The European Open
European stocks pulled back from two-month highs on Wednesday, with JD Sports and Julius Baer shares leading the decline. Meanwhile, investors stayed cautious, watching U.S. trade talks and the tax bill debate.
The pan-European STOXX 600 index dropped 0.4%, with retail and auto stocks leading the decline
Swiss bank Julius Baer saw its shares fall 4.6% after revealing a $156.4 million charge from a credit review and announcing a new chief risk officer.
JD Sports shares dropped 6.5%, making it the worst performer in the index, after the British retailer reported a 2% drop in first-quarter sales and warned that higher prices in the U.S. could reduce customer demand.
The DAX index is struggling to gain acceptance above the 24000 handle at present, with yesterday’s daily candle close leaving bulls with something to consider.
All sectors are currently in the red for the day, excluding Utilities and Financials, which have eked out marginal gains.
Source: LSEG
Will the G7 Meeting Aid the Ailing Dollar?
The US Dollar has continued its struggles this morning with the G7 meeting now underway in Canada. Safe-haven currencies received a bid overnight as rumors of a potential Israeli strike on Iranian nuclear facilities ramped up geopolitical risk.
The G7 meeting kicked off yesterday and could be the saving grace the US Dollar needs at the moment. The lack of high-impact US data this week has meant that the US Dollar slide has been unchallenged, but comments from the G7 meeting around trade could arrest the greenback’s slide.
Keep an eye out for any communication post the meeting or over the next day or so. Any tweaks to the language used to describe FX policy could have repercussions for the US Dollar and FX as a whole.
However, given the current climate and risks present in markets, there is also the possibility that the G7 may not want to stir up volatility and may keep their communication limited and language on FX policy unchanged.
Currency Power Balance
Source: OANDA Labs
Israel-Iran Tensions Trigger Haven Bids
Safe haven demand received a bid overnight on news that Israel might be planning to attack Iran’s nuclear sites, based on U.S. intelligence.
This is happening while Iran and the U.S. are reportedly in talks to reduce tensions. A CNN report suggests that an attack on Iran’s nuclear sites could be more likely if the U.S. makes a deal with Iran that doesn’t fully eliminate its uranium stockpile.
However, Yesterday Iran’s Supreme Leader Khamenei stated that he has doubts about the nuclear discussions with the US. “I don’t think nuclear talks with the U.S. will bring results. I don’t know,” Khamenei said during a speech in remembrance of Iran’s late President Ebrahim Raisi.
The impact has seen Oil prices rise temporarily and Gold continue its ascent and reclaim the $3300/oz handle. Oil prices have surrendered the initial gains but Gold continues to hold the high ground at around $3315/oz at the time of writing.
Any further developments here should be monitored as it could have a significant impact on both Gold and Oil prices.
Economic Data Releases
Looking at the economic calendar, it’s another quiet day in terms of data releases from the US.
For now, keep an eye on the G7 meeting and any potential announcements around a potential escalation between Iran-Israel. Trade deal announcements also remain key should any materialize during the US session.
Chart of the Day - WTI Oil
From a technical standpoint, WTI has looked poised for a continuation of the bullish move started on May 5.
However, after the initial rally, WTI has been consolidating for the past 5 trading days with today’s spike higher facing significant selling pressure.
For the bullish momentum to continue, a daily candle close above the 63.70 swing high is needed.
Geopolitical risk with regard to Iran-Israel could also be the catalyst needed for a bullish rally.
Until then and if the status quo remains unchanged, there is a possibility that the sideways price action we are witnessing may continue.
WTI Oil Daily Chart, May 21, 2025
Source: TradingView.com
Support
- 61.50
- 60.56
- 60.00
Resistance
- 63.00
- 63.70
- 65.00