Tag: EUR

  • Geopolitical Escalation Fuels Risk Aversion; Dollar Still Lags Despite Bounce

    Geopolitical Escalation Fuels Risk Aversion; Dollar Still Lags Despite Bounce


    Risk aversion dominates global markets today as geopolitical tensions in the Middle East intensify, though the broader equity selloff has remained contained so far. The trigger came early Friday when Israel launched a series of airstrikes deep into Iranian territory, targeting key military and nuclear infrastructure. In response, Iran retaliated with a wave of drone attacks aimed at Israel—estimated at around 100 drones. The development marked a sharp escalation in hostilities that took markets by surprise. While the US has so far distanced itself from the conflict, analysts have warned that any Iranian attack on American bases could pull Washington into the war, an outcome that would significantly raise the stakes for global markets.

    In currency markets, risk-sensitive assets are bearing the brunt of the shift in sentiment. Aussie and Kiwi have fallen to the bottom of the weekly performance board, weighed down by geopolitical fear and, in the Kiwi’s case, a sharp deterioration in domestic manufacturing activity too. Dollar has managed to rebound modestly today, but remains the third worst-performing major for the week. Earlier inflation data, both CPI and PPI, came in softer than expected, reinforcing expectations for a Fed rate cut in September and limiting the Dollar’s momentum.

    Swiss Franc stands out as the strongest performer for the week, benefiting from traditional safe-haven demand amid heightened geopolitical uncertainty. Euro has also held firm, underpinned by a steady flow of ECB commentary indicating that the easing cycle is nearing its end. Loonie ranks third, supported by surging oil prices. Yen and Sterling are trading in the middle of the pack. The Yen, despite an early jump, has given back gains as safe-haven flows rotate toward the Franc.

    In Europe, at the time of writing, FTSE is down -0.02%. DAX is down -1.08%. CAC is down -0.78%. UK 10-year yield is up 0.042 at 4.524. Germany 10-year yield is up 0.016 at 2.500. Earlier in Asia, Nikkei fell -0.89%. Hong Kong HSI fell -0.59%. China Shanghai SSE fell -0.75%. Singapore Strait Times fell -0.27%. Japan 10-year JGB yield fell -0.058 to 1.402.

    Eurozone industrial production down -2.4% mom in April, broad-based weakness

    Eurozone industrial production dropped sharply by -2.4% mom in April, significantly below expectations of a -1.6% decline. Output fell in all major categories, with non-durable consumer goods posting the steepest drop at -3.0%. Capital goods, energy (-1.1%), and intermediate goods (-0.7%) also contracted. Durable consumer goods saw a modest -0.2% fall, offering little relief in an otherwise dismal report.

    At the EU level, industrial output slipped -1.8% mom, driven by steep declines in Ireland (-15.2%), Malta (-6.2%), and Lithuania (-3.0%). While a few economies such as Denmark (+3.5%) and Luxembourg (+3.2%) managed modest gains, the regional picture remains weak.

    EU exports drop -1.9% yoy in April as shipments to China plunge -15.9% yoy

    Eurozone trade data for April showed signs of weakening external demand, with goods exports falling -1.4% yoy to EUR 243.0B, while imports edged up 0.1% yoy to EUR 233.1B. Despite the drop in exports, the region maintained a trade surplus of EUR 9.9B, helped by subdued import growth. Intra-Eurozone trade also declined, down -2.0% yoy to EUR 217.3B.

    Across the broader European Union, the trade picture reflected similar pressures. EU exports dropped -1.9% yoy to EUR 218.2B, while imports increased 0.5% yoy to EUR 210.7B, yielding a surplus of EUR 7.4B. Intra-EU trade fell -1.7% yoy to EUR 341.9B.

    While exports to the US remained a bright spot, rising 3.8% yoy, exports to China plunged -15.9% yoy. On the import side, EU purchases from China rose 8.4% yoy. Imports from the U.S. rose modestly by 2.4% yoy.

    NZ BNZ manufacturing fall to 47.5, slumps back into contraction

    New Zealand’s manufacturing sector slipped sharply back into contraction in May, with the BusinessNZ Performance of Manufacturing Index plunging from 53.3 to 47.5. The reading not only marks a decisive reversal from April’s expansion but also sits well below the historical average of 52.5.

    Key components of the index showed broad-based weakness: production dropped from 53.0 to 48.7, employment tumbled from 54.6 to 45.7, and new orders fell sharply from 50.8 to 45.3—all signaling deteriorating activity across the sector.

    The sharp decline was echoed in business sentiment, with 64.5% of survey respondents offering negative comments—up from 58% in April. The commentary reflects a growing sense of pessimism as manufacturers grapple with falling demand, weak forward orders, and subdued consumer spending. Rising input costs, ongoing economic uncertainty, and stalled investment plans are compounding pressures.

    BNZ’s Senior Economist Doug Steel said that “the New Zealand economy can claw its way forward over the course of 2025, but the PMI is yet another indicator that suggests an increased risk that the bounce in GDP reported for Q4, 2024 and Q1, 2025 could come to a grinding halt”.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1503; (P) 1.1567; (R1) 1.1649; More…

    Intraday bias in EUR/USD remains neutral and more consolidations could be seen below 1.1630 temporary top. . Further rally is expected as long as 1.1372 support holds. Above 1.1630 will resume the rally from 1.0176 to 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. However, break of 1.1372 support will indicate short term topping, and turn bias to the downside for deeper pullback.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 1.1604 support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PMI May 47.5 53.9 53.3
    04:30 JPY Tertiary Industry Index M/M Apr 0.30% 0.20% -0.30% -1.00%
    04:30 JPY Industrial Production M/M Apr -1.10% -0.90% -0.90%
    06:00 EUR Germany CPI M/M May F 0.10% 0.10% 0.10%
    06:00 EUR Germany CPI Y/Y May F 2.10% 2.10% 2.10%
    08:30 GBP Consumer Inflation Expectations 3.20% 3.40%
    09:00 EUR Eurozone Industrial Production M/M Apr -2.40% -1.60% 2.60% 2.40%
    09:00 EUR Eurozone Trade Balance (EUR) Apr 14.0B 22.5B 27.9B 28.8B
    12:30 CAD Manufacturing Sales M/M Apr -2.80% -2.00% -1.40%
    12:30 CAD Capacity Utilization Q1 80.10% 79.80% 79.80% 79.70%
    12:30 CAD Wholesale Sales M/M Apr -2.30% 0.30% 0.20% 0.00%
    14:00 USD UoM Consumer Sentiment Jun P 53.5 52.2
    14:00 USD UoM Inflation Expectations Jun P 6.60%

     



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  • Dollar Crushed as Dovish Inflation Data and Trade Tensions Weigh; Euro Surges to Multi-Year High

    Dollar Crushed as Dovish Inflation Data and Trade Tensions Weigh; Euro Surges to Multi-Year High


    Dollar accelerated its broad-based selloff in early US trading, plunging to its lowest level against Euro since 2021. The latest catalyst came from softer-than-expected May PPI data, which followed Wednesday’s downside surprise in CPI. The tandem inflation prints have further calmed fears of immediate tariff-driven price pass-through, at least for now, and are reinforcing expectations that Fed is moving closer to resume policy easing.

    As a result, market expectations for Fed easing have firmed up. Fed funds futures are now pricing in an 80% chance of a rate cut in September, up from around 75% just a week ago before the two inflation releases. The tone of both upstream and downstream price measures—despite the tariff backdrop—has strengthened the market’s conviction that Fed will deliver a cut before the fourth quarter, particularly as labor market data has also started to show signs of softening.

    Adding to Dollar’s woes is renewed uncertainty over US trade policy. While Treasury Secretary Scott Bessent floated the possibility of extending the current 90-day tariff truce with “good faith” trading partners, President Donald Trump struck a starkly different tone. Trump dismissed the need for any extension and hinted that countries would be unilaterally informed of their new tariff terms in the coming weeks. This reinforces fears that the US may revert to aggressive, one-sided trade actions just as the 90-day tariff truce nears expiration.

    In the currency markets, Dollar is clearly the weakest performer of the day, followed by Loonie and Aussie. In contrast, safe-haven demand has lifted Swiss Franc to the top of the board, with Euro and Yen close behind. Euro in particular continues to draw support from a series of ECB officials signaling that the rate-cut cycle is nearing completion. That divergence—between a Fed leaning dovish and an ECB shifting toward a pause—is now starkly reflected in EUR/USD price action.

    Sterling and Kiwi are trading in the middle of the pack, with the Pound underperforming its European peers. UK GDP contracted more than expected in April, reinforcing expectations for a BoE rate cut in August. Despite some signs of resilience in the broader three-month growth trend, momentum has clearly slowed, leaving BoE less justification to hold rates elevated for much longer.

    Technically, Gold is also bouncing on Dollar weakness, and focus is back on 3403.49 resistance. Firm break there will resume the rally from 3120.34, and revive the case that correction from 3499.79 high has completed. Further rally should then be seen to retest 3499.79.

    In Europe, at the time of writing, FTSE is up 0.18%. DAX is down -0.87%. CAC is down -0.43%. UK 10-year yield is down -0.063 at 4.488. Germany 10-year yield is down -0.059 at 2.478. Earlier in Asia, Nikkei fell -0.65%. Hong Kong HSI fell -1.36%. China Shanghai SSE rose 0.01%. Singapore Strait Times rose 0.08%. Japan 10-year JGB yield fell -0.001 to 1.460.

    US initial jobless claims unchanged at 248k, match expectations

    US initial jobless claims were unchanged at 248k in the week ended June 7, slightly below expectation of 251k. Four-week moving average of initial claims rose 5k to 240k, highest since August 26, 2023.

    Continuing claims rose 54k to 1956k in the week ending May 31, highest sine November 13, 2021. Four-week moving average of continuing claims rose 20k to 1915k, highest since November 27, 2021.

    US PPI up 0.1% mom, 2.6% yoy in May

    US PPI rose 0.1% mom in May, below expectation of 0.2% mom. PPI services rose 0.1% mom, while PPI goods rose 0.2% mom. PPI less food, energy and trade services rose 0.1% mom.

    For the 12 months period, PPI rose from 2.5% yoy to 2.6% yoy, matched expectations. PPI less food, energy and trade services rose 2.7% yoy.

    ECB Schnabel: Monetary easing nears end as Europe embraces stronger Euro and fiscal support

    ECB Executive Board Member Isabel Schnabel signaled today that the central bank’s monetary easing cycle is “coming to an end,” citing stable medium-term inflation forecasts and improving macroeconomic conditions.

    Speaking with notable confidence, Schnabel downplayed the expected dip in inflation—projected at just 1.6% in 2026—as a “temporary deviation” caused by energy base effects and a stronger euro.

    Schnabel painted a relatively constructive picture of the Eurozone economy, stating that growth remains “broadly stable” even as global trade tensions intensify. Private consumption continues to provide a key pillar of support, while both manufacturing and construction sectors are showing signs of recovery. She also highlighted that “Additional defense and infrastructure spending counteract tariff shock on growth”.

    In her view, these structural shifts, combined with a resilient Euro and outperforming equity markets, reflect a “new European growth narrative” that could elevate the region’s economic standing.

    Still, Schnabel acknowledged the risks posed by escalating trade tensions, particularly in the form of inflation volatility and financial market uncertainty. She warned that tariffs can be amplified through global value chains, posing upside risks to inflation. At the same time weaponisation of raw materials threatens to further strain supply chains.

    ECB Villeroy and Šimkus emphasize flexibility as policy hits neutral zone

    Comments from two ECB Governing Council members today reinforced a cautious stance as the easing cycle appears to have reached a natural pause, following eight consecutive rate cuts.

    French member Francois Villeroy de Galhau emphasized flexibility, telling Franceinfo radio that future policy will depend on how inflation evolves, stressing a preference for “pragmatism and agility.”

    Lithuanian member Gediminas Šimkus echoed a similar tone, stating that policy has now reached a “neutral level”. It is critical for ECB to maintain the freedom, “not to commit to one direction or another”. He warned of growing uncertainty, particularly around upcoming US trade decisions as the 90-day tariff truce nears expiry on July 9.

    UK GDP contracts -0.3% mom in April, as services drag

    The UK economy contracted -0.3% mom in April, a sharper decline than the expected -0.1%. The main drag came from the services sector, which fell -0.4% mom and contributed most to the monthly GDP drop. Production also shrank -0.6% mom. In contrast, construction provided a rare bright spot, rising 0.9% mom, though not enough to offset broader weakness.

    Despite the poor April print, the broader picture remains more constructive. GDP expanded 0.7% in the three months to April compared to the prior three-month period, with services up 0.6%, production up 1.1%, and construction up 0.5%.

    Japanese business confidence sours amid tariff fears and profit warnings

    Business sentiment in Japan deteriorated sharply in Q2, with the Ministry of Finance’s survey revealing a broad-based loss of confidence across industries.

    The overall index for large firms slipped into negative territory at -1.09, down from Q1’s modest 2.0. Large manufacturers saw sentiment weaken further from -2.4 to -4.8, while large non-manufacturers experienced a steep drop from 5.2 to -5.7, suggesting that economic uncertainty is spreading beyond export-heavy sectors.

    The survey also highlighted a growing sense of earnings pessimism. Large manufacturers now expect recurring profits to decline -1.2% in the fiscal year ending March 2026, a downgrade from the -0.6% fall seen in the previous survey. Particularly alarming is the auto sector’s outlook, with automakers and parts suppliers projecting a severe -19.8% drop in profits.

    This highlights the mounting concern over the impact of steep US tariffs, which threaten to hit Japan’s flagship export industry hard and weigh on broader economic momentum.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1429; (P) 1.1465; (R1) 1.1524; More…

    EUR/USD’s rally from 1.0176 resumed by accelerating through 1.1572 resistance. Intraday bias stays on the upside at this point. Next target is 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, below 1.1504 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 1.1604 support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance May -8% -3% -3%
    23:50 JPY BSI Large Manufacturing Index Q2 -4.8 0.8 -2.4
    01:00 AUD Consumer Inflation Expectations Jun 5.00% 4.10%
    06:00 GBP GDP M/M Apr -0.30% -0.10% 0.20%
    06:00 GBP Industrial Production M/M Apr -0.60% -0.40% -0.70%
    06:00 GBP Industrial Production Y/Y Apr -0.30% -0.20% -0.70%
    06:00 GBP Manufacturing Production M/M Apr -0.90% -0.80% -0.80%
    06:00 GBP Manufacturing Production Y/Y Apr 0.40% 0.40% -0.80%
    06:00 GBP Goods Trade Balance (GBP) Apr -23.2B -20.8B -19.9B
    12:30 USD PPI M/M May 0.10% 0.20% -0.50% -0.20%
    12:30 USD PPI Y/Y May 2.60% 2.60% 2.40% 2.50%
    12:30 USD PPI Core M/M May 0.10% 0.30% -0.40% -0.20%
    12:30 USD PPI Core Y/Y May 3.00% 3.00% 3.10% 3.20%
    12:30 USD Initial Jobless Claims (Jun 6) 248K 251K 247K 248K
    14:30 USD Natural Gas Storage 108B 122B

     



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  • Sterling Slides on Poor UK GDP, While Dollar Struggles Under Trade Uncertainty

    Sterling Slides on Poor UK GDP, While Dollar Struggles Under Trade Uncertainty


    Sterling came under renewed pressure at the start of European session, triggered by a deeper-than-expected contraction in UK GDP for April. Services sector, the economy’s dominant component, posted its first monthly decline since October. Nine out of 14 services subsectors registered falls, pointing to broad-based weakness. It’s a disappointing start to Q2 and follows weaker-than-expected labor data earlier in the week.

