Tag: United States

  • 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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  • Dollar Drops on CPI Miss; Trade Optimism Offers Limited Support

    Dollar Drops on CPI Miss; Trade Optimism Offers Limited Support


    Dollar fell broadly following weaker-than-expected US inflation report for May, reinforcing the narrative that consumer prices have not yet felt the full brunt of tariff pressures. The data offered some relief that the feared pass-through from tariffs to end consumers hasn’t materialized, at least not yet.

    However, it wasn’t enough to shift expectations for the June and July Fed meetings, where markets still overwhelmingly anticipate the central bank to hold steady. What did shift slightly was the probability of a September rate cut. According to fed funds futures, the odds of a cut in Q3 have now climbed above 55%. Nonetheless, the Fed is unlikely to act preemptively without more confirmation.

    On trade, President Trump declared this week’s talks with China a success, albeit with no rollback of existing tariffs. While the 55% tariff rate remains in place, Trump noted that China has committed to supplying key items such as magnets and rare earths “up front,” with the US reciprocating on non-economic terms like student access.

    In the broader FX market, Dollar is now the weakest performer for the week, followed by Sterling and Yen. The Pound remains weighed down by soft UK labor market data. On the other hand, Euro is gaining the upper hand, while commodity Aussie and Kiwi are benefiting from improved risk sentiment. Swiss Franc and Loonie sit in the middle.

    In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.41%. CAC is up 0.10%. UK 10-year yield is up 0.008 at 4.552. Germany 10-year yield is down -0.006 at 2.521. Earlier in Asia, Nikkei rose 0.55%. Hong Kong HSI rose 0.84%. China Shanghai SSE rose 0.52%. Singapore Strait Times fell -0.37%. Japan 10-year JGB yield fell -0.019 to 1.461.

    US CPI ticks up to 2.4%, core unchanged at 2.8%, undershoot expectations

    US consumer inflation data for May came in softer than expected, offering some relief to markets concerned about price pressures from tariffs and broader cost pass-throughs.

    Headline CPI rose just 0.1% mom, below consensus of 0.2% mom. Core CPI, which excludes food and energy, also surprised to the downside with a 0.1% mom rise against an expected 0.3% mom. The gains in overall prices were primarily driven by shelter (0.3% mom) and food (0.3% mom), while energy posted a -1.0% monthly drop.

    On an annual basis, headline CPI rose slightly from 2.3% yoy to 2.4% yoy, still undershooting the forecasted 2.5% yoy. Core CPI held steady at 2.8% yoy, also missing expectations of 2.9% yoy.

    ECB’s Lane: Last week’s rate cut aimed at anchoring expectations, avoiding prolonged undershoot

    ECB Chief Economist Philip Lane emphasized that last week’s rate cut was a strategic step to ensure inflation remains on track toward the 2% target over the medium term. He argued that, without this move, the “projected negative inflation deviation” over the next 18 months could have risked becoming entrenched.

    In a speech today, Lane also stressed the importance of clarity in ECB’s reaction function. By cutting the deposit facility rate to 2.00%, the central bank signaled that “we are determined to make sure that inflation returns to target in the medium term”. This helps “underpin inflation expectations and avoid an unwarranted tightening in financial conditions.”

    On the other hand, holding the rate at 2.25% could have sent the wrong signal, Lane warned, potentially triggering a market repricing that would reinforce a “more pronounced and longer-lasting undershoot of the inflation target.”

    ECB’s Kazaks: Further fine-tuning cuts likely

    Latvian ECB Governing Council member Martins Kazaks signaled openness to further interest rate cuts, suggesting that while ECB has already delivered significant easing, “fine-tuning” adjustments could be needed depending on how the economy evolves.

    He noted that current market pricing for one more cut is “not out of the realm of the baseline,” but stressed that any additional moves must be carefully calibrated to keep inflation anchored near the 2% target.

    Kazaks warned against complacency, highlighting risks of a persistent inflation undershoot. While not yet leaning toward accommodative territory, he emphasized the importance of vigilance, particularly amid the uncertain impact of global trade tensions. So far, deflationary effects seem to dominate, but the final outcome remains highly uncertain and must be watched closely.

    Japan’s CGPI cools to 3.2% in May, but food inflation continue to rise

    Japan’s corporate goods price index slowed more than expected in May, easing from 4.1% to 3.2% yoy, versus the anticipated 3.5% yoy. The decline reflects the broader disinflationary trend in upstream prices, aided by the recent rebound in Yen. Yen-based import price index plunged -10.3% yoy, a sharper drop than April’s -7.3% yoy.

