Ceasefire Talks Calm Markets, Rate Risks Remain (1-5 June)

Markets entered June with a calmer tone as reports of progress in US-Iran talks helped ease pressure on energy prices. A possible 60-day ceasefire extension supported hopes that tensions around the Strait of Hormuz could cool further, although final approval from President Trump remains pending.

The move helped push Brent crude to six-week lows and lowered some inflation concerns. Still, markets remain careful. The dollar held near two-week lows, major bond yields eased, and precious metals recovered, while investors continued to watch central-bank signals and upcoming US labor data.

Currencies

Dollar Index:
The dollar index hovered near 99, close to a two-week low, but remained on track to end May about 1% higher. Softer oil prices and weaker PCE inflation eased some pressure on the Fed, although markets still price a possible December rate hike at around 46%.

Euro:
EUR/USD traded near $1.165, heading for a monthly decline of around 0.8% against the dollar. Mixed inflation readings across the Eurozone kept ECB policy in focus, with prices still above the 2% target. ECB minutes also supported expectations of a possible June rate hike.

British Pound:
The pound stayed near $1.342, set for a monthly loss of more than 1% against the dollar. Political uncertainty, weaker growth expectations, and the UK’s sensitivity to energy prices weighed on sentiment. Softer inflation and a cooling labor market also reduced expectations for further Bank of England tightening.

Japanese Yen:
The yen traded near 159.3 per dollar after Japan’s finance minister warned that authorities could step in if excessive volatility continues. Markets are waiting for Finance Ministry data that may confirm late-April intervention. Stronger retail sales and industrial output supported the domestic backdrop, but the Bank of Japan remained cautious on rate hikes.

Commodities

Gold Holds as Talks Continue

Gold rose for a second session, reaching around $4,580 an ounce after reports suggested the US and Iran may extend their ceasefire. Even so, gold remained on track for a small monthly decline as higher-for-longer rate expectations limited upside momentum. Softer demand from India and cautious buying in China also kept gains under control.

Brent Drops on Ceasefire Hopes

Brent crude fell about 2% to $91.2 per barrel, its lowest level in six weeks. The drop followed reports of a tentative ceasefire extension and easing concerns around the Strait of Hormuz. Brent is heading for a monthly decline of around 17%, the biggest since 2020, although analysts warn that any supply recovery could take time due to infrastructure damage and logistical delays.

Silver Finds Support

Silver climbed to around $76 an ounce and remained on track for a monthly gain of more than 3%. Hopes for a ceasefire extension supported the move, while inflation risks and elevated rate expectations kept the outlook balanced. UBS also lowered its forecasts for silver’s supply deficit and investment demand.

Fixed Income

US 10 Year Treasury Note Yield:
The US 10-year Treasury yield hovered around 4.45%, near three-week lows but still up around 7 basis points for the month. Softer oil prices and weaker PCE inflation reduced some pressure, while markets continued to price a possible December Fed hike.

UK 10 Year Bond Yield:
UK 10-year gilt yields stayed near 4.8%, close to their lowest level since April 17. Hopes for a US-Iran agreement eased inflation concerns, while softer UK data encouraged markets to scale back expectations for more Bank of England rate hikes.

Japan 10 Year Government Bond Yield:
Japan’s 10-year government bond yield fell to around 2.65%, a two-week low. Reports of progress in US-Iran talks helped ease global inflation and rate concerns. BoJ Governor Kazuo Ueda flagged inflation risks from oil prices but did not signal an immediate rate hike.

Germany 10-Year Bond Yield:
German 10-year Bund yields fell to around 2.9%, their lowest level since mid-March. Cooling German inflation helped, although price pressures in France, Spain, and Italy remained above the ECB’s 2% target. Markets still expect a 25-basis-point ECB rate hike at the June 11 meeting.

Economic Data

United States GDP Growth Rate

The US economy grew at an annualized 1.6% in the first quarter, improving from 0.5% in Q4 but coming in below the earlier 2% estimate. Consumer spending rose 1.4%, mainly supported by services, while investment increased 7% due to stronger equipment and intellectual property spending. Net trade remained a drag on growth.

United States Personal Spending

US personal spending rose 0.5% in April, slowing from a revised 1% increase in March. Goods spending was supported by higher energy costs, especially gasoline, while services spending gained on housing, recreation, and dining. Real consumer spending rose only 0.1%, pointing to softer momentum.

United States Durable Goods Orders

Durable goods orders jumped 7.9% in April to $346 billion, beating expectations and marking the strongest increase since May 2025. Transportation equipment, especially nondefense aircraft and parts, drove most of the gain. Excluding transportation, orders rose 1.1%, while business investment signals remained mixed.

Japan Consumer Confidence

Japan’s consumer confidence index rose to 33.6 in May from 32.2 in April, beating forecasts. Sentiment improved across livelihood, income growth, employment prospects, and willingness to buy durable goods, showing broader improvement in household confidence.

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