    The string of soft UK economic releases is likely to reinforce BoE’s case for policy easing. Market expectations for a rate cut in August are now firming, with investors betting that the BoE will continue its gradual loosening cycle. While the central bank has maintained a cautious stance thus far, the data flow increasingly supports action sooner rather than later, especially if core inflation continues to moderate alongside cooling wages and tepid output growth.

    Meanwhile, Dollar remains the worst-performing major currency this week, despite receiving a brief reprieve from a strong 10-year Treasury auction on Wednesday. Market attention is now on today’s 30-year auction, which could provide further clues about investor confidence in US fiscal stability. A solid reception would help calm nerves around rising debt issuance.

    However, the broader macro backdrop, particularly trade uncertainty, continues to weigh heavily on the greenback. Hopes that this week’s US-China talks would deliver material de-escalation were dashed after no tariffs were rolled back as part of the so-called framework deal. Instead, the absence of concrete outcomes, coupled with hints that the US may further delay its self-imposed 90-day tariff review deadline, has left markets in limbo.

    Testifying before Congress, US Treasury Secretary Scott Bessent struck a more conciliatory tone, suggesting that Washington may extend the negotiation window with key trading partners—including the EU—if they are seen to be acting in “good faith”. While this may avert immediate tariff escalation, it also signals that trade talks could drag on well into the second half of the year. That lack of resolution is weighing on sentiment and feeding into a mild risk-off tone across markets.

    In terms of weekly currency performance, Euro is the clear outperformer, while Yen and Swiss Franc are also benefiting from safe-haven flows. At the other end of the spectrum, Dollar leads the laggards, followed by the Aussie and Sterling. The Loonie and Kiwi are trading more neutrally. Overall, markets are showing a tilt toward risk aversion.

    Technically, an immediate focus is now on 38.2% retracement of 0.8737 to 0.8354 at 0.8500. in EUR/GBP. Decisive break there will suggest that fall from 0.8737 has completed at 0.8354. Even as a corrective bounce, rise from there would target 61.8% retracement at 0.8591.

    In Asia, Nikkei closed down -0.65%. Hong Kong HSI is down -0.89%. China Shanghai SSE is up 0.03%. Singapore Strait Times is up 0.21%. Japan 10-year JGB yield fell -0.002 to 1.458. Overnight, DOW closed down -0.00%. S&P 500 fell -0.27%. NASDAQ fell -0.50%. 10-year yield fell sharply by -0.062 to 4.412.

    UK GDP contracts -0.3% mom in April, as services drag

    The UK economy contracted -0.3% mom in April, a sharper decline than the expected -0.1%. The main drag came from the services sector, which fell -0.4% mom and contributed most to the monthly GDP drop. Production also shrank -0.6% mom. In contrast, construction provided a rare bright spot, rising 0.9% mom, though not enough to offset broader weakness.

    Despite the poor April print, the broader picture remains more constructive. GDP expanded 0.7% in the three months to April compared to the prior three-month period, with services up 0.6%, production up 1.1%, and construction up 0.5%.

    Japanese business confidence sours amid tariff fears and profit warnings

    Business sentiment in Japan deteriorated sharply in Q2, with the Ministry of Finance’s survey revealing a broad-based loss of confidence across industries.

    The overall index for large firms slipped into negative territory at -1.09, down from Q1’s modest 2.0. Large manufacturers saw sentiment weaken further from -2.4 to -4.8, while large non-manufacturers experienced a steep drop from 5.2 to -5.7, suggesting that economic uncertainty is spreading beyond export-heavy sectors.

    The survey also highlighted a growing sense of earnings pessimism. Large manufacturers now expect recurring profits to decline -1.2% in the fiscal year ending March 2026, a downgrade from the -0.6% fall seen in the previous survey. Particularly alarming is the auto sector’s outlook, with automakers and parts suppliers projecting a severe -19.8% drop in profits.

    This highlights the mounting concern over the impact of steep US tariffs, which threaten to hit Japan’s flagship export industry hard and weigh on broader economic momentum.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1429; (P) 1.1465; (R1) 1.1524; More…

    EUR/USD’s rise from 1.1064 resumed by breaking through 1.1494 and intraday bias is back on the upside for 1.1572 high. Strong resistance could be seen there to bring another fall, to extend the near term consolidation pattern. Firm break of 1.1404 support will turn intraday bias back to the downside for 1.1209 first. However, decisive break of 1.1572 will resume whole rise from 1.0176.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0894) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance May -8% -3% -3%
    23:50 JPY BSI Large Manufacturing Index Q2 -4.8 0.8 -2.4
    01:00 AUD Consumer Inflation Expectations Jun 5.00% 4.10%
    06:00 GBP GDP M/M Apr -0.30% -0.10% 0.20%
    06:00 GBP Industrial Production M/M Apr -0.60% -0.40% -0.70%
    06:00 GBP Industrial Production Y/Y Apr -0.30% -0.20% -0.70%
    06:00 GBP Manufacturing Production M/M Apr -0.90% -0.80% -0.80%
    06:00 GBP Manufacturing Production Y/Y Apr 0.40% 0.40% -0.80%
    06:00 GBP Goods Trade Balance (GBP) Apr -23.2B -20.8B -19.9B
    12:30 USD PPI M/M May 0.20% -0.50%
    12:30 USD PPI Y/Y May 2.60% 2.40%
    12:30 USD PPI Core M/M May 0.30% -0.40%
    12:30 USD PPI Core Y/Y May 3.00% 3.10%
    12:30 USD Initial Jobless Claims (Jun 6) 251K 247K
    14:30 USD Natural Gas Storage 108B 122B

     



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  • Sterling Slumps as UK Jobs Data Fuels August BoE Rate Cut Bets

    Sterling Slumps as UK Jobs Data Fuels August BoE Rate Cut Bets


    Sterling is sold off notably today after dismal UK labor market data intensified expectations of a BoE rate cut in August. The most striking element was the -109k drop in payrolled employment—the largest non-pandemic decline since records began in 2014—coupled with a rise in the unemployment rate to its highest level since mid-2023.

    While wage growth remains elevated, its slowdown reinforces the view that inflationary pressures are easing. With signs that labour market cooling is gaining momentum, markets are increasingly pricing in not just an August rate cut, but a follow-up move in November. Traders will, however, closely monitor Chancellor Rachel Reeves’ fiscal statement tomorrow, which may influence expectations depending on the scale and orientation of policy shifts.

    Elsewhere, markets are also eyeing the second day of US-China trade talks in London. Ahead of the meeting, U.S. Commerce Secretary Howard Lutnick said that he expected a full day meeting today, while the negotiations are “going well”. Both sides are expected to issue updates later in the day.

    Overall in the currency markets, Sterling is currently the worst performer, followed by Swiss Franc, and then Dollar. Loonie is the best, followed by Aussie, and then Euro. Yen and Aussie are positioning in the middle.

    Technically, focus is now on 1.1045 support in GBP/CHF with today’s dip. Firm break there will complete a head and shoulder top pattern, which suggest that rise from 1.0610 has completed, at 1.1200. Deeper decline should then be seen to 38.2% retracement of 1.0610 to 1.1200 at 1.0975, and possibly further to 61.8% retracement at 1.0835.

    In Europe, at the time of writing, FTSE is up 0.53%. DAX is down -0.40%. CAC is up 0.01%. UK 10-year yield is down -0.094 at 4.543. Germany 10-year yield is down -0.035 at 2.535. Earlier in Asia, Nikkei rose 0.32%. Hong Kong HSI fell -0.08%. China Shanghai SSE fell -0.44%. Singapore Strait Times fell -0.06%. Japan 10-year JGB yield rose 0.002 to 1.480.

    ECB’s Villeroy: Favorable 2 and 2 zone is not static

    French ECB Governing Council member Francois Villeroy de Galhau said in a conference today that ECB is now in a favorable “2 and 2 zone. That means, inflation is forecast at 2% this year, while deposit rate is also at 2%.

    Nevertheless, he warned that with current uncertainties, this zone “does not mean a comfortable zone or a static zone”. “We will remain pragmatic and data-driven, and as agile as necessary,” Villeroy added.

    Separately, Finnish ECB policymaker Olli Rehn warned that as inflation is projected to stay below 2% this year, the central must be mind of “not slipping towards the zero lower bound.”

    “We must not grow overconfident — instead we must stay vigilant and monitor the risks in both directions,” Rehn said. “The ECB team must remain alert and ready to act with agility as and if needed.”

    Eurozone Sentix surges back into positive territory, recession fears recede

    Investor sentiment in the Eurozone turned notably upbeat in June, as Sentix Investor Confidence index climbed from -8.1 to +0.2—its first positive reading since June 2024 and well above expectations of -6. Current Situation Index also improved markedly from -19.3 to -13.0, while Expectations Index jumped from 3.8 to 14.3.

    Germany led the improvement, with its overall Sentix index rising to -5.9, the highest since March 2022. Expectations climbed by 12 points to 17.5, while current conditions advanced for the fourth consecutive month to -26.8.

    According to Sentix, fears of a recession triggered by the US tariff shock in April have largely dissipated, and the economic outlook for the Eurozone is now tilted toward a cyclical upswing.

    With economic momentum building and the Sentix inflation barometer showing signs of easing price pressures, ECB may view its policy as being in a “comfort zone.” While another rate cut isn’t off the table, any such move could be delayed if the upswing continues to solidify over the summer.

    UK labor market softens as unemployment rises to 4.6% and wage growth slows

    UK labor market data released today point to gradual cooling. In May, payrolled employment dropped by -109k, or -0.4% mom. Claimant count rose sharply by 33.1k, well above the expected 4.5k increase. Wage pressures are also easing, with median monthly pay rising by 5.8% yoy, down from 6.2% previously, though still within a relatively tight band seen this year.

    For the three months to April, unemployment rate ticked up to 4.6% as expected, while both average earnings measures came in softer than forecast. Regular pay (excluding bonuses) rose 5.2% yoy, and total pay increased 5.3% yoy, both under the 5.5% consensus.

    BoJ’s Ueda reaffirms gradual tightening path, cites limited room for rate cuts

    BoJ Governor Kazuo Ueda reiterated to parliament today that interest rate hikes will continue, though cautiously, once the central bank gains “more conviction that underlying inflation will approach 2% or hover around that level”.

    Ueda explained that BoJ still maintains negative real interest rates to support inflation momentum and ensure price growth remains both stable and sustained.

    However, Ueda also flagged a significant limitation in policy space should economic conditions deteriorate. With the short-term policy rate still only at 0.5%, the BoJ has “limited room” to cut rates in response to any sharp downturn in growth.

    Australia’s Westpac consumer sentiment edges higher as rate cuts clash with growth worries

    Australia’s Westpac Consumer Sentiment index rose a modest 0.5% mom in June to 92.6, reflecting a population still mired in what Westpac called a “holding pattern of cautious pessimism.”

    The data reveal “two clear opposing forces” shaping household attitudes: easing inflation and RBA’s May rate cut have improved perceptions around major purchases. On the other hand, sluggish domestic growth and global trade uncertainties continue to weigh heavily on expectations.

    Looking ahead, attention turns to the RBA’s next meeting on July 7–8. With economic data remaining mixed and labor market tightness still evident, Westpac expects the central bank to proceed with caution and keep the cash rate on hold. Nonetheless, a fresh round of economic projections in August could pave the way for another 25 basis point cut, as RBA recalibrates its stance amid still-sluggish growth.

    Australia’s NAB business confidence lifts to 2, but employment conditions erode

    Australia’s NAB Business Confidence index turned positive in May, rising from -1 to 2. However, the improvement in confidence was not matched by underlying business conditions, which weakened further. Business Conditions index slipped from 2 to 0, with trading conditions dipping slightly from 6 to 5, profitability remaining in the red at -4, and employment conditions dropping from 4 to 0 — all pointing to a stagnating environment.

    On the inflation front, cost indicators presented a mixed picture. Labor cost growth remained firm at a quarterly equivalent pace of 1.7%. Purchase cost and final product price growth eased to 1.1% and 0.5%, respectively. Retail price growth held steady at 1.2%, suggesting persistent margin pressures.

    NAB Chief Economist Sally Auld emphasized that business conditions are still weak and warned that continued softness could cap any recovery in confidence. She also flagged the labor market as a key area to monitor, with the employment index now below average.

    EUR/GBP Mid-Day Outlook

    Daily Pivots: (S1) 0.8419; (P) 0.8424; (R1) 0.8433; More…

    EUR/GBP’s rebound from resumed by breaking through 0.8448 resistance, and intraday bias is back on the upside for 38.2% retracement of 0.8737 to 0.8354 at 0.8500. Strong resistance could be seen from 0.8500 to complete the corrective bounce. On the downside, break of 0.8413 support will bring retest of 0.8354 low. However, firm break of 0.8500 will pave the way to 61.8% retracement at 0.8591 instead.

    In the bigger picture, price actions from 0.8221 medium term bottom are merely forming a corrective pattern. Nevertheless, there is no clear momentum to break through 0.8201 key support (2022 low) yet. Hence, range trading is expected between 0.8221/8737 for now.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Retail Sales Monitor Y/Y May 0.60% 2.70% 6.80%
    23:50 JPY Money Supply M2+CD Y/Y May 0.60% 0.50%
    00:30 AUD Westpac Consumer Confidence Jun 0.50% 2.20%
    01:30 AUD NAB Business Confidence May 2 -1
    01:30 AUD NAB Business Conditions May 0 2
    06:00 JPY Machine Tool Orders Y/Y May 3.40% 7.70%
    06:00 GBP Claimant Count Change May 33.1K 4.5K 5.2K -21.2K
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Apr 5.20% 5.50% 5.60% 5.50%
    06:00 GBP Average Earnings Including Bonus 3M/Y Apr 5.30% 5.50% 5.50% 5.60%
    06:00 GBP ILO Unemployment Rate (3M) Apr 4.60% 4.60% 4.50%
    08:30 EUR Eurozone Sentix Investor Confidence Jun 0.2 -6 -8.1
    10:00 USD NFIB Business Optimism Index May 98.8 95.9 95.8

     



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  • Aussie Firmer in Quiet Markets as US-China Trade Talks Continue

    Aussie Firmer in Quiet Markets as US-China Trade Talks Continue


    Global markets remain in a state of cautious anticipation as high-level trade negotiations between the US and China continue for a second day in London. While there’s no definitive outcome yet, mild optimism lingers. Asian equities reflected that mood, with Japan’s Nikkei and Hong Kong’s Hang Seng Index both trading slightly higher. Yet the prevailing sense is one of hesitation, with limited conviction behind the moves. Investors are still waiting for substantive developments before making bolder positioning decisions.

    In the currency markets, Kiwi and Aussie continue to outperform for the week so far, buoyed by broad risk resilience and perhaps early hopes that renewed dialogue could reduce global trade frictions. However, upside momentum in both currencies has been sluggish. At the other end, Loonie is trading as the weakest, followed by Swiss Franc and Japanese Yen. Dollar, Euro, and British Pound are largely directionless, trading in the middle of the weekly performance board.

    The London meetings between US and Chinese officials mark the second day of high-stakes negotiations aimed at resolving the fallout from earlier tariff escalations. While Monday’s talks yielded no breakthrough, the inclusion of Commerce Secretary Howard Lutnick in this round is notable. His agency oversees export controls, signaling the centrality of rare earths in the ongoing discussions. These magnets, vital to EV production and defense equipment, have become a leverage point for Beijing as it holds a near-monopoly over global supply.

    Markets are not pricing in a full resolution just yet. Most expectations center around a tentative agreement on technical issues or interim concessions, such as expanded export licenses. However, structural divisions persist, particularly over technology and national security. Without more substantive signs of compromise, the fragile sentiment boost from the talks could quickly fade, especially if either side issues a combative post-meeting statement.

