Oil prices fell on Friday but are still on track for the first weekly profit in three weeks, after US President Donald Trump talked to his Chinese counterpart Xi Jinping this week, reinforcing hopes of a resumption to trade talks. 

Brent futures fell 28 cents, or 0.4% to $65.06 a barrel, while US West Texas fell 0.6% to $63.01 a barrel.

Weekly Gains after Two Weeks of Losses 

Oil prices are heading for weekly gains after two weeks of losses, with Brent up 1.8% this week, while Brent is up 3.7%.

Prices were boosted after a phone call between Trump and Jinping, with Trump describing it as “very positive”.

Canada also continued its trade talks with the US, with PM Carney in direct talks with Trump according to government sources.

However, trade uncertainty remains a negative overall for oil prices.

Fitch Ratings expect oil prices to be underpinned as the US potentially prepares to impose new sanctions on Venezuela, while Israel is gearing up for an attack against Iranian infrastructure. 

However, prices are facing pressure due to weaker demand and higher production from OPEC+ members.

Saudi Reduces Prices

Saudi Arabia reduced its oil prices for Asian countries in July to two-month lows, after OPEC+ agreed to raise output by 411,000 thousand bpd in July. 

Saudi Arabia has been pushing for increasing production amid a strategy to regain market share. 

HSBC expects the oil market to reach a balance in the second and third quarters, as summer demand spikes in July and August, absorbing higher OPEC+ production, before the balance turns into a surplus in the fourth quarter of 2025.

The dollar is heading for a weekly loss today amid a weak US economic performance and little progress in trade talks with global partners. 

Investors are closely assessing the US payrolls report released today to gauge the path ahead for the Fed’s monetary policies, with recent data so far showing the economy is facing increasing inflationary pressures and slower growth.

A slowdown in US job creations indicates that corporations remain uncertain and concerned about tariffs, but it likely won’t change the Fed’s cautious perspective.

Dollar No Longer a Haven?

The dollar is increasingly losing its global status as a safe haven as investors continue to flee US assets in droves.

The yen fell 0.35% today to 144.12 against the dollar, while the Swiss franc fell to 0.82.

Sterling fell 0.18% to $1.35 away from a three-year high but still heading for a 0.6% weekly profit. 

The dollar index eked out some gains today to 98.9, but still headed towards a 0.5% weekly loss.

ECB’s Bullish Stance

The euro tapered off six-week highs, scaled after bullish remarks by ECB officials, with the price now down to $1.1423.

Traders now expect 25 basis points of rate cuts overall by the ECB by the end of the year, with some, such as Deutsche Bank, expecting double that amount. 

Recent data showed German exports and industrial production weaker than expected in April, reflecting the challenges facing the economy.

Markets React to Trump-Xi Calls

Most currencies gained on the dollar on Thursday after the Trump-Xi phone call before giving up some of the gains.

However, the call didn’t provide much clarity with concerns still persistent on the future of trade negotiations between the two economies. 

Gold prices rose in European trade on Friday, resuming gains and approaching a four-week high once more, on track for a weekly profit.

The gains are curbed by the stronger dollar ahead of crucial US payrolls data later today.

The Fed depends on such data to decide on future monetary policies and interest rate decisions.

The Price

Gold prices rose 0.7% to $3375 an ounce, with a session-low at $3352.

On Thursday, the precious metal lost 0.55% on profit-taking away from a four-week high at $3403.

Weekly Trades

Gold prices are up 2.65% so far this week, on track for the second weekly profit in three weeks. 

US Dollar

The dollar index rose 0.15% on Friday on track for the first profit in three sessions away from a six-week trough at 98.35 against a basket of major rivals.

The dollar is boosted as US-China trade tensions receded following the Trump-Xi phone call.

US Rates

Earlier US data showed the services sectors shrank for the first time in a year, while the private sector added far less jobs than expected last month.

According to the Fedwatch tool, the odds of a Fed 0.25% June interest rate cut stood at 2%, while the odds of a July rate cut stood at 24%.

Now traders expect 50 basis points of US rate cuts overall this year, starting October.

Later today, the payrolls report will be released, expected to show the addition of 126 thousand last month, while unemployment is expected unchanged at 4.2%.

SPDR

Gold holdings at the SPDR Gold Trust remained unchanged yesterday at 935.65 tons, the highest since May 13.

The euro fell in European trade on Friday against a basket of major rivals, giving up a six-week high against the US dollar on profit-taking.

Despite the losses, the common currency is about to mark a weekly profit after the European Central Bank hinted at a pause in the year-long cycle of policy easing. 

The dollar rebounded ahead of the crucial US payrolls report later today, which would provide important clues on the odds of future Fed rate cuts. 

The Price

The EUR/USD rose 0.1% today to $1.1433, with a session-high at $1.1457.

The euro closed up 0.25% on Thursday against the dollar, marking a six-week high at $1.1495 following the ECB’s policy meeting.

Weekly Trades

The euro is up 0.8% so far this week on the dollar, on track for the second weekly profit in three weeks.

The ECB

The European Central Bank cuts interest rates to three-year lows at 2.15%, the seventh such rate cut in a row

The ECB expects government investments in defense and infrastructure to boost growth in the medium term, even as trade uncertainties continue to cloud business investments and exports in the short term 

It expects real GDP growth at 0.9% in 2025, and 1.1% in 2026, and 1.3% in 2027.

It also expects inflation at 2.0% in 2025, then 1.6% in 2026, and back to 2% in 2027

Lagarde

ECB President Christine Lagarde hinted at the possible end of the current cycle of policy easing, which was in response to a combined shock such as the Covid 19 pandemic, the Ukrainian war, and the energy crisis.

European Rates

According to a Reuters source, most ECB members now aim at holding interest rates unchanged in July, with the global markets now expecting just an additional 25 basis points of rate cuts by the end of the year.  

US Dollar

The dollar index rose 0.15% on Friday away from six-week lows at 98.35 against a basket of major rivals.

The path of the dollar next week will likely be determined by the all important US payrolls report today.