if the conflict is resolved next month.
The impact on commodities was immediate. Brent crude surged more than 8% for the week, with energy-driven inflation now the central concern across global markets. In the UK, a domestic political crisis added a second layer of uncertainty. Senior Labour figures including Health Secretary Wes Streeting resigned to position themselves for a leadership challenge against Prime Minister Keir Starmer, sending GBP/USD to its lowest level in over a month, despite a stronger-than-expected UK Q1 GDP print of 0.6%.
Iran ceasefire diplomacy is the single biggest risk to watch heading into next week. Any confirmed breakdown in talks would send oil sharply higher and trigger fresh risk-off moves across equities and currencies. The FOMC minutes on May 20 will also shape how markets interpret the current inflation picture. Keep a close eye on official statements from both Washington and Tehran.
Forex Markets
The US dollar had a strong week, with the DXY climbing to around 99.27, its highest level in over a month. The catalyst was the April CPI print released on May 12: a 3.8% annual rate, the highest since May 2023, driven almost entirely by an 18% surge in energy costs. Markets quickly priced out any remaining hope of a Fed rate cut and began speculating about a possible hike later this year.
GBP fell sharply, losing around 2% for the week and sliding below $1.34. Political pressure on PM Starmer intensified as senior Labour figures resigned. A solid Q1 GDP report (+0.6%) did little to offset the political noise.
EUR/USD fell to around 1.165, down roughly 1% for the week. The ECB now has nearly 90% market probability attached to a June rate hike, but the stronger dollar is weighing on the pair regardless.
USD/JPY extended its winning run for the fifth consecutive session, rising to around 158.5. Japan’s heavy reliance on energy imports leaves the yen particularly exposed to high oil prices. BOJ board members are publicly calling for faster rate hikes, but the pair remains dollar-driven for now.
AUD/USD slipped from four-year highs near 0.7280 to around 0.7140. The RBA has already hiked three times in 2026, with markets pricing an 80% chance of a fourth move by August. NZD/USD fell roughly 1% to around 0.593, with the RBNZ holding rates at 2.25% and a July hike now fully priced. CHF held relatively steady at around 0.79 per dollar. Safe-haven demand from the Iran war is supporting the franc, but the SNB has signalled willingness to intervene if appreciation becomes disorderly.
Currencies to watch
UK political risk is the key variable. If Starmer faces a formal leadership challenge this week, sterling could extend losses toward the 1.30-1.32 range. Watch for any parliamentary developments.
At 158.5, this pair is approaching territory that has historically triggered BOJ intervention. Watch for official commentary and any signals of coordinated action.
The ECB’s June 11 meeting is now a major market event. Any shift in guidance before then could move the pair sharply in either direction. The 1.160 level is the key downside area to watch.
The dollar holds the upper hand while inflation data stays elevated. FOMC minutes on May 20 are the key event for FX markets this week. EUR/USD and GBP/USD both face further downside if those minutes carry any hike bias. Watch the DXY at the 100 level. A break and close above that would signal a more meaningful shift in dollar sentiment.
Indices
US equities had a split week. The S&P 500 hit an all-time high of 7,502 on Thursday, driven by AI-related earnings momentum and positive sentiment from the Trump-China summit. The Dow briefly reclaimed 50,000 for the first time in weeks, and the Nasdaq touched a record 26,635.
Friday brought a sharp reversal. The S&P 500 shed 1.24% to close at 7,408. The Nasdaq lost 1.54% to 26,225. The Dow gave back 537 points. The catalyst was a combination of rising Treasury yields, with the 10-year hitting 4.46%, and renewed inflation anxiety following the hot CPI print earlier in the week. Tech stocks bore the brunt of the Friday selling.
For the week overall, the S&P 500 and Nasdaq each ended up around 0.3%, while the Dow was essentially flat. Six consecutive winning weeks have left valuations stretched, making indices vulnerable to any fresh surprise on inflation or rates.
The AI trade remains the backbone of this rally, but Friday showed how quickly sentiment can turn. FOMC minutes on May 20 are the pivotal event for equity markets this week. A hawkish tone could push Treasury yields higher and weigh on growth stocks. Watch the S&P 500 at 7,300 as a key support area if selling pressure returns.
Gold & Oil
Gold had its worst week in months. XAU/USD fell roughly $176, or 3.7%, to trade near $4,550. The catalyst was the April US CPI print of 3.8%, which pushed the probability of a June rate cut to near zero. Hot PPI data on May 13 compounded the damage. The dollar strengthened sharply and real yields rose. Gold, which pays no yield, sold off hard in response. The standout paradox of the week was that gold fell despite an active geopolitical war. The dollar’s move proved more powerful than the safe-haven bid.
Oil was the clear winner of the week. Brent crude surged above $109 per barrel for a weekly gain of around 8%. WTI climbed more than 11% to around $105-106. The driver was the Strait of Hormuz disruption. The IEA warned that global supply could remain materially short through October if the conflict is not resolved, with flows through the strait down around 4 million barrels per day since March.
For gold, the $4,441 support level is the key area to watch in the coming sessions. A further dollar rally or hawkish signal from the FOMC minutes could push XAU toward that level. For oil, the ceasefire situation is the only real driver right now. Watch for diplomatic announcements from Washington or Tehran. Either a deal or an escalation would move Brent significantly in a very short time.
Week in Review
- US April CPI hit 3.8%, the highest since May 2023, driven by an 18% surge in energy costs.
- S&P 500 and Nasdaq hit all-time records on May 14, then gave back most gains in a sharp Friday selloff.
- Brent crude surged 8% as the Strait of Hormuz stayed effectively shut to commercial traffic.
- GBP fell 2% as senior Labour figures resigned and political pressure on PM Starmer intensified sharply.
- Gold lost 3.7% on dollar strength and vanishing rate cut expectations.
- May 20: FOMC meeting minutes. Any hike signal from the Fed would reshape FX and equity markets quickly.
- May 21: US Initial Claims and Philly Fed Manufacturing data.
- May 22: Final Michigan Consumer Sentiment reading.
- UK political situation: a formal Labour leadership challenge would hit GBP hard and fast.
- Iran ceasefire developments: any escalation or peace signal is the biggest macro wildcard of the week.