    Technically, EUR/AUD is now pressing 1.7460 support as the decline from 1.7705 extends. Firm break there will argue that choppy recovery from 1.7245 has completed as a correction, ahead of 38.2% retracement of 1.8554 to 1.7245. That would also suggest that fall from 1.8854 is ready to resume through 1.7245 low.

    In Asia, at the time of writing, Nikkei is up 0.89%. Hong Kong HSI is up 0.15%. China Shanghai SSE is down -0.13%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is down -0.002 at 1.476. Overnight, DOW closed down -0.00%. S&P 500 rose 0.09%. NASDAQ rose 0.31%. 10-year yield fell -0.028 to 4.482.

    BoJ’s Ueda reaffirms gradual tightening path, cites limited room for rate cuts

    BoJ Governor Kazuo Ueda reiterated to parliament today that interest rate hikes will continue, though cautiously, once the central bank gains “more conviction that underlying inflation will approach 2% or hover around that level”.

    Ueda explained that BoJ still maintains negative real interest rates to support inflation momentum and ensure price growth remains both stable and sustained.

    However, Ueda also flagged a significant limitation in policy space should economic conditions deteriorate. With the short-term policy rate still only at 0.5%, the BoJ has “limited room” to cut rates in response to any sharp downturn in growth.

    Australia’s Westpac consumer sentiment edges higher as rate cuts clash with growth worries

    Australia’s Westpac Consumer Sentiment index rose a modest 0.5% mom in June to 92.6, reflecting a population still mired in what Westpac called a “holding pattern of cautious pessimism.”

    The data reveal “two clear opposing forces” shaping household attitudes: easing inflation and RBA’s May rate cut have improved perceptions around major purchases. On the other hand, sluggish domestic growth and global trade uncertainties continue to weigh heavily on expectations.

    Looking ahead, attention turns to the RBA’s next meeting on July 7–8. With economic data remaining mixed and labor market tightness still evident, Westpac expects the central bank to proceed with caution and keep the cash rate on hold. Nonetheless, a fresh round of economic projections in August could pave the way for another 25 basis point cut, as RBA recalibrates its stance amid still-sluggish growth.

    Australia’s NAB business confidence lifts to 2, but employment conditions erode

    Australia’s NAB Business Confidence index turned positive in May, rising from -1 to 2. However, the improvement in confidence was not matched by underlying business conditions, which weakened further. Business Conditions index slipped from 2 to 0, with trading conditions dipping slightly from 6 to 5, profitability remaining in the red at -4, and employment conditions dropping from 4 to 0 — all pointing to a stagnating environment.

    On the inflation front, cost indicators presented a mixed picture. Labor cost growth remained firm at a quarterly equivalent pace of 1.7%. Purchase cost and final product price growth eased to 1.1% and 0.5%, respectively. Retail price growth held steady at 1.2%, suggesting persistent margin pressures.

    NAB Chief Economist Sally Auld emphasized that business conditions are still weak and warned that continued softness could cap any recovery in confidence. She also flagged the labor market as a key area to monitor, with the employment index now below average.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6496; (P) 0.6515; (R1) 0.6536; More…

    Intraday bias in AUD/USD remains neutral as it’s still staying below 0.6536 resistance. More consolidations could be seen, but even in case of another dip, further rise is in favor favor as long as 0.6406 support holds. On the upside, decisive break of 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6406 will turn bias to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6443) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fall through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Retail Sales Monitor Y/Y May 0.60% 2.70% 6.80%
    23:50 JPY Money Supply M2+CD Y/Y May 0.60% 0.50%
    00:30 AUD Westpac Consumer Confidence Jun 0.50% 2.20%
    01:30 AUD NAB Business Confidence May 2 -1
    01:30 AUD NAB Business Conditions May 0 2
    06:00 JPY Machine Tool Orders Y/Y May 7.70%
    06:00 GBP Claimant Count Change May 4.5K 5.2K
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Apr 5.50% 5.60%
    06:00 GBP Average Earnings Including Bonus 3M/Y Apr 5.50% 5.50%
    06:00 GBP ILO Unemployment Rate (3M) Apr 4.60% 4.50%
    08:30 EUR Eurozone Sentix Investor Confidence Jun -6 -8.1
    10:00 USD NFIB Business Optimism Index May 95.9 95.8

     



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  • Markets Hold Breath as US-China Trade Talks Resume

    Markets Hold Breath as US-China Trade Talks Resume


    The cautious optimism in Asia failed to spill into European markets, as investors turned cautious ahead of today’s US-China trade talks in London. While no one expects a sweeping resolution to the broader trade conflict, hopes are centered on incremental progress—particularly around rare earths.

    Kevin Hassett, Director of the US National Economic Council, struck a pragmatic tone in his remarks today, emphasizing the goal of securing tangible commitments from China on resuming critical mineral exports. Hassett stated that the meeting’s purpose was to verify China’s seriousness, aiming for “a short meeting with a big, strong handshake.” He added that a mutual agreement could result in immediate easing of US export controls, clearing the path for further negotiations.

    Meanwhile, parallel trade efforts are underway between the US and Japan. Japan’s top trade envoy, Ryosei Akazawa, is reportedly planning his fourth US trip in as many weeks to engage in a sixth round of ministerial talks. While the discussions are said to be progressing, Akazawa conceded that the two sides have yet to reach a consensus. The urgency is growing ahead of the upcoming G7 summit in Canada, where a leaders’ meeting between the US and Japan may be on the agenda.

    In currency markets, Kiwi is leading gains today, followed by Aussie and Japanese Yen. On the other end, Swiss Franc is the weakest performer, trailed by Dollar and Euro. Sterling and Loonie are mixed in the middle.

    On the metals front, a divergence is forming between Gold and Silver. Gold is continuing its retreat, while Silver remains on a firm upward path. Technically, further rise in Silver is expected as long as 34.40 support holds, with focus on 100% projection of 28.28 to 33.66 from 31.65 at 37.03. Decisive break there could prompt further acceleration to 161.8% projection at 40.35.

    In Europe, at the time of writing, FTSE is down -0.24%. DAX is down -0.77% CAC is down -0.35%. UK 10-year yield is up 0.013 at 4.666. Germany 10-year yield is up 0.01 at 2.589. Earlier in Asia, Nikkei rose 0.92%. Hong Kong HSI rose 1.63%. China Shanghai SSE rose 0.43%. FTSE rose 0.05%. Japan 10-year JGB yield rose 0.019 to 1.479.

    ECB Kazimir: Likely at end of cuts, eyes summer data for fine-tuning

    Slovak ECB Governing Council member Peter Kazimir signaled a possible end to the current easing cycle, writing in an opinion piece today that “we’re nearly done with, if not already at the end of, the easing cycle.”

    While acknowledging the potential for weaker-than-expected economic growth in the eurozone, Kazimir emphasized the importance of staying focused on inflation to, which he warned could surprise to the upside.

    Looking ahead, Kazimir stressed the need for flexibility, noting that “incoming data throughout the summer will provide a clearer picture and guide our decisions on whether further fine-tuning is needed.”

    China’s CPI falls -0.1% yoy in May, negative for fourth month

    China’s headline CPI stayed in negative territory for the fourth consecutive month in May, coming in at -0.1% yoy, slightly better than the expected -0.2% yoy.

    The persistent softness in overall inflation was largely driven by a sharp -6.1% yoy decline in energy prices, which alone shaved off nearly half a percentage point from the annual CPI reading.

    On a monthly basis, CPI fell -0.2% mom, with energy again dragging down the figure through a -1.7% mom decline.

    In contrast, core inflation, which strips out food and energy prices, rose to 0.6% yoy, the highest level since January.

    Producer price pressures continue to weaken further, with PPI dropping to -3.3% yoy from -2.7% yoy previously, marking the deepest contraction in nearly two years. Wholesale prices have now been stuck in deflation since October 2022.

    China’s trade surplus widens to USD 103.2B in May, US exports slump -34.5% yoy

    China’s trade surplus widened to USD 103.2B in May, exceeding expectations of USD 101.3, even as headline export and import figures undershot forecasts. Exports rose 4.8% yoy, just shy of the 5.0% yoy consensus. Imports fell -3.4% yoy, a sharper drop than the anticipated -0.9% yoy.

    Exports to the US plunged -34.5% yoy, highlighting the entrenched trade tensions despite Washington’s partial tariff rollback in April. However, the impact was cushioned by robust growth in exports to ASEAN (15% yoy), the European Union (12% yoy), and Africa (33% yoy).

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1359; (P) 1.1409; (R1) 1.1445; More…

    No change in EUR/USD’s outlook and intraday bias stays neutral. Price actions from 1.1572 are seen as a corrective pattern to rally from 1.0716. While rebound from 1.1064 might extend, strong resistance should emerge from 1.1572 to limit upside. On the downside, break of 1.1356 support will argue that the correction is already in the third leg, and target 1.1209 support for confirmation.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0894) holds.


    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Manufacturing Sales Q1 5.10% 1.10% 3.00%
    23:50 JPY Bank Lending Y/Y May 2.40% 2.40% 2.40% 2.30%
    23:50 JPY Current Account (JPY) Apr 2.31T 2.59T 2.72T
    23:50 JPY GDP Q/Q Q1 F 0.00% -0.20% -0.20%
    23:50 JPY GDP Deflator Y/Y Q1 F 3.30% 3.30% 3.30%
    01:30 CNY CPI Y/Y May -0.10% -0.20% -0.10%
    01:30 CNY PPI Y/Y May -3.30% -3.00% -2.70%
    03:00 CNY Trade Balance (USD) May 103.2B 101.1B 96.2B
    05:00 JPY Eco Watchers Survey: Current May 44.4 43.9 42.6
    14:00 USD Wholesale Inventories M/M Apr F 0% 0%

     



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  • Job Data and US-China Rapprochement Fuel Dollar Rebound Prospects

    Job Data and US-China Rapprochement Fuel Dollar Rebound Prospects


    Risk sentiment improved last week, driven by the solid US non-farm payroll report that helped ease fears of a deepening slowdown. Adding to the optimism was a thaw in US-China relations. While no concrete breakthrough emerged, the fact that both sides were willing to engage again offered some relief to global markets weary of tariff escalations.

    Dollar capitalized on this shift late in the week, rebounding after a string of weak data had previously weighed on sentiment. Although the greenback still finished as the second worst performer for the week, the technical picture points to scope for a near-term bounce.

    By contrast, Yen was the worst performer, pressured by improving risk appetite and technical breakouts in crosses, with further weakness likely if sentiment remains supported. Swiss Franc also underperformed, dragged down not just by reduced demand for safe-haven assets but also by a negative inflation print, which solidified expectations of another SNB rate cut this month.

    In the middle of the pack were Euro and Loonie. Both ECB and BoC delivered rate decisions in line with expectations. ECB cut by 25bps and BoC held steady. Yet, their respective advances against Dollar faded as improving trade prospects and rebounding US yields provided a floor for the greenback.

    NFP Rescues Sentiment, Fed Cut Bets Recede Further

    After a week dominated by downbeat US data—particularly the contractionary ISM manufacturing and services, sentiment got a needed boost from May’s non-farm payrolls. While hiring did slow, the headline print of 139k jobs, paired with a steady unemployment rate and stronger-than-expected wage growth, helped restore some confidence in the durability of the US labor market.

    For now, the economy appears to be holding up reasonably well against the growing cloud of tariff uncertainty. Rather than crumbling under pressure, the labor market continues to show resilience, suggesting the real economic drag from trade tensions may not fully materialize until later in the year—if at all.

    In response, market pricing for Fed policy has shifted. A rate hold at the June FOMC meeting is now virtually assured. Fed fund futures currently show an 83% chance of no change in July, up from 74% a week ago. September pricing has also adjusted notably, with odds of a hold rising to nearly 40%, from just 28% last week.

    This shift in expectations aligns with the more cautious wing of the Fed. As Minneapolis Fed President Neel Kashkari recently explained, two camps have emerged within the FOMC. One favors looking through tariff-induced price shocks as temporary and advocates rate cuts to support growth. The other sees a more prolonged inflation threat from drawn-out trade disputes and retaliatory measures, suggesting policy caution is warranted.

    Fed Governor Adriana Kugler has added detail to this latter view, identifying three channels through which tariffs may embed inflation. First, she cautioned that higher short-run inflation expectations may give firms more pricing power, extending inflation’s lifespan. Second, “opportunistic pricing” could allow businesses to raise prices even on goods unaffected by tariffs. Finally, she warned that reduced productivity, stemming from cost pressures and weakened investment, could feed longer-term inflation.

    For now, the labor market’s endurance gives the inflation-hawk camp more credibility.

    Renewed US-China Trade Talks Offer Glimmer of Hope

    Signs of thawing in US-China tensions added some additional cautious optimism. The long-awaited phone call between US President Donald Trump and Chinese President Xi Jinping finally took place last week, breaking weeks of silence and geopolitical posturing. More critically, the conversation was not just symbolic—it quickly translated into concrete steps, including a formal resumption of trade negotiations.

    Trump announced that Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer will meet Chinese counterparts in London on Monday for renewed trade talks. The resumption of dialogue is a modest but meaningful shift away from the stalemate that has plagued relations.

    Adding to the sense of tentative de-escalation, Beijing has quietly taken steps to ease the pressure on US supply chains. According to a Reuters report, China granted temporary export licenses to rare-earth suppliers servicing the top three US automakers. This comes after Beijing’s April decision to restrict exports of rare earths and magnets—critical inputs for automotive, aerospace, and tech industries—sparked widespread supply chain disruptions.

    The impact of these restrictions is already visible. Ford recently suspended production of its Explorer SUV at its Chicago plant for a week due to a rare-earth shortage. That incident highlights how deeply reliant advanced manufacturing has become on these materials—and how easily geopolitical leverage can disrupt production cycles. Beijing’s decision to grant temporary relief may signal a tactical concession ahead of negotiations, without altering its broader strategic posture.

    Wall Street Ends Higher But Rally May Stall at Key Levels

    Despite ending the week on a positive note, major US stock indexes are showing signs of fatigue, with momentum staying unconvincing. Any further gains are likely to face stiff resistance ahead. Meanwhile, Dollar Index continued to struggle to breakout from recently established range. There is room for a bounce in Dollar as the near term consolidation is set to extend.

    DOW’s rise from 36611.78 is still seen as the second leg of the corrective pattern from 45073.63 high. While further rally might be seen, upside should be limited by 45073.63 to bring near term reversal. Also, considering that D MACD is now staying below signal line, firm break of 41352.09 support will at least indicate short term topping, and bring deeper pullback.

    NASDAQ’s picture is similar. Rise from 14784.03 is seen as the second leg of the consolidation pattern from 20204.58. While further rally might be seen, strong resistance should emerge from 20204.58 to bring near term reversal. Considering that D MACD is staying below signal line, firm break of 18599.68 support will at least indicate short term toping, and bring deeper pullback.

    Dollar index struggled to find decisive momentum to break through 97.92 low. Price action from there are seen as a corrective pattern to the decline from 110.17. Break of 100.54 resistance will indicate that the third leg of the consolidations has started, and target 38.2% retracement of 110.17 to 97.92 at 102.60.

    BoC Hold, ECB Cuts, EUR/CAD Ranges

    Two major central banks, BoC and ECB, delivered expected decisions last week. BoC left its overnight rate unchanged at 2.75% for the second straight meeting, as policymakers await greater clarity on the impact of global trade negotiations. While markets expect easing to resume later this year, the timing remains unclear. The central bank appears willing to act in the second half of the year but is seeking more definitive economic data before committing to further policy moves.

