Bitcoin surged past the $100,000 milestone on Thursday, buoyed by renewed enthusiasm for cryptocurrencies amid fiscal and economic policy discussions under former President Donald Trump. Meanwhile, the U.S. dollar weakened broadly against G10 currencies as traders adopted a cautious stance ahead of Friday’s U.S. payrolls report. Mixed U.S. jobless claims data and modestly higher Treasury yields failed to provide clear direction for the greenback, leaving the market in a holding pattern.

Euro Gains as France Stabilizes Post-Political Turmoil

The euro strengthened as French President Emmanuel Macron survived a no-confidence vote and announced plans to appoint a new prime minister. This political shake-up reassured markets, providing a boost to EUR/USD. Macron’s swift response to political instability appears to have reduced immediate risks, supporting the euro’s recovery.

U.S. Political and Fiscal Moves in Focus

U.S. fiscal reform took center stage as Elon Musk and Vivek Ramaswamy met with Republican lawmakers to discuss plans for significant government spending cuts. The discussions drew attention to potential shifts in fiscal policy, though details remain scarce. The dollar index edged lower as markets await further clarity on these policy developments and the upcoming payrolls data, which could influence Federal Reserve rate expectations.

Commodity Weakness Pressures Commodity Currencies

Commodity-linked currencies, including the Australian and Canadian dollars, underperformed as falling oil and metal prices weighed on sentiment. WTI crude slipped after OPEC+ announced a delay in production increases, citing tepid global demand and rising supply from non-OPEC producers. Copper prices also fell, reflecting continued uncertainty over China’s economic stimulus measures.

Mixed Market Sentiment Limits Equity and Commodity Gains

Equity markets were subdued, with the S&P 500 trading flat as traders awaited key economic data and policy signals. Treasury yields edged slightly higher, and gold prices declined on firmer yields. Copper also retreated, reflecting weaker demand expectations and broader market caution.

Currency Market Overview

• Euro (EUR/USD): Gained on reduced political risks in France and dollar weakness, climbing to a weekly high.
• Yen (USD/JPY): Edged lower as mild safe-haven demand surfaced amid subdued risk appetite.
• Pound (GBP/USD): Posted modest gains, supported by optimism over U.K. growth ambitions outlined by Prime Minister Keir Starmer.
• Australian Dollar (AUD/USD): Remained range-bound, pressured by weak commodity prices but supported by softer dollar sentiment.
• Dollar Index (DXY): Retreated as the greenback lost ground ahead of Friday’s payrolls report.

Outlook: U.S. Data and Policy Developments Take Center Stage

• Dollar: Friday’s payrolls report will be a key determinant for the dollar’s trajectory, with traders watching for signs of labor market strength or weakness.
• Euro: Further political stability in France could support the euro, though eurozone growth concerns may limit its upside.
• Yen: Haven flows could boost the yen if geopolitical risks escalate or global economic conditions deteriorate.
• Pound: Sterling’s performance will hinge on market perceptions of Starmer’s economic agenda and how it aligns with growth challenges.
• Commodity Currencies: Weak oil and metal fundamentals may continue to weigh on the Australian and Canadian dollars, though potential Chinese stimulus could provide short-term relief.

Conclusion

Markets remain in a cautious holding pattern, with focus shifting to critical U.S. economic data and geopolitical developments. The dollar’s recent weakness reflects uncertainty over Federal Reserve policy and global growth risks, while cryptocurrencies like Bitcoin are drawing attention as alternative assets in an evolving fiscal and economic landscape.