Three markets to watch next week (29.05.2025)

Another exciting week on the markets is behind us. Uncertainty over tariffs and the legal turmoil surrounding the Trump administration are adding to the mixed signals from the economy. Tensions between Trump and Powell remain in the background – the president is pushing for faster rate cuts, while the Fed maintains its stance of data-dependent decision-making. In the upcoming week, we will see another round of key data, including interest rate decisions from the ECB and BOC, as well as U.S. labor market reports. For this reason, it will be worth monitoring financial instruments such as EURUSD, US500, and USDCAD.

EURUSD

The market is fully pricing in a 25 basis point ECB rate cut on Thursday, bringing the deposit rate down to 2.00%. However, further cuts are likely to be more cautious and dependent on the ongoing situation. Therefore, the post-decision press conference and communication from ECB President Lagarde will be worth watching. Market sentiment and signals from ECB officials suggest a possible pause in July. Trade tensions – especially tariff threats from President Trump – and mixed inflation signals are adding extra uncertainty. During the decision itself, as well as the release of other U.S. macroeconomic data, volatility in the EURUSD pair may be elevated.

US500

The US500 index closed the month just a few percentage points below all-time highs. Market sentiment in equities will primarily depend on trade negotiations and the release of key macroeconomic data. In the coming week, we will get labor market reports, ISM reports, and PMI readings. Expectations point to an ISM manufacturing print of 48.9 points, while the PMI is expected to come in as high as 52.3 points. Such a large divergence only confirms the high level of business uncertainty in current trade conditions. During these releases, we can expect elevated volatility in the US500 index.

USDCAD

Despite easing trade tensions and Prime Minister Carney’s efforts to stimulate the domestic economy, the Bank of Canada is expected to keep interest rates unchanged at 2.75% during its June 4, 2025 meeting. Markets are pricing in a hold at the current level. While some economists foresee potential cuts later in the year, bond markets remain skeptical, suggesting limited room for policy easing. Everything will depend on the Bank’s communication, but during the decision and the press conference, we can expect elevated volatility in the USDCAD pair.