    Meanwhile, ECB followed through with a 25bps rate cut, lowering its deposit rate to 2.00%. After the meeting, a number of Governing Council members hinted at a possible pause in July. Some Governing Council members went further, suggesting the ECB may have already “won the battle” against inflation. With the policy rate now considered deep in neutral territory, the threshold for additional easing has risen substantially, especially amid persistent global trade and geopolitical risks.

    Technically, EUR/CAD continued to gyrate inside established range last week, as consolidation pattern from 1.5959 extended. Another dip cannot be ruled out in the near term. But downside should be contained by 1.5402 cluster support (38.2% retracement of 1.4483 to 1.5959 at 1.5395 to bring rebound. On the upside, break of 1.5759 resistance will bring retest of 1.5959 high.

    EUR/USD Weekly Outlook

    EUR/USD edged higher to 1.1494 last week but lost momentum again. Initial bias stays neutral this week first. Price actions from 1.1572 are seen as a corrective pattern to rally from 1.0716. While rebound from 1.1064 might extend, strong resistance should emerge from 1.1572 to limit upside. On the downside, break of 1.1356 support will argue that the correction is already in the third leg, and target 1.1209 support for confirmation.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0875) holds.

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1278) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



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  • Dollar Rebounds as NFP and Wages Beat Forecasts, Tariff Impact Yet to Materialize

    Dollar Rebounds as NFP and Wages Beat Forecasts, Tariff Impact Yet to Materialize


    Dollar staged a firm comeback today following slightly better-than-expected non-farm payroll figures, with job growth at 139k and wage growth coming in strong at 0.4% mom. While not a blowout report, the data was enough to alleviate immediate concerns of a sharp labor market slowdown. Stock futures also advanced, suggesting that investors are reassessing the near-term risks from tariffs and focusing instead on the resilience in headline economic indicators.

    Despite ongoing caution over the economic toll of US trade policy, particularly with the expiration of the 90-day tariff truce looming in July, the effects haven’t yet registered decisively in labor markets. In fact, the stronger-than-expected wage growth might reinforce some Fed officials’ inflation concerns, supporting the market consensus that the next rate cut, if any, is unlikely before September.

    Outside of the US, Loonie is also showing strength, underpinned by solid domestic jobs data. Aussie and Kiwi are mildly firmer too, buoyed by broader risk appetite. Meanwhile, safe havens are under pressure, with Yen and Swiss Franc the weakest of the day as investors rotate into higher-yielding and risk-correlated assets. Euro and Sterling are softer, but holding within familiar ranges.

    In Europe, at the time of writing, FTSE is up 0.10%. DAX is down -0.15%. CAC is up 0.14%. UK 10-year yield is up 0.03 at 4.656. Germany 10-year yield is down -0.11 at 2.573. Earlier in Asia, Nikkei rose 0.50%. Hong Kong HSI fell -0.48%. China Shanghai SSE rose 0.04%. Japan 10-year JGB yield fell -0.002 to 1.459.

    US NFP grows 139k in May, unemployment rate steady at 4.2%

    US non-farm payroll employment rose 139k in May, above expectation of 130k. That’s slightly below average monthly gain of 149k over the prior 12 months.

    Unemployment rate was unchanged at 4.2%, matched expectations. Participation rate fell from 62.6% to 62.4%.

    Average hourly earnings rose 0.4% mom, above expectation of 0.3% mom. Over the past 12 months, average hourly earnings have increased by 3.9% yoy.

    Canada’s employment grow 8.8k in May, unemployment rate rises to 7%

    Canada’s employment grew 8.8k in May, better than expectation of -11.9k fall. Growth in full-time employment (+58k; +0.3%) was offset by a decline in part-time work (-49k; -1.3%).

    Unemployment rate rose from 6.9% to 7.0%, matched expectations. Employment rate held steady at 60.8%.

    Average hourly wages among employees increased 3.4% you, same as in April.

    ECB officials signal pause yesterday’s rate cut, emphasize flexibility

    One day after ECB delivered its eighth rate cut in this easing cycle, a coordinated message emerged from several Governing Council members: ECB is not committing to further immediate action.

    Latvian central banker Martins Kazaks was particularly blunt, stating that markets should not expect a rate cut at every meeting. He emphasized the value of preserving “policy space”.

    “We don’t get much data between now and the July meeting so it may well be the case that we pause,” Kazaks said. “But uncertainty remains very high, the political situation may change every day. So forward guidance isn’t your friend in these circumstances.”

    Greek central bank chief Yannis Stournaras echoed this sentiment, calling ECB’s work on inflation “nearly done,” while warning that further cuts would require growth to fall short of current forecasts.

    Estonian Governor Madis Muller also struck a cautious tone, suggesting the rate-cutting cycle may be “almost finished,” but acknowledged that visibility is limited. All three policymakers stressed that decisions ahead would remain data-driven, and that it was too early to rule out any scenario.

    French Governor François Villeroy de Galhau and Lithuania’s Gediminas Šimkus declared victory over inflation. However, both underlined the importance of maintaining flexibility in the face of mounting global uncertainty. Villeroy also reassured that “We have tools to react if there’s deflation.”

    Eurozone retail sales inch up 0.1% mom April, mixed national trends

    Eurozone retail sales rose just 0.1% mom in April, falling short of expectations for a 0.2% mom rise. Modest gains in food, drink, and tobacco sales (+0.5%) and a solid rebound in automotive fuel purchases (+1.3%) were offset by a -0.3% decline in non-food product sales.

    Across the EU, retail sales rose a more robust 0.7% mom, but the underlying data painted a sharply divided picture. Poland led with a remarkable 7.5% surge, followed by Slovakia and Sweden at 2.4%. In contrast, Germany—the region’s largest economy—saw a -1.1% drop, dragging on the overall Eurozone figure.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1401; (P) 1.1448; (R1) 1.1491; More…

    Intraday bias in EUR/USD is turned neutral with current retreat. While another rise might be seen, strong resistance could emerge from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1356 support will indicate that the corrective pattern from 1.1572 might have started the third leg, and target 1.1209 support for confirmation.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Overall Household Spending Y/Y Apr -0.10% 1.50% 2.10%
    05:00 JPY Leading Economic Index Apr P 103.4 104 104.1 108.1
    06:00 EUR Germany Industrial Production M/M Apr -1.40% -0.90% 3.00% 2.30%
    06:00 EUR Germany Trade Balance (EUR) Apr 14.6B 20.2B 21.1B
    07:00 CHF Foreign Currency Reserves (CHF) May 704B 703B
    09:00 EUR GDP Q/Q Q1 F 0.60% 0.40% 0.30%
    09:00 EUR Eurozone Employment Change Q/Q Q1 F 0.20% 0.30% 0.30%
    09:00 EUR Eurozone Retail Sales M/M Apr 0.10% 0.20% -0.10% 0.40%
    12:30 CAD Net Change in Employment May 8.8K -11.9K 7.4K
    12:30 CAD Unemployment Rate May 7.00% 7.00% 6.90%
    12:30 USD Nonfarm Payrolls May 139K 130K 177K 147K
    12:30 USD Unemployment Rate May 4.20% 4.20% 4.20%
    12:30 USD Average Hourly Earnings M/M May 0.40% 0.30% 0.20%

     



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  • Euro Firms as ECB Lagarde Stays Confident; Silver Surges on Shift from US Assets

    Euro Firms as ECB Lagarde Stays Confident; Silver Surges on Shift from US Assets


    Euro surged against Dollar after ECB President Christine Lagarde struck a relatively confident tone in her post-meeting press conference. She downplayed immediate trade war fallout, stating that U.S. tariffs would likely impact growth more in 2026, by which time EU fiscal expansion—particularly military spending—would help cushion the blow.

    Also, Lagarde emphasized that the ECB is well positioned to respond to prevailing uncertainties. There was no explicit signal of a pause in the easing cycle, but the emphasis on a “meeting-by-meeting” approach suggests the ECB will tread carefully going forward.

    Meanwhile, US futures ticked up after Chinese state media reported that President Trump and President Xi had held a phone call, providing a modicum of relief amid heightened trade tensions. The news sparked a mild rally in US equity futures and lent support to risk-sensitive currencies like the Australian and Canadian Dollars.

    However, Dollar itself faced renewed pressure following a surprising jump in initial jobless claims. The data added to a string of disappointing US labor signals this week—weak ADP job growth and declines in ISM employment components—raising the risk of a downside surprise in Friday’s NFP report.

    Elsewhere, Silver extended its rally and surged to its highest level in 13 years. The move reflects growing investor demand for tangible, supply-constrained assets amid structural uncertainties around US fiscal and trade policies.

    For decades, persistent US current account deficits were offset by capital inflows into Treasuries and equities. That dynamic is now being reassessed, as sovereign wealth funds and large institutional investors rebalance away from the US due to rising geopolitical risk, trade protectionism, and concerns over long-term debt sustainability. This structural shift has driven renewed interest in precious and industrial metals.

    Technically, next near term target for Silver is 100% projection of 28.28 to 33.66 from 31.65 at 37.03. Decisive break there will pave the way to 161.8% projection at 40.35. For now, outlook will remain bullish as long as 33.66 resistance turned support holds, in case of retreat.

    In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.52%. CAC is up 0.24%. UK 10-year yield is up 0.01 at 4.621. Germany 10-year yield is up 0.031 at 2.558. Earlier in Asia, Nikkei fell -0.51%. Hong Kong HSI rose 1.07%. China Shanghai SSE rose 0.23%. Singapore Strait Times rose 0.35%. Japan 10-year JGB yield fell -0.044 to 1.461.

    US initial jobless claims jump to 247k vs exp 235k

    US initial jobless claims rose 8k to 247k in the week ending May 30, above expectation of 235k. Four-week moving average of initial claims rose 4.5k to 235k. Continuing claims fell -3k to 1904k in the week ending May 24. Four-week moving average of continuing claims rose 8k to 1895k, highest since November 27, 2021.

    ECB cuts 25bps, downgrades inflation forecasts

    ECB lowered deposit rate by 25bps to 2.00% as widely expected. The central bank cited “exceptional uncertainty,” and its commitment to a data-dependent, meeting-by-meeting approach, refraining from offering forward guidance on the future path of interest rates.

    In the updated economic projections, ECB now expects headline inflation to average 2.0% in 2025 and 1.6% in 2026—down 0.3 percentage points from March’s forecast. Headline inflation would then return to target at 2.0% in 2027. The revision was largely due to lower energy prices and a stronger Euro.

    Core inflation is expected to ease to 2.4% in 2025 and 1.9% in both 2026 and 2027, broadly unchanged from previous forecasts.

    On growth, ECB projects real GDP to expand by 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. While the 2025 GDP forecast remains unchanged due to a strong first quarter, ECB acknowledged that the remainder of the year looks weaker, in part due to trade-related uncertainty.

    Weak global demand and potential retaliation to US tariffs could continue to drag on exports and business investment. However, rising public investment, particularly in defense and infrastructure, is expected to lend some support to growth in the medium term.

    Eurozone PPI slumps -2.2% mom on energy prices

    Eurozone PPI dropped sharply by -2.2% mom in April, steeper than the expected -1.8% mom. decline. Annual PPI rose just 0.7% yoy, below forecasts of 1.2% yoy. PPI ex-energy was up 0.1% mom, 1.1% yoy

    The drag on Eurozone PPI was driven primarily by a -7.7% mom fall in energy prices. Prices for intermediate goods also declined slightly by -0.1% mom, while capital goods prices held flat. In contrast, consumer goods offered some offset, with durable and non-durable segments rising 0.1% mom and 0.3% mom respectively.

    The broader EU showed a similar picture, with PPI falling -2.1% mom and rising just 0.6% yoy. Country-level data revealed significant monthly drops in industrial prices in France (-4.3%), Ireland (-4.0%), and Bulgaria (-4.9%). Only a handful of smaller economies like Cyprus and Malta posted slight increases.

    Japan’s real wages fall -1.8% yoy in April, down for the fourth month

    Real wages in Japan fell by -1.8% yoy in April, marking the fourth consecutive month of decline as persistent inflation continued to erode household purchasing power.

    While nominal wages rose 2.3% yoy, slightly below the expected 2.6%, gains were outpaced by a still-elevated consumer inflation rate of 4.1%, driven by rising food and energy costs. The inflation metric used by the labor ministry has remained near 4% for five straight months, keeping real income in negative territory.

    On the positive side, base salaries rose 2.2% yoy, the fastest increase in four months and well above March’s 1.4% yoy gain. This also marked the 42nd consecutive month of growth in regular pay. Overtime pay rebounded with a modest 0.8% yoy rise, while special payments grew 4.1% yoy.

    China’s Caixin PMI composite falls to 49.6, contracts for first time since 2022

    China’s Caixin PMI Services rose modestly from 50.7 to 51.1 in May, aligning with expectations. However, the gain in services was not enough to offset the drag from manufacturing, as PMI Composite slipped into contraction at 49.6, its first reading below 50 since December 2022.

    Wang Zhe of Caixin Insight Group noted that the manufacturing slump was weighing heavily on the overall market, with new export orders remaining “sluggish” across both goods and services. Although input costs rose slightly, firms were unable to pass these on to customers, with selling prices continuing to fall and compressing profit margins.

    Caixin flagged “unfavorable factors remain relatively prevalent”, with growing external trade uncertainty and “noticeable weakening” in macro indicators at the start of Q2. The “significantly intensified”downward pressure raises the urgency for further targeted policy support.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1371; (P) 1.1403; (R1) 1.1449; More…

    EUR/USD’s rebound from 1.1064 resumed by breaking through 1.1453 today. Intraday bias is back on the upside for 1.1572 high. Strong resistance could be seen there to limit upside, at least on first attempt. On the downside, On the downside, break of 1.1356 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1209 support. Nevertheless, decisive break of 1.1572 will confirm larger up trend resumption.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Apr 2.30% 2.60% 2.30%
    01:30 AUD Trade Balance (AUD) Apr 5.41B 6.05B 6.90B 6.89B
    01:45 CNY Caixin Services PMI May 51.1 51.1 50.7
    06:00 EUR Germany Factory Orders M/M Apr 0.60% -1.10% 3.60% 3.40%
    07:00 CHF Unemployment Rate May 2.90% 2.80% 2.80%
    08:30 GBP Construction PMI May 47.9 47.2 46.6
    09:00 EUR Eurozone PPI M/M Apr -2.20% -1.80% -1.60% -1.70%
    09:00 EUR Eurozone PPI Y/Y Apr 0.70% 1.20% 1.90%
    11:30 USD Challenger Job Cuts Y/Y May 47.00% 62.70%
    12:15 EUR ECB Deposit Rate 2.00% 2.00% 2.25%
    12:30 CAD Trade Balance (CAD) Apr -7.1B 0.2B -0.5B -2.3B
    12:30 USD Initial Jobless Claims (May 30) 247K 235K 240K 239K
    12:30 USD Trade Balance (USD) Apr -61.6B -117.2B -140.5B -138.3B
    12:30 USD Nonfarm Productivity Q1 -1.50% -0.80% -0.80%
    12:30 USD Unit Labor Costs Q1 6.60% 5.70% 5.70%
    12:45 EUR ECB Press Conference
    14:00 CAD Ivey PMI May 48.3 47.9
    14:30 USD Natural Gas Storage 111B 101B

     



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  • Markets Unshaken by Weak US Data, Await Guidance from ECB

    Markets Unshaken by Weak US Data, Await Guidance from ECB


    The US markets remain remarkably steady overnight despite a string of soft US economic releases overnight. Disappointing job and services data failed to trigger any meaningful selloff in equities, while Dollar edged slightly lower. Market pricing for Fed policy remains broadly unchanged, with a 96% chance of a hold at the upcoming meeting and a 70% probability for no change in July. Still, Friday’s non-farm payrolls report looms as a potential catalyst for repricing should the labor market disappoint more sharply than expected.

    On the trade front, tensions are simmering as the US formally doubled its tariffs on imported steel and aluminum. Canada is now openly preparing retaliatory measures should ongoing negotiations with Washington break down. Prime Minister Mark Carney told lawmakers that Canada is engaged in “intensive negotiations” but is also preparing reprisal tariffs in parallel.

    Meanwhile, EU-US trade talks appear to be moving in a more constructive direction. After a meeting in Paris, EU negotiator Maros Sefcovic and US Trade Representative Jamieson Greer described the discussions as productive and advancing “at pace.” Sefcovic noted the talks are now “very concrete,” and Greer echoed that sentiment, signaling genuine willingness from both sides to achieve a reciprocal agreement.

    Attention now turns to ECB’s policy decision later today. A 25 bps rate cut is fully priced in, with the real focus on whether President Lagarde signals a pause for July. Given the subdued market response to recent central bank events and the current range-bound conditions, it remains to be seen whether today’s meeting will break the stalemate .

    In weekly performance terms, Dollar is currently the worst performer, followed by Swiss Franc and Loonie. At the other end of the spectrum, Kiwi leads gains, with the Aussie and Sterling also modestly firmer. Euro and Ten are trading in the middle of the pack. Yet, almost all major pairs and crosses remain trapped within last week’s ranges.

    In Asia, at the time of writing, Nikkei is down -0.53%. Hong Kong HSI is up 0.60%. China Shanghai SSE is up 0.08%. Singapore Strait Times is up 0.10%. Japan 10-year JGB yield is down -0.039 at 1.466. Overnight, DOW fell -0.22%. S&P 500 rose 0.01%. NASDAQ rose 0.32%. 10-year yield fell -0.095 to 4.365.

    Looking ahead, German factory orders, UK PMI construction and Eurozone PPI will be released in European session, but the main event is defintely ECB rate decision and press conference. Later in the data, Canada will release trade balance and Ivey PMI. US will release jobless claims and trade balance.

    ECB to cut, focus on Lagarde’s signal for a July pause

    ECB is set to lower its deposit rate by 25 bps to 2.00% today, marking the eighth cut of this easing cycle and bringing policy deep into neutral territory. With inflation falling back below the 2% target in May, the case for further easing is clear in the near term. However, the main focus will be on President Christine Lagarde’s forward guidance, particularly whether she signals a July pause in rate cuts, and the ECB’s updated economic projections.

    The case for caution is clear. The Eurozone faces a highly uncertain backdrop with multiple crosscurrents. Trade war remain front and center, with US President Donald Trump’s tariff agenda weighing heavily on confidence and investment. Retaliatory moves from the EU could compound the hit to activity. At the same time, the surprised surge in Euro risks exerting additional downward pressure on inflation. Amid this uncertainty, ECB is expected to lower both its 2025 growth and inflation forecasts, acknowledging the softening outlook.

    At the same time, medium-term fundamentals could provide some support. The EU’s major rearmament plans and Germany’s fiscal pivot to expansion are likely to bolster investment and domestic demand over time. That said, these structural measures will take time to feed through.

    A July pause would allow policymakers to evaluate how these domestic tailwinds and external headwinds ultimately shape the outlook, particularly as geopolitical and policy unpredictability continues to cloud the picture.

    Technically, EUR/CHF’s near term price actions from 0.9445 are more likely than not a triangle consolidation pattern. That is, rise from 0.9218 is in favor to resume, even as a corrective move. Break of 0.9389 minor resistance will be a bullish sign and further break of 0.9419 should sent EUR/CHF through 0.9445 resistance.

    Japan’s real wages fall -1.8% yoy in April, down for the fourth month

    Real wages in Japan fell by -1.8% yoy in April, marking the fourth consecutive month of decline as persistent inflation continued to erode household purchasing power.

    While nominal wages rose 2.3% yoy, slightly below the expected 2.6%, gains were outpaced by a still-elevated consumer inflation rate of 4.1%, driven by rising food and energy costs. The inflation metric used by the labor ministry has remained near 4% for five straight months, keeping real income in negative territory.

    On the positive side, base salaries rose 2.2% yoy, the fastest increase in four months and well above March’s 1.4% yoy gain. This also marked the 42nd consecutive month of growth in regular pay. Overtime pay rebounded with a modest 0.8% yoy rise, while special payments grew 4.1% yoy.

    China’s Caixin PMI composite falls to 49.6, contracts for first time since 2022

    China’s Caixin PMI Services rose modestly from 50.7 to 51.1 in May, aligning with expectations. However, the gain in services was not enough to offset the drag from manufacturing, as PMI Composite slipped into contraction at 49.6, its first reading below 50 since December 2022.

    Wang Zhe of Caixin Insight Group noted that the manufacturing slump was weighing heavily on the overall market, with new export orders remaining “sluggish” across both goods and services. Although input costs rose slightly, firms were unable to pass these on to customers, with selling prices continuing to fall and compressing profit margins.

    Caixin flagged “unfavorable factors remain relatively prevalent”, with growing external trade uncertainty and “noticeable weakening” in macro indicators at the start of Q2. The “significantly intensified”downward pressure raises the urgency for further targeted policy support.

    Fed’s Beige Book: General tone slightly pessimistic and uncertain

    Fed’s Beige Book report paints a picture of slowing US economy marked by pervasive caution and subdued sentiment.

    Economic activity was reported to have “declined slightly” overall, with half of the twelve Districts seeing slight to moderate declines, while three reported no change and three noted slight growth. The general tone remains “slightly pessimistic and uncertain,” echoing the previous report, as elevated policy and economic uncertainty continues to weigh on both business and household decision-making.

    Consumer spending trends were mixed, with most Districts reporting little change or modest declines. However, in some cases, spending picked up on goods expected to be affected by tariffs—suggesting front-loading behavior amid trade concerns. Employment levels were largely stable, while price pressures persisted, rising at a moderate pace.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3645; (P) 1.3688; (R1) 1.3724; More…

    USD/CAD’s decline from 1.4791 is still in progress and intraday bias stays on the downside. Next target is 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. Firm break there will pave the way to 100% projection at 1.3349. On the upside, outlook will stay bearish as long as 1.3860 resistance holds, in case of recovery.

    In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Apr 2.30% 2.60% 2.30%
    01:30 AUD Trade Balance (AUD) Apr 5.41B 6.05B 6.90B 6.89B
    01:45 CNY Caixin Services PMI May 51.1 51.1 50.7
    05:45 CHF Unemployment Rate May 2.80% 2.80%
    06:00 EUR Germany Factory Orders M/M Apr -1.10% 3.60%
    08:30 GBP Construction PMI May 47.2 46.6
    11:30 USD Challenger Job Cuts Y/Y May 62.70%
    12:15 EUR ECB Deposit Rate 2.00% 2.25%
    12:30 CAD Trade Balance (CAD) Apr 0.2B -0.5B
    12:30 USD Initial Jobless Claims (May 30) 235K 240K
    12:30 USD Trade Balance (USD) Apr -117.2B -140.5B
    12:30 USD Nonfarm Productivity Q1 -0.80% -0.80%
    12:30 USD Unit Labor Costs Q1 5.70% 5.70%
    12:45 EUR ECB Press Conference
    14:00 CAD Ivey PMI May 48.3 47.9
    14:30 USD Natural Gas Storage 111B 101B

     



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  • Muted Trading Persists as Trump Pressures Fed after ADP Miss

    Muted Trading Persists as Trump Pressures Fed after ADP Miss


    Trading remains subdued as markets drift into the US session, with little conviction across asset classes. US futures dipped slightly after a dismal ADP employment report showing only 37k job additions in May, sharply below expectations. Still, the reaction was contained, with no clear evidence of a broad risk-off move.

    US President Donald Trump added to the noise with another jab at Fed on Truth Social: “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE.” While such commentary adds political pressure, Fed officials have consistently stated they need to remain patient given the elevated uncertainty surrounding US tariff policies and ongoing trade talks. Fed is clearly reluctant to act prematurely.

    Trade remains a key driver of sentiment. The latest round of higher US tariffs on steel and aluminium took effect on Wednesday, affecting all partners except the UK, which has a preliminary agreement in place. Today also marks the Trump administration’s self-imposed deadline for trading partners to submit their “best offers” to avoid sweeping tariffs set to begin in early July. Markets are likely to see a pickup in volatility as the tariff pause approaches its final weeks.

    In the currency markets, Dollar is currently the worst performer for the day so far, followed by Loonie and Yen. At the other end, Aussie is leading gains, followed by Kiwi and Swiss Franc. Euro and Pound are holding steady in the middle of the pack. Despite some movement, major currency pairs remain trapped within last week’s ranges.

    USD/CAD may come into sharper focus later in the session as BoC delivers its rate decision, alongside the release of the US ISM Services report.

    Technically, USD/CAD remains on the defensive and poised for further decline as long as the 1.3860 resistance level holds. 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603 might provide some support to bring rebound. However, decisive break there could prompt downside acceleration to 100% projection at 1.3349 rather quickly.

    In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.39%. CAC is up 0.57%. UK 10-year yield is down -0.041 at 4.606. Germany 10-year yield is flat at 2.523. Earlier in Asia, Nikkei rose 0.80%. Hong Kong HSI rose 0.60%. China Shanghai SSE rose 0.42%. Singapore Strait Times is up 0.24%. Japan 10-year JGB yield rose 0.023 to 1.505.

    US ADP jobs rise only 37k, but wages growth stays firm

    The US private sector added just 37k jobs in May, sharply below expectations of 120k, according to the ADP report.

    Weakness was most apparent in goods-producing sectors, which shed -2k jobs, while service providers managed a modest gain of 36k. By company size, medium-sized businesses led with 49k new jobs, while small firms lost -13k and large firms shed -3k.

    Despite the hiring slowdown, wage pressures remained firm. Annual pay growth for job-stayers held steady at 4.5%, while job-changers saw a 7% increase, unchanged from April.

    Nela Richardson, ADP’s chief economist, acknowledged the slowdown in hiring but noted that wage pressures have not yet eased meaningfully—suggesting lingering tightness in segments of the labor market even as overall momentum weakens.

    UK PMI services finalized at 50.9, rebound as tariff concerns ease

    The UK services sector returned to modest growth in May, with PMI Services finalized at 50.9, rebounding from April’s 27-month low of 49.0. Composite PMI also edged into expansion at 50.3, up from 48.5.

    Tim Moore of S&P Global highlighted that easing fears over US tariffs, firmer global markets, and renewed client confidence underpinned the service sector’s recovery. Business sentiment for the year ahead climbed to a seven-month high, driven by investment plans and improved sales expectations.

    However, the underlying job market remains soft. The eight-month stretch of declining employment in the sector now marks the longest non-pandemic downturn since the global financial crisis.

    But encouragingly, input cost inflation eased from April’s peak, while competitive pricing pressures led to the slowest increase in service charges since October.

    Eurozone PMI composite finalized at 50.2, ECB cuts and Germany to suhion tariffs impact ahead

    Eurozone’s services sector contracted modestly in May, with the final PMI Services reading falling to 49.7, down from April’s 50.1, marking a six-month low. This decline pulled the Composite PMI down to 50.2, indicating only marginal overall growth in private sector activity.

    The divergence in national performance was notable: Italy led with a 13-month high of 52.5, while Germany and France both remained in contraction, with Germany posting a five-month low of 48.5 and France improving to a nine-month high of 49.3.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, expressed confidence that expected ECB rate cuts and anticipated fiscal support from Germany would help cushion the impact of rising tariffs and growing uncertainty.

    However, inflation signals from the PMI survey were mixed. Services sector sales price growth moderated again, which may reassure the ECB on the disinflation front. Still, cost pressures picked up slightly, which could complicate the ECB’s job over the longer term. Nevertheless, with goods prices easing more quickly and overall inflation slipping below target.

    Australia’s GDP grows only 0.2% qoq in Q1, as weather and public investment drag

    Australia’s GDP expanded just 0.2% qoq in Q1, falling short of expectations for 0.4% qoq growth. On an annual basis, GDP rose 1.3% yoy. However, GDP per capita declined by -0.2% qoq, marking a renewed contraction in individual economic output.

    The ABS noted that severe weather disrupted key sectors including mining, tourism, and shipping, while also impacting domestic demand and exports.

    The most notable drag came from public investment, which fell -2.0%, contributing to the largest negative impact from public spending since Q3 2017. Net exports also weighed slightly, subtracting -0.1 percentage points from quarterly growth.

    Japan’s PMI composite finalized at 50.2, growth momentum falters

    Japan’s private sector lost steam in May as final PMI Services reading slipped to 51.0 from April’s 52.4, while Composite PMI declined to 50.2 from 51.2. The data point to only marginal growth in overall activity, with a slowdown in services combining with a mild deterioration in manufacturing output.

    S&P Global’s Annabel Fiddes noted that the rise in total new orders “moved closer to stagnation, as service sector sales grew at their slowest pace in six months and factory demand continued to decline. This moderation suggests that Japan’s private sector “may struggle to bounce back in the near-term”.

    Underlying concerns were linked to external and structural factors, including an uncertain global demand outlook, persistent labor shortages, and mounting cost pressures.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1338; (P) 1.1397; (R1) 1.1429; More…

    EUR/USD is staying in consolidations below 1.1453 temporary top and intraday bias remains neutral. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD GDP Q/Q Q1 0.20% 0.40% 0.60%
    07:50 EUR France Services PMI May F 48.9 47.4 47.4
    07:55 EUR Germany Services PMI May F 47.1 47.2 47.2
    08:00 EUR Eurozone Services PMI May F 49.7 48.9 48.9
    08:30 GBP Services PMI May F 50.9 50.2 50.2
    12:15 USD ADP Employment Change May 37K 120K 62K 60K
    12:30 CAD Labor Productivity Q/Q Q1 0.40% 0.60%
    13:45 CAD BoC Interest Rate Decision 2.75% 2.75%
    13:45 USD Services PMI May F 52.3 52.3
    14:00 USD ISM Services PMI May 52 51.6
    14:30 CAD BoC Press Conference
    14:30 USD Crude Oil Inventories -2.9M -2.8M
    18:00 USD Fed’s Beige Book

     



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  • Subdued Markets Drift as Tariff Tensions Resurface and BoC Decision Looms

    Subdued Markets Drift as Tariff Tensions Resurface and BoC Decision Looms


    Global markets remain subdued as investors struggle to find a firm direction. US stocks closed higher overnight, with NASDAQ extending to fresh multi-week highs, suggesting some resilience in tech-led risk appetite. Asian equities followed suit to some extent, but the overall momentum has been tepid.

    In the currency markets, Dollar is attempting to recover from recent losses, though the rebound so far lacks strong conviction. Loonie and Kiwi are mildly firmer. However, Aussie and Yen are both underperforming, sitting at the bottom of the performance table and highlighting the absence of a coherent risk-on or risk-off narrative. European majors are positioned in the middle of the pack, with Swiss Franc slightly outperforming.

    The trade backdrop remains tense. US President Donald Trump’s decision to double tariffs on most imported steel and aluminum to 50% took effect on today, marking a new escalation in the global trade conflict. According to economic adviser Kevin Hassett, the initial 25% steel tariffs delivered partial support, but “more help is needed,” hence the decision to double the rates. The move came just as the White House also demanded “best offers” from trade partners ahead of a self-imposed early July deadline. Attention now turns to the European Union, with markets awaiting any formal response or retaliatory measures.

    Technically, EUR/GBP’s recovery has stalled ahead of 0.8458 resistance and retreated notably. Focus is back on 0.8401 support. Firm break there will argue that fall from 0.8737 might be ready to resume through 0.8354. That, if happens, might be accompanied by extended pullback in EUR/USD or upside break out in GBP/USD, or both.

    In Asia, at the time of writing, Nikkei is up 0.92%. Hong Kong HSI is up 0.47%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -0.07%. Japan 10-year JGB yield is up 0.014 at 1.495. Overnight, DOW rose 0.51%. S&P 500 rose 0.58%. NASDAQ rose 0.81%. 10-year yield fell -0.002 to 4.460.

    Looking ahead, final PMI Services data from both the Eurozone and the UK will be released in European session. In the US, markets will closely watch the ADP employment report and ISM services index for clues on labor market momentum and service sector resilience. Still, the day’s main event is BoC policy decision, where the central bank is widely expected to hold, but guidance could lean dovish as trade risks intensify.

    BoC to hold rates at 2.75%, maintain dovish bias

    BoC is widely expected to leave interest rate unchanged at 2.75% for the second consecutive meeting today.

    While Q1 GDP surprised to the upside at 2.2% annualized, the growth was heavily front-loaded by export activity as US buyers rushed to stockpile Canadian goods ahead of impending tariffs. That one-off boost is unlikely to alter the central bank’s cautious stance in light of growing global and domestic uncertainties. Meanwhile, core inflation rose back to near the top of BoC’s 1-3% target range, offering a reasonable basis for a continued pause.

    Overall, expectations are firmly anchored toward further easing later this year. A Reuters poll found that 75% (17 of 23) of economists anticipate at least two more cuts in 2025, with two of them forecasting as many as four.

    Given the high degree of trade uncertainty, particularly around tariffs, BoC is likely to keep a flexible tone in its communication. While the rate is on hold today, policymakers are expected to leave the door open for adjustments ahead, depending on how the trade situation evolves.

    In the currently markets, today’s BoC decision may not be the key driver for USD/CAD. Instead, market direction is still largely dictated by sentiment around US trade policy.

    Technically, further decline is expected as long as 1.3860 resistance holds, to 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. There might be some support from 1.3603 to contain downside and bring a rebound, as a correction to the five wave decline from 1.4791 high. However, decisive break there could prompt downside acceleration to 100% projection at 1.3349 rather quickly.

    Australia’s GDP grows only 0.2% qoq in Q1, as weather and public investment drag

    Australia’s GDP expanded just 0.2% qoq in Q1, falling short of expectations for 0.4% qoq growth. On an annual basis, GDP rose 1.3% yoy. However, GDP per capita declined by -0.2% qoq, marking a renewed contraction in individual economic output.

    The ABS noted that severe weather disrupted key sectors including mining, tourism, and shipping, while also impacting domestic demand and exports.

    The most notable drag came from public investment, which fell -2.0%, contributing to the largest negative impact from public spending since Q3 2017. Net exports also weighed slightly, subtracting -0.1 percentage points from quarterly growth.

    Japan’s PMI composite finalized at 50.2, growth momentum falters

    Japan’s private sector lost steam in May as final PMI Services reading slipped to 51.0 from April’s 52.4, while Composite PMI declined to 50.2 from 51.2. The data point to only marginal growth in overall activity, with a slowdown in services combining with a mild deterioration in manufacturing output.

    S&P Global’s Annabel Fiddes noted that the rise in total new orders “moved closer to stagnation, as service sector sales grew at their slowest pace in six months and factory demand continued to decline. This moderation suggests that Japan’s private sector “may struggle to bounce back in the near-term”.

    Underlying concerns were linked to external and structural factors, including an uncertain global demand outlook, persistent labor shortages, and mounting cost pressures.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6439; (P) 0.6470; (R1) 0.6492; More…

    Intraday bias sin AUD/USD remains neutral for the moment. With 0.6406 support intact, further rally is expected. ON the upside, firm break of 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, decisive break of 0.6406 will confirm short term topping, and turn bias back to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6441) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fail through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 AUD GDP Q/Q Q1 0.20% 0.40% 0.60%
    07:50 EUR France Services PMI May F 47.4 47.4
    07:55 EUR Germany Services PMI May F 47.2 47.2
    08:00 EUR Eurozone Services PMI May F 48.9 48.9
    08:30 GBP Services PMI May F 50.2 50.2
    12:15 USD ADP Employment Change May 120K 62K
    12:30 CAD Labor Productivity Q/Q Q1 0.40% 0.60%
    13:45 CAD BoC Interest Rate Decision 2.75% 2.75%
    13:45 USD Services PMI May F 52.3 52.3
    14:00 USD ISM Services PMI May 52 51.6
    14:30 CAD BoC Press Conference
    14:30 USD Crude Oil Inventories -2.9M -2.8M
    18:00 USD Fed’s Beige Book

     



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  • Euro Slips on Softer CPI, But Trading Largely Listless

    Euro Slips on Softer CPI, But Trading Largely Listless


    The currency markets remain largely listless today, with all major pairs and crosses still trapped within last week’s ranges. Euro edged slightly lower following the release of Eurozone CPI data, which showed inflation falling below the ECB’s 2% target for the first time since September last year. The core measure also softened notably, reinforcing the view that disinflationary pressures—particularly within services—are well entrenched. With inflation now comfortably back within target, markets have little doubt that ECB will proceed with a 25bps rate cut this Thursday.

    Uncertainty over tariffs continues to hover as a key wildcard. With little clarity on whether the US will escalate its trade actions further, markets are reluctant to commit. A July pause from ECB remains the base case, but further action could hinge on whether tariffs ultimately push inflation up through cost channels—or suppress demand and contribute to disinflation. This dilemma is front and center as policymakers navigate crosscurrents in growth and prices.

    Adding to the cautious mood, the OECD revised its global growth forecasts downward. It now sees world GDP expanding just 2.9% in both 2025 and 2026, citing increased trade barriers and lingering policy uncertainty as key drags. OECD Secretary General Mathias Cormann warned that a further 10 percentage point hike in US bilateral tariffs could shave 0.3% off global output over two years, while likely adding to inflation in affected countries.

    Technically, AUD/JPY continues to press 38.2% retracement of 86.03 to 95.63 at 91.96. Firm break of this fibonacci level will extend the correction from 95.63 to 100% projection of 95.63 to 91.64 from 93.85 at 89.86. Nevertheless, strong bounce from current level, followed by break of 93.85 resistance, will argue that rise from 86.03 is ready to resume through 95.63.

    In Europe, at the time of writing, FTSE is up 0.17%. DAX is up 0.16%. CAC is down -0.15%. UK 10-year yield is down -0.038 at 4.632. Germany 10-year yield is down -0.019 at 2.51. Earlier in Asia, Nikkei fell -0.06%. Hong Kong HSI rose 1.53%. China Shanghai SSE rose 0.43%. Singapore Strait times rose 0.10%. Japan 10-year JGB yield fell -0.27 to 1.482.

    BoE’s Bailey: Rate path still downward, but clouded by unpredictability

    BoE Governor Andrew Bailey told the Treasury Committee today that while the direction for interest rates remains downward, the outlook has become increasingly uncertain.

    Declining to pre-commit to a vote at the upcoming June meeting, Bailey said, “the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty.”

    He emphasized the role of external forces, noting that the Bank has revised its language to reflect the “unpredictable” nature of the current global environment.

    His comments were echoed by fellow policymakers Catherine Mann and Sarah Breeden, who both acknowledged that rates are likely headed lower but stressed the difficulty in forecasting the exact pace or scale of future cuts.

    Mann warned against assuming a fixed glide path, while Breeden said “there is uncertainty about how far, how fast.”

    Eurozone CPI falls to 1.9%, below ECB target for first time since Sep 2024

    Eurozone inflation dipped back below the ECB’s 2% target for the first time since September 2024. Headline CPI fell from 2.2% yoy to 1.9% yoy in May, undershooting expectations of 2.0%. Core CPI (ex-energy, food, alcohol & tobacco) also eased more than forecast to 2.3% from 2.7%.

    The disinflation was led by a sharp slowdown in services inflation, which dropped from 4.0% yoy to 3.2% yoy. Non-energy industrial goods remained unchanged at 0.6% yoy. Energy prices continued to contract at -3.6% yoy, reinforcing the broader downward pressure. Despite a slight uptick in food and alcohol inflation to 3.3% yoy, the overall picture confirms easing price momentum across key sectors.

    Swiss CPI falls to -0.1% yoy, first negative since 2021

    Swiss consumer inflation turned negative in May for the first time since March 2021, with headline CPI falling -0.1% yoy, down from 0.0% in April yoy. Core inflation, which strips out volatile components such as fresh food and energy, slipped to 0.5% yoy from 0.6% yoy previously.

    On a monthly basis, both headline and core CPI rose 0.1%, in line with expectations.

    The breakdown reveals that domestic product prices grew just 0.2% mom and decelerated to from 0.8% yoy to 0.6% yoy. Imported goods prices were flat on the month and fell -2.4% yoy, ticked up from -2.5% yoy.

    BoJ’s Ueda: Ready to hike if wage growth recovers from tariff drag

    BoJ Governor Kazuo Ueda told parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations.

    He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures. However, Ueda expressed confidence that wage momentum would eventually “re-accelerate”, helping to sustain a moderate growth in household consumption.

    Looking ahead, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy evolves in line with its projections. “If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates,” he said.

    However, he cautioned that uncertainty surrounding the economic outlook remains “extremely high.”

    RBA’s Hunter: AUD’s recent resilience linked to global shift away from USD exposure

    RBA Chief Economist Sarah Hunter addressed the unusual behavior of the Australian Dollar in recent months in a speech today. She highlighted that while initial moves were consistent with past risk-off episodes, the currency’s subsequent rebound against the US Dollar stood out as “more unusual”.

    On a “trade-weighted” basis, AUD has remained broadly stable, even though it has appreciated against the greenback and the Chinese renminbi, while weakening against most other major currencies.

    This divergence, Hunter explained, stems from “offsetting factors”. Global growth concerns have pressured the AUD against safe-haven and cyclical peers, while simultaneous outflows from US assets have weakened the US Dollar.

    Hunter cautioned that it’s too soon to tell whether this trend will persist, but acknowledged that recent market behavior reflects shifting investor sentiment, particularly toward capital reallocation away from US assets. As a result, Australian Dollar’s relative resilience against USD may be underpinned by portfolio rebalancing and perceived relative economic stability.

    Hunter noted that the trade-weighted index has reverted to “pre-shock values”, suggesting minimal net change in the foreign-currency value of Australian exports. However, the “relative move of capital” into Australia, at a time when the US is facing policy and tariff-related volatility, could offer some support to “domestic investment activity”, providing a cushion to the broader economy amid global uncertainties.

    RBA Minutes: 25bps cut chosen for caution and predictability after debating hold and 50bps options

    RBA’s May 20 meeting minutes revealed that policymakers weighed three policy options—holding rates, a 25bps cut, or a larger 50bps reduction—before ultimately opting for a modest 25bps cut to 3.85%.

    The case for easing hinged on three key factors: sustained progress in bringing inflation back toward target without upside surprises, weakening global conditions and household consumption, and the view that a cut would be the “path of least regret” given the risk distribution.

    While members discussed a 50bps reduction after deciding to ease, they found the case for a larger move unconvincing. Australian data at the time showed little evidence that trade-related global uncertainty was materially harming domestic activity. Furthermore, some scenarios might even result in upward pressure on inflation, prompting caution. The Board also assessed that it was “not yet time to move monetary policy to an expansionary stance”.

    Ultimately, the Board judged that to move “cautiously and predictably” was more appropriate.

    Caixin PMI manufacturing drops to 48.3, as China faces marked weakening at start of Q2

    China’s manufacturing sector unexpectedly shrank in May, with Caixin PMI falling to 48.3 from 50.4, well below market expectations of 50.6. This marked the first contraction in eight months and the lowest reading since September 2022.

    According to Caixin Insight’s Wang Zhe, both supply and demand weakened, with a particularly notable drag from overseas demand. Employment continued to contract, pricing pressures remained subdued, and logistics saw moderate delays. Although business optimism saw a marginal recovery, the broader picture points to intensifying headwinds.

    The report highlights the fragile start to Q2, with Wang pointing to a “marked weakening” in key economic indicators and a “significantly intensified” level of downward pressure.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1377; (P) 1.1413; (R1) 1.1480; More…

    Intraday bias in EUR/USD is turned neutral with current retreat. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Terms of Trade Index Q1 1.90% 3.60% 3.10% 3.20%
    23:50 JPY Monetary Base Y/Y May -3.40% -4.20% -4.80%
    01:30 AUD RBA Meeting Minutes
    01:30 AUD Current Account (AUD) Q1 -14.7B -12.0B -12.5B -16.3B
    01:45 CNY Caixin Manufacturing PMI May 48.3 50.6 50.4
    06:30 CHF CPI M/M May 0.10% 0.10% 0.00%
    06:30 CHF CPI Y/Y May -0.10% -0.10% 0%
    09:00 EUR Eurozone Unemployment Rate Apr 6.20% 6.20% 6.20% 6.30%
    09:00 EUR Eurozone CPI Y/Y May P 1.90% 2.00% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y May P 2.30% 2.40% 2.70%
    14:00 USD Factory Orders M/M Apr -3.10% 3.40%

     



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  • Trade Tensions Drag Dollar While Oil Jumps on OPEC+ Hold

    Trade Tensions Drag Dollar While Oil Jumps on OPEC+ Hold


    Risk sentiment remains fragile as the US session gets underway, with equity markets under pressure from renewed tariff threats. European stocks are particularly heavy after US President Donald Trump threatened to double tariffs on imported steel. UK equities, however, are finding some support from Prime Minister Keir Starmer’s announcement of increased defense spending.

    In the currency markets, Dollar is under broad pressure, currently the weakest performer of the day as traders react to the heightened trade uncertainty again. Loonie and Swiss Franc are also underperforming. Kiwi leads gains, followed by Yen and Aussie. Sterling and Euro sit in the middle.

    Meanwhile, oil prices have jumped after OPEC+ confirmed it would maintain output increases in July at pace of 411k barrels per day. Markets had been wary of a possible larger hike, as hinted by sources late last week. That outcome would have likely sparked a sharp bearish gap on Monday’s open. The restraint from OPEC+ has thus supported a modest rebound in crude.

    Technically, despite the rebound, WTI crude remains capped below key cluster resistance at 65.24 (38.2% retracement of 81.01 to 55.20 at 65.05. As long as this resistance zone holds, outlook will stay bearish for down trend resumption through 55.20 at a later stage. Nevertheless, firm break of 65.05/24 would bring strong rally to 61.8% retracement at 71.15, with risk of bullish trend reversal.

    In Europe, at the time of writing, FTSE is up 0.08%. DAX is down -0.45%. CAC is down -0.58%. UK 10-year yield is up 0.025 at 4.674. Germany 10-year yield is up 0.036 at 2.541. Earlier in Asia, Nikkei fell -1.30%. Hong Kong HSI fell -0.57%. Singapore Strait Times fell -0.10%. Japan 10-year JGB yield rose 0.004 to 1.509.

    UK PMI manufacturing finalized at 46.4, with tentative signs of stabilization

    UK manufacturing activity remained in contraction in May, with PMI finalized at 46.4, up modestly from April’s 45.4.

    The data indicate that the sector continues to face “major challenges,” according to S&P Global’s Rob Dobson, citing turbulent domestic and global conditions, trade uncertainty, subdued client confidence, and increased wage costs tied to tax changes.

    Still, there are early signs that the worst of the downturn may be easing. The indexes for output and new orders have risen for two consecutive months and were stronger than the initial flash estimates, hinting at possible stabilization.

    However, Dobson warned that the sector could either steady or slip further depending on how trading conditions evolve in the coming months.

    Eurozone PMI manufacturing finalized at 49.4, recovery progressing

    Eurozone PMI manufacturing was finalized at 49.4 in May, up from April’s 49.0 and marking the highest level in 33 months.

    Production increased across all four major economies: Germany, France, Italy, and Spain, supporting economist Cyrus de la Rubia’s view that the recovery is gaining traction.

    De la Rubia also noted that output has now risen for three straight months, reinforcing the view that the recovery is gaining traction. Historical data suggests a 72% chance of another output increase next month.

    Falling input costs, driven by lower energy prices, have enabled manufacturers to cut selling prices again, offering the ECB more flexibility for its expected interest rate cuts.

    However, the outlook remains clouded by external risks, particularly the threat of higher US tariffs on EU goods. Any escalation in transatlantic trade tensions could quickly derail the fragile rebound.

    Swiss GDP grew 0.5% in Q1, pharma exports surge on tariff frontloading

    Switzerland’s GDP expanded by 0.5% qoq in Q1, beating market expectations of 0.4% qoq. When adjusted for the impact of major sporting events, GDP growth came in even stronger at 0.8% qoq. The State Secretariat for Economic Affairs noted that the services sector posted broad-based gains and domestic demand remained firm, contributing to the overall solid performance.

    A standout was the chemical and pharmaceutical sector, which surged 7.5% in the quarter, driven by a sharp rise in pharmaceutical exports. This lifted overall manufacturing output by 2.1% and goods exports by 5.0%. Notably, exports to the US jumped significantly, suggesting possible front-loading in anticipation of evolving US trade policy.

    Japan’s PMI manufacturing finalized at 49.5, firms eye recovery despite trade headwinds

    Japan’s PMI Manufacturing was finalized at 49.5 in May, up from April’s 48.7. S&P Global’s Annabel Fiddes noted that business conditions “moved closer to stabilisation,” as declines in sales eased and firms reported improved hiring activity.

    Global trade tensions stemming from US tariffs continue to weigh on demand, with businesses citing “increased client hesitancy” and weaker orders.

    Despite persistent external challenges around tariffs, sentiment around future output improved, and hiring rose at the fastest pace in over a year.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.1310; (P) 1.1350; (R1) 1.1387; More…

    Intraday bias in EUR/USD is back on the upside as rebound from 1.1064 resumed by breaking through 1.1417. Further rise would be seen to retest 1.1572. Strong resistance could be seen there to limit upside at first attempt. Below 1.1311 minor support will turn intraday bias neutral first. Nevertheless, decisive break of 1.1572 will confirm larger up trend resumption.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Capital Spending Q1 6.40% 3.80% -0.20%
    00:30 JPY Manufacturing PMI May 49.4 49 49
    01:00 AUD TD-MI Inflation Gauge M/M May -0.40% 0.60%
    06:30 CHF Real Retail Sales Y/Y Apr 1.30% 2.50% 2.20% 2.10%
    07:00 CHF GDP Q/Q Q1 0.50% 0.40% 0.20% 0.30%
    07:30 CHF Manufacturing PMI May 42.1 48.1 45.8
    07:50 EUR France Manufacturing PMI May F 49.8 49.5 49.5
    07:55 EUR Germany Manufacturing PMI May F 48.3 48.8 48.8
    08:00 EUR Eurozone Manufacturing PMI May F 49.4 49.4 49.4
    08:30 GBP Manufacturing PMI May F 46.4 45.1 45.1
    08:30 GBP Mortgage Approvals Apr 60K 65K 64K
    08:30 GBP M4 Money Supply M/M Apr 0.00% 0.20% 0.30%
    13:30 CAD Manufacturing PMI May 45.3
    13:45 USD Manufacturing PMI May F 52.3 52.3
    14:00 USD ISM Manufacturing PMI May 49.3 48.7
    14:00 USD ISM Manufacturing Prices Paid May 70.2 69.8
    14:00 USD ISM Manufacturing Employment Index May 46.5
    14:00 USD Construction Spending M/M Apr 0.30% -0.50%

     



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  • Cautious Mood in Asia as Markets Eye Trump-Xi Trade Call and Steel Tariff Fallout

    Cautious Mood in Asia as Markets Eye Trump-Xi Trade Call and Steel Tariff Fallout


    Asian markets traded with a mild risk-off tone to start the week, though overall activity remains subdued due to holidays in China, Malaysia, and New Zealand. Nikkei is under pressure, weighed down by rising US-China trade tensions and US President Donald Trump’s announcement of steeper steel tariffs. Hong Kong equities are also lower, reflecting regional unease. The muted mood extends to currency markets, where Dollar is softer, though the pullback remains modest. The Swiss Franc and Loonie are also on the weaker side, while Kiwi, Aussie, and Yen are firmer. Euro and Sterling are holding mid-pack.

    On the trade front, US National Economic Council Director Kevin Hassett said on Sunday that President Trump and Chinese President Xi Jinping could speak as soon as this week, raising hopes that communication channels remain open. “We expect a wonderful conversation about the trade negotiations,” Hassett said, expressing optimism about renewed dialogue. However, last week’s heated rhetoric casts a long shadow. Trump accused Beijing of violating their preliminary trade deal, prompting a swift rebuttal from Chinese officials today, who insisted they had “strictly implemented” their commitments and decried the US claims as “seriously contrary to the facts.”

    Further darkening the trade outlook, Trump announced late on Friday that tariffs on imported steel and aluminum will be doubled to 50% starting June 4, aiming to provide what he called “even further security” for the U.S. steel industry. The European Commission responded sharply over the weekend, warning that the move increases economic uncertainty and imposes higher costs on both sides of the Atlantic. Brussels confirmed it is prepared to retaliate, with countermeasures now under consideration. The threat of escalating tariff battles across multiple fronts continues to weigh on investor sentiment globally.

    With the lingering tension, markets in a cautious mood, waiting for clarity on whether the Trump-Xi call will materialize this week—and, more importantly, whether it brings any de-escalation. In the background, traders are also preparing for two major central bank decisions this week, with both ECB and Bank BoC set to meet. Key US data releases—including ISM manufacturing and services indexes, and the May non-farm payrolls report—will also be closely watched.

    Technically, EUR/CAD would be a pair to watch this week. Price actions from 1.5959 are seen as a consolidation pattern to rally from 1.4483, that is set to extend further. In case of another dip, downside should be contained by 1.5420 cluster support (38.2% retracement of 1.4483 to 1.5959 at 1.5395. Break of 1.5720 will bring stronger rebound, but upside should be limited by 1.5959 resistance. Some range trading setup could be used to capitalize on the moves.

    In Asia, at the time of writing, Nikkei is down -1.40%. Hong Kong HSI is down -2.20%. China is on holiday. Singapore Strait Times is down -0.49%. Japan 10-year JGB yield is up 0.006 at 1.511.

    Japan’s PMI manufacturing finalized at 49.5, firms eye recovery despite trade headwinds

    Japan’s PMI Manufacturing was finalized at 49.5 in May, up from April’s 48.7. S&P Global’s Annabel Fiddes noted that business conditions “moved closer to stabilisation,” as declines in sales eased and firms reported improved hiring activity.

    Global trade tensions stemming from US tariffs continue to weigh on demand, with businesses citing “increased client hesitancy” and weaker orders.

    Despite persistent external challenges around tariffs, sentiment around future output improved, and hiring rose at the fastest pace in over a year.

    China’s NBS PMI Manufacturing edges higher to 49.5, second month of contraction

    China’s official NBS PMI Manufacturing rose from 49.0 to 49.5 in May, signaling a modest improvement but still marking the second consecutive month of contraction.

    The lift was driven by an acceleration in production and more optimistic business sentiment. The production sub-index climbed 0.9 pts to 50.7. New orders index increased from 49.2 to 49.8. New export orders also rebounded from a low base of 44.7 to 47.5, as some firms reported improved trade activity with the US.

    Meanwhile, PMI Non-Manufacturing edged slightly lower from 50.4 to 50.3, lifting the PMI Composite to 50.4 from 50.2. Although still in expansion territory, the composite figure is consistent with the sluggish momentum seen over the past year.

    Fed’s Waller: Temporary tariff effects could clear path for “good news” rate cut later this year

    In a speech today, Fed Governor Christopher Waller struck signaled his support for “good news” rate cuts later this year, if inflation continues to ease and trade tensions don’t escalate significantly.

    In his view, any inflation resulting from tariffs “will not be persistent” and he supports “looking through” these effects when considering policy decisions.

    Waller added that the strong labor market and continued disinflation through April give the Fed time to assess the outcome of ongoing trade negotiations before making policy moves.

    Should tariffs remain near his “lower scenario” and inflation continue its downward path toward 2%, Waller said he would support so-called “good news” rate cuts, easing driven by a stable economy rather than distress.

    ECB to cut, BoC to hold, NFP and other data eyed

    Markets enter the week bracing for a dense calendar of central bank decisions and high-impact data releases, all unfolding under the shadow of unresolved global trade tensions. ECB is poised to deliver its another rate cut of the cycle, while BoC is widely expected to stay on hold. In parallel, a string economic indicators from the US, Canada, and China will be scrutinized for clues on the global outlook. But with sentiment increasingly shaped by geopolitics, markets may struggle to find a clear directional cue out of the economic events.

    ECB is all but certain to lower its deposit rate by 25bps to 2.00%. However, the bigger question is what comes next. With rates then clearly within the estimated neutral zone, many expect this week’s move to mark a pivot to a more cautious stance. A Reuters poll shows that 51 of 72 economists forecast the ECB will pause in July. Nearly 30% believe the June cut will be the final one of the cycle. Only 45% anticipate one more cut beyond this week.

    Much hinges on the tone President Christine Lagarde strikes in her post-meeting press conference. Investors will watch closely for signs of a formal shift to a wait-and-see stance. Updated ECB economic projections will also be key, particularly any revisions to inflation and growth forecasts in light of persistent trade tensions. Adding to the picture, Eurozone flash CPI for May, due earlier in the week, is expected to slow to the 2% target. Such a reading would reinforce the view that aggressive further easing is unlikely, at least in the near term.

    In Canada, BoC is widely expected to keep its benchmark interest rate unchanged at 2.75% for a second consecutive meeting. Markets are pricing in roughly a 75% chance of a hold. Although the Canadian economy remains fragile, the sharper-than-expected rebound in core inflation, specifically CPI excluding energy, which surged to 2.9% in April, has made policymakers wary of easing further too quickly. BoC appears inclined to wait for greater clarity on US-Canada trade developments before contemplating further policy moves. May employment data will also be watched closely for any signs of labor market weakening that could shift the policy calculus.

    In the US, attention turns to the ISM manufacturing and services indexes, as well as May non-farm payrolls report. Barring any major surprises, however, these releases are unlikely to dislodge the Fed from its patient stance. With inflation still trending lower but global risks elevated, Fed has made clear it will not rush into rate cuts again. Fed fund futures are currently pricing in a 73% chance of a rate cut in September, though that remains highly dependent on the outcome of trade negotiations—particularly with China and the EU.

    Elsewhere, investors will also parse Australia’s Q1 GDP and RBA meeting minutes, Swiss GDP and CPI, and China’s Caixin PMIs. But for now, it is trade headlines—not just data—that are likely to set the tone. With central banks turning more cautious and the global growth pulse still uncertain, volatility may persist, especially as June unfolds with little in the way of firm resolution to the issues most weighing on sentiment.

    Here are som ehighlights for the week:

    • Monday: Japan PMI manufacturing final; Swiss retail sales, GDP, PMI manufacturing; EUrozone PMI manufacturing final; UK PMI manufacturing final; Canada PMI manufacturing; US ISM manufacturing.
    • Tuesday: New Zeaand terms of trade; Japan monetary base; RBA minutes; China Caixin PMI manufacturing; Swiss CPI; Eurozone CPI flash, unemployment rate.
    • Wednesday: Australia GDP; Eurozone PMI services final; UK PMI services final; US ADP employment, ISM services, Fed’s Beige Book; BoC rate decision.
    • Thursday: Japan labor cash earnings; Australia goods trade balance; China Caixin PMI services; Swiss unemployment rate; Germany factory orders; UK PMI construction; ECB rate decsion; US jobless claims, trade balance.
    • Friday: Japan household spending, leading indicators; Germany industrial production, trade balance; Swiss Foreign currency reserves; Eurozone GDP final, retail sales; Canada employment; US non-farm payrolls.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6409; (P) 0.6431; (R1) 0.6454; More…

    Range trading continues in AUD/USD and intraday bias stays neutral. Further rally is expected with 0.6406 support intact. Above 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, firm break of 0.6406 will confirm short term topping, and turn bias back to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

    In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6441) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fail through 0.5913 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Capital Spending Q1 6.40% 3.80% -0.20%
    00:30 JPY Manufacturing PMI May 49.4 49 49
    01:00 AUD TD-MI Inflation Gauge M/M May -0.40% 0.60%
    06:30 CHF Real Retail Sales Y/Y Apr 2.50% 2.20%
    07:00 CHF GDP Q/Q Q1 0.40% 0.20%
    07:30 CHF Manufacturing PMI May 48.1 45.8
    07:50 EUR France Manufacturing PMI May F 49.5 49.5
    07:55 EUR Germany Manufacturing PMI May F 48.8 48.8
    08:00 EUR Eurozone Manufacturing PMI May F 49.4 49.4
    08:30 GBP Manufacturing PMI May F 45.1 45.1
    08:30 GBP Mortgage Approvals Apr 65K 64K
    08:30 GBP M4 Money Supply M/M Apr 0.20% 0.30%
    13:30 CAD Manufacturing PMI May 45.3
    13:45 USD Manufacturing PMI May F 52.3 52.3
    14:00 USD ISM Manufacturing PMI May 49.3 48.7
    14:00 USD ISM Manufacturing Prices Paid May 70.2 69.8
    14:00 USD ISM Manufacturing Employment Index May 46.5
    14:00 USD Construction Spending M/M Apr 0.30% -0.50%

     



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  • Markets Turn Cautious Again on Trade Stalemates; Euro Picking Up Momentum in Some Crosses

    Markets Turn Cautious Again on Trade Stalemates; Euro Picking Up Momentum in Some Crosses


    Asian markets returned to a risk-off tone today, with investor sentiment once again weighed down by the lack of clarity on the US tariff front and the apparent stalling of key trade negotiations. The week’s earlier relief rally following the U.S. court ruling against President Trump’s sweeping reciprocal tariffs has faded, as the legal battle drags on and policy direction remains uncertain. The result is renewed market hesitancy, with equities pulling back and safe-haven flows nudging Yen higher.

    In currency markets, the tone is cautious and directionless, with almost all major pairs and crosses confined to last week’s ranges. After a volatile stretch, there’s little momentum to drive breakouts. For the day, Yen is the strongest performer, supported by risk aversion, followed by the Dollar and Kiwi. On the weaker side, the Euro is underperforming, trailed by the Aussie and Sterling. Swiss Franc and Loonie are trading near the middle of the pack.

    Thursday’s session in the US captured this shifting mood well as stocks closed well off their intraday highs. That optimism was first driven by the US Court of International Trade’s ruling that struck down most of Trump’s global tariff orders. However, the relief was short-lived. The US Court of Appeals paused that ruling to consider the administration’s appeal, setting a new timeline for responses from both plaintiffs and the government in early June. The pause has restored uncertainty to a situation markets briefly hoped was resolved.

    Further dampening sentiment were remarks from US Treasury Secretary Scott Bessent, who confirmed that US-China trade talks are “a bit stalled.” He did, however, hold out the possibility of further engagement in the coming weeks, including a potential leader-level call. Still, Bessent acknowledged that the magnitude and complexity of the negotiations likely require direct involvement from both presidents, a signal that near-term breakthroughs remain unlikely.

    Technically, however, EUR/GBP’s break of 0.8400 minor resistance suggests short term bottoming at 0.8354, on bullish convergence condition in 4H MACD. While the rebound might still be a corrective move, further rise is now in favor through 0.8458 resistance to 38.2% retracement of 0.8737 to 0.8354 at 0.8500.

    In Asia, at the time of writing, Nikkei is down -1.08%. Hong Kong HSI is down -1.54%. China Shanghai SSE is down -0.30%. Singapore Strait Times is down -0.24%. Japan 10-year JGB yield is down -0.015 at 1.506. Overnight, DOW rose 0.28%. S&P 500 rose 0.40%. NASDAQ rose 0.39%. 10year yield fell -0.053 to 4.424.

    Looking ahead, Germany CPI flash is the main focus in European sess. Switzerland will publish KOF economic barometer. Eurozone will release M3 money supply. Later in the day, attention will be on Canada GDP, and US PCE inflation.

    Japan’s industrial production falls -0.9% mom in April, but May rebound expected

    Japan’s industrial production fell by -0.9% mom in April, a milder decline than the expected -1.4%. The Ministry of Economy, Trade and Industry maintained its view that production “fluctuates indecisively,” reflecting ongoing uncertainty, particularly around global trade developments.

    While the ministry said the impact of US tariffs was limited in April, some firms have voiced concern about the manufacturing outlook as policy risks persist.

    The breakdown of the data shows a mixed picture: six of 15 industrial sectors saw declines, including production machinery, fabricated metals, and transport equipment excluding motor vehicles. However, eight sectors recorded gains, with electronic parts and business-oriented machinery showing notable strength.

    Manufacturers surveyed expect a sharp 9.0% rebound in May, followed by a -3.4% dip in June.

    Also released, Japan’s retail sales grew by a stronger-than-expected 3.3% yoy in April, outpacing the consensus of 2.9% yoy. Meanwhile, the unemployment rate remained steady at 2.5%.

    Tokyo core inflation accelerates to 3.6%, driven by food and services costs

    Tokyo’s core CPI (excluding fresh food) accelerated to 3.6% yoy in May, up from 3.4% yoy and above market expectations of 3.5% yoy, marking the fastest pace since January 2023. This marks the third consecutive year that core inflation has exceeded the Bank of Japan’s 2% target.

    While headline CPI ticked down slightly from 3.5% yoy to 3.4% yoy, the underlying core-core measure (excluding food and energy) also edged up fro 2.0% yoy to 2.1% yoy, suggesting broad-based inflation persistence.

    The surge in non-fresh food prices, up 6.9% yoy, remains a dominant driver—highlighted by a staggering 93.2% yoy jump in rice prices.

    Another notable development is the uptick in services inflation, which climbed to 2.2% yoy from 2.0% yoy , indicating that businesses are beginning to pass on higher labor costs.

    Australia retail sales down -0.1% mom in April, weighed by weak clothing demand

    Australia’s retail sales turnover unexpectedly declined by -0.1% mom in April, missing expectations for a 0.3% mom rise. On an annual basis, sales were up 3.8% compared to April 2024/

    The Australian Bureau of Statistics noted that the decline was driven primarily by reduced spending on clothing. The weakness was partly offset by a rebound in Queensland, where businesses recovered from disruptions caused by ex-Tropical Cyclone Alfred in March.

    RBNZ’s Silk: Data to guide timing and need for further cuts

    RBNZ Assistant Governor Karen Silk said that interest rates are currently within the estimated neutral band of 2.5% to 3.5%.

    She noted that the full impact of previous easing has yet to filter through the economy, making any future adjustments highly dependent on incoming data.

    The OCR track indicates “whatever we do is going to be data-dependent, and then we will be looking to the data to help us to decide when or if we cut further from here,” she added.

    Fed’s Logan: Policy well positioned, ready to respond to shifting risks

    Dallas Fed President Lorie Logan said overnight that with inflation “trending gradually back to target”, the labor market “holding strong”, and risks to Fed’s dual mandate are “roughly balanced.

    Speaking at an event, Logan emphasized that “monetary policy is in a good place”, and there is no immediate need for a policy shift.

    Logan also highlighted the potential impact of fiscal policy and regulatory changes, noting they could stimulate investment and consumer demand, while elevated economic uncertainty or financial volatility might dampen activity.

    Fed’s Daly: Modestly or moderately restrictive policy still needed

    San Francisco Fed President Mary Daly, in a Reuters interview, emphasized that above-target inflation remains her “focus” while the labor market is in “solid shape”.

    With inflation still running above the Fed’s 2% target and uncertainty around the pace of its decline, Daly said it’s appropriate for monetary policy to remain in a “modestly or moderately restrictive” stance to guide inflation back to target.

    Daly added that she’s closely watching for any signs of labor market weakening but hasn’t observed such signals yet. At the same time, she remains attentive to whether inflation continues to gradually ease or risks becoming sticky or re-accelerating.

    BoE’s Bailey stresses caution on rate cuts amid inflation surprises and trade uncertainty

    BoE Governor Andrew Bailey emphasized the need for a “gradual and careful” approach to future interest rate cuts in light of lingering global trade uncertainty and its impact on domestic inflation.

    His comments follow last week’s stronger-than-expected inflation data, which showed UK CPI jumping to 3.5% in April from 2.6%. Bailey noted it remains unclear how much of the increase is due to seasonal factors, and said the BoE will closely examine the next set of inflation data ahead of its June policy decision.

    Bailey acknowledged that while core inflation is “gradually grinding down”, the pace of improvement remains sluggish. He also highlighted a renewed rise in food price inflation, which—although not unique to the UK—has a significant influence on public inflation perceptions.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.7527; (P) 1.7591; (R1) 1.7709; More…

    EUR/AUD’s break of 1.7628 resistance argues that fall from 1.8554 might have completed as a correction at 1.7245. Intraday bias is back on the upside for 38.2% retracement of 1.8554 to 1.7245 at 1.7745. Firm break there will solidify this bullish case and target 61.8% retracement at 1.8054. On the downside, however, break of 1.7460 support will bring retest of 1.7245 instead.

    In the bigger picture, as long as 1.7062 resistance turned support (2023 high) holds, up trend from 1.4281 (2022 low) should still be in progress. Break of 1.8554 will target 100% projection of 1.4281 to 1.7062 from 1.5963 at 1.8744. However, sustained break of 1.7062 will confirm medium term topping and bring deeper fall back to 1.5963 support.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Building Permits M/M Apr -15.60% 9.60% 10.70%
    23:30 JPY Tokyo CPI Y/Y May 3.40% 3.50%
    23:30 JPY Tokyo CPI Core Y/Y May 3.60% 3.50% 3.40%
    23:30 JPY Tokyo CPI Core-Core Y/Y May 2.10% 2%
    23:30 JPY Unemployment Rate Apr 2.50% 2.50% 2.50%
    23:50 JPY Industrial Production M/M Apr P -0.90% -1.40% 0.20%
    23:50 JPY Retail Trade Y/Y Apr 3.30% 2.90% 3.10%
    01:30 AUD Retail Sales M/M Apr -0.10% 0.30% 0.30%
    01:30 AUD Private Sector Credit M/M Apr 0.70% 0.50% 0.50%
    01:30 AUD Building Permits M/M Apr -5.70% 3.10% -8.80% -7.10%
    05:00 JPY Housing Starts Y/Y Apr -26.60% -18.30% 39.10%
    06:00 EUR Germany Retail Sales M/M Apr 0.30% -0.20%
    07:00 CHF KOF Economic Barometer May 98.3 97.1
    08:00 EUR Eurozone M3 Money Supply Y/Y Apr 3.70% 3.60%
    12:00 EUR Germany CPI M/M May P 0.10% 0.40%
    12:00 EUR Germany CPI Y/Y May P 2.10% 2.10%
    12:30 CAD GDP M/M Mar 0.20% -0.20%
    12:30 USD Personal Income M/M Apr 0.30% 0.50%
    12:30 USD Personal Spending M/M Apr 0.20% 0.70%
    12:30 USD PCE Price Index M/M Apr 0.10% 0%
    12:30 USD PCE Price Index Y/Y Apr 2.20% 2.30%
    12:30 USD Core PCE Price Index M/M Apr 0.10% 0%
    12:30 USD Core PCE Price Index Y/Y Apr 2.50% 2.60%
    12:30 USD Goods Trade Balance (USD) Apr P -141.8B -162.0B
    12:30 USD Wholesale Inventories Apr P 0.40% 0.50%
    13:45 USD Chicago PMI May 45.1 44.6
    14:00 USD UoM Consumer Sentiment May F 50.8 50.8
    14:00 USD UoM 1-year Inflation Expectations May F 7.30% 7.30%

     



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  • Dollar Surges as US Court Strikes Down Trump’s Reciprocal Tariffs; Risk Appetite Rebounds

    Dollar Surges as US Court Strikes Down Trump’s Reciprocal Tariffs; Risk Appetite Rebounds


    Dollar’s rebound gather extra momentum today, after the US Court of International Trade struck down President Donald Trump’s sweeping reciprocal tariffs, giving markets a fresh catalyst. The court ruled that the reciprocal tariffs imposed in April across multiple countries under claims of correcting trade imbalances exceeded presidential authority under the International Emergency Economic Powers Act. The decision marks a significant legal blow to Trump’s aggressive trade agenda.

    In a strongly worded decision, the three-judge panel concluded that the “Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs.” The ruling also invalidated separate tariffs targeting Canada, Mexico, and China under the pretext of combating drug trafficking, stating those measures lacked a direct link to the threats cited. However, tariffs on specific items like steel and aluminum remain unaffected, as they were justified under different statutes not challenged in this case.

    The Trump administration has ten days to comply with the ruling, though it has already filed an appeal to the US. Court of Appeals for the Federal Circuit. While the immediate legal outcome remains uncertain, markets responded decisively to the court’s move.

    The decision sparked a broad risk-on reaction in financial markets, with DOW futures jumping over 500 points and Asian equities advancing, led by gains in Japan. Gold, which had been buoyed by safe-haven flows in recent sessions, fell below the 3250 level as investor sentiment improved. Nevertheless, 10-year Treasury yield remained steady around 4.5%, suggesting that bond markets are taking a more measured view, likely awaiting further clarity from the appeal process and ongoing trade negotiations.

    Dollar dominated currency markets, emerging as the clear outperformer of the day. It was followed by the Aussie and Loonie, both benefiting from the upbeat mood. At the bottom end, Yen is staying at the bottom, while Swiss Franc and Euro also softened. Kiwi and Sterling are positing in the middle.

    Technically, Gold’s break of 3279.22 support suggests that rebound from 3120.34 has already completed at 3365.92. Corrective pattern from 3499.79 should have started another falling leg. Deeper decline should be seen to 55 D EMA (now at 3190.95) first. Strong rebound from there will keep the pattern from 3499.79 a sideway one. However, sustained break of the 55 D EMA will open up deeper fall through 3120.34 to 100% projection of 3449.79 to 3120.34 from 3365.92 at 2980.47, which is slightly below 3000 psychological level.

    In Asia, at the time of writing, Nikkei is up 1.79%. Hong Kong HSI is up 1.07%. China Shanghai SSE is up 0.72%. Singapore Strait Times is down -0.30%. Japan 10-year JGB yield is up 0.003 at 1.521. Overnight, DOW fell -0.58%. S&P 500 fell -0.56%. NASDAQ fell -0.51%. 10-year yield rose 0.043 to 4.477.

    Looking ahead, the European calendar is empty with Switzerland, France and Germany on holiday. Later in the day, US will release GDP revision, jobless claims and pending home sales.

    RBNZ’s Hawkesby: OCR in neutral zone, July cut not a done deal

    RBNZ Governor Christian Hawkesby told Bloomberg TV today that another rate cut at the July meeting is “not a done deal” and “not something that’s programmed.”

    With the OCR at 3.25% after this week’s reduction, it’s now sitting within the estimated neutral range of 2.5% to 3.5%. Hawkesby emphasized the central bank has entered a phase of “considered steps,” guided closely by incoming data rather than a preset easing path.

    He acknowledged rising uncertainty, noting that near-term growth headwinds have intensified and both demand and inflation pressures are weaker than they were back in February. He also highlighted the uncertainty surrounding global trade policy, particularly tariff developments, which could play out in various ways.

    NZ ANZ business confidence falls to 36.6, supporting case for further RBNZ easing

    New Zealand’s ANZ Business Confidence index dropped sharply in May, falling from 49.3 to 36.6. Own Activity Outlook, a key indicator of firms’ expectations for their own performance, declined to 34.8 from 47.7.

    Profit expectations also plunged to 11.1, indicating mounting pressure on margins. Although cost and wage expectations eased slightly, they remain elevated, while inflation expectations edged up from 2.65% to 2.71%.

    According to ANZ, the survey paints a mixed picture: the economy is in recovery mode, but businesses continue to face tough operating conditions, particularly in passing on cost increases. The data reinforces the view that RBNZ can afford to support growth through further rate cuts, barring any major inflation or data surprises.

    ANZ expects the OCR to eventually fall to 2.5%, as global headwinds and domestic fragilities persist.

    FOMC minutes reveal deepening concerns over persistent inflation and trade-led slowdown

    The FOMC minutes from the May 6–7 meeting highlighted growing anxiety among policymakers about the dual threat of persistent inflation and deteriorating growth prospects, largely stemming from US trade policies.

    Nearly all participants flagged the risk that inflation could be “more persistent than expected” as the economy adjusts to elevated import tariffs. This situation, they warned, could force the Fed into “difficult tradeoffs” if inflation stays stubborn while growth and employment begin to falter.

    The Committee agreed that uncertainty surrounding the economic outlook had “increased further”, justifying a cautious stance on monetary policy, “until the net economic effects of the array of changes to government policies become clearer.”

    Fed staff revised their GDP projections lower for 2025 and 2026, citing a larger-than-anticipated drag from recent tariff announcements. Beyond the short-term impact, officials also warned of longer-term structural effects, with trade restrictions likely to slow productivity growth and reduce the economy’s potential “over the next few years.”

    The labor market outlook has also darkened, with staff forecasting the unemployment rate to rise above its “natural rate” by year-end and remain elevated through 2027.

    Inflation forecast was revised higher, with tariffs seen boosting prices notably in 2025, before gradually easing. Inflation is still expected to return to 2% by 2027, but the path there is now more complicated.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1268; (P) 1.1307; (R1) 1.1329; More…

    EUR/USD’s break of 1.1255 support suggests that rebound 1.1064 has completed at 1.1417. Corrective pattern from 1.1572 is now extending with another falling leg. Intraday bias is back on the downside for 1.1064 first. Break there will target 100% projection of 1.1572 to 1.1064 from 1.1417 at 1.0909. For now, risk will stay on the downside as long as 1.1417 resistance holds, in case of recovery.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 55 W EMA (now at 1.0858) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:00 NZD ANZ Business Confidence May 36.6 49.3
    01:30 AUD Private Capital Expenditure Q1 -0.10% 0.50% -0.20% 0.20%
    05:00 JPY Consumer Confidence May 32.8 31.8 31.2
    12:30 CAD Current Account (CAD) Q1 -3.6B -5.0B
    12:30 USD Initial Jobless Claims (May 23) 230K 227K
    12:30 USD GDP Annualized Q1 P -0.30% -0.30%
    12:30 USD GDP Price Index Q1 P 3.70% 3.70%
    14:00 USD Pending Home Sales M/M Apr -1.00% 6.10%
    14:30 USD Natural Gas Storage 98B 120B
    15:00 USD Crude Oil Inventories 0.3M 1.3M

     



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