    Falling raw material costs were evident across sectors, with steel prices down -4.8% yoy, chemicals -3.1% yoy, and non-ferrous metals -2.1% yoy

    However, consumer-related categories showed more persistence in inflation. Prices of food and beverages accelerated to 4.2% yoy from April’s 4.0% yoy, suggesting that inflationary stickiness in essential goods remains a challenge despite broader producer-side cooling.

    AUD/USD Mid-Day Report

    Daily Pivots: (S1) 0.6497; (P) 0.6515; (R1) 0.6540; More…

    Intraday bias in AUD/USD is mildly on the upside with breach of 0.6536 resistance. Rise from 0.5913 could be resuming for 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, considering bearish divergence condition in 4H MACD, break of 0.6478 support will turn bias back to the downside for 55 D EMA (now at 0.6410) and possibly below.

    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
    23:50 JPY PPI Y/Y May 3.20% 3.50% 4.00% 4.10%
    12:30 CAD Building Permits M/M Apr -6.60% 0.30% -4.10% -5.30%
    12:30 USD CPI M/M May 0.10% 0.20% 0.20%
    12:30 USD CPI Y/Y May 2.40% 2.50% 2.30%
    12:30 USD CPI Core M/M May 0.10% 0.30% 0.20%
    12:30 USD CPI Core Y/Y May 2.80% 2.90% 2.80%
    14:30 USD Crude Oil Inventories -2.4M -4.3M

     



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  • Fragile Trade Progress and CPI Ahead Keep Risk Appetite in Check

    Fragile Trade Progress and CPI Ahead Keep Risk Appetite in Check


    Asian equities edged modestly higher on Wednesday, lifted by the announcement that US and Chinese officials reached a “framework” to implement the Geneva trade consensus and advance commitments made in the latest Trump-Xi phone call. While officials from both sides struck an optimistic tone, the agreement remains preliminary, lacking substantive details on thornier issues.

    US Commerce Secretary Howard Lutnick confirmed that the deal would still require presidential approval on both sides before moving forward. One of the key elements of the framework involves China’s rare-earth exports, a pivotal issue as the US seeks to stabilize supply chains. Lutnick said the US expects export restrictions to be eased, with reciprocal rollback of recent US technology export bans to China.

    However, the broader market reaction was muted. The US Court of Appeals allowed Trump’s contested tariffs to remain in place pending further legal review, undermining hopes of swift tariff rollback. The ruling enables the continued enforcement of “Liberation Day” tariffs, which apply to imports from major partners. This legal backdrop, coupled with still-fragile diplomatic progress, reinforces the market’s caution.

    In the currency markets, the overall tone is mixed, with Swiss Franc and Dollar leading as the day’s strongest performers so far, followed by Loonie. On the other end, risk-sensitive currencies Kiwi and Aussie are softer, alongside Sterling. Euro and Yen are positioning in the middle of the pack. Despite modest equity gains, this is far from a full-fledged risk-on environment.

    Attention now shifts to two major US events: US CPI report and 10-year Treasury note auction. The inflation data will serve as a critical barometer for how much of the tariff impact is bleeding into consumer prices. Simultaneously, the Treasury auction will test investor appetite for government debt amid lingering concerns over deficits, erratic trade policies, and rising issuance needs.

    In Asia, at the time of writing, Nikkei is up 0.50%. Hong Kong HSI is up 0.92%. China Shanghai SSE is up 0.55%. Singapore Strait Times is down -0.51%. Japan 10-year JGB yield is down -0.017 at 1.463. Overnight, DOW rose 0.25%. S&P 500 rose 0.55%. NASDAQ rose 0.63%. 10-year yield fell -0.008 to 4.474.

    Inflation data and treasury auction pose twin tests for US Bond Market

    Two major events in the US are closely watched today. The May CPI report and the USD 39B 10-year Treasury auction converge to test sentiment in the bond market.

    The May CPI will offer the clearest signal yet of whether tariffs are beginning to filter through to consumer prices. Economists expect a 0.2% mom gain, with annual headline inflation accelerating to 2.5%. Core CPI, is projected to rise 0.3% mom and accelerate to 2.9% yoy.

    While today’s CPI reading will provide an initial glimpse, the real acceleration in prices may come in June as tariffs ripple through supply chains. The unpredictability of Trump’s trade strategy, frequent shifts between escalation and truce, could delay the impact but increasing its persistence. Fed’s challenge is not only identifying if inflation is returning, but determining whether it’s sticky enough to warrant policy action beyond holding rates steady.

    Meanwhile, the 10-year Treasury auction will act as a referendum on fiscal credibility. With swelling deficits, an uncertain trade outlook, and ballooning spending commitments—including the administration’s touted “big, beautiful” infrastructure and defense budgets—investors will be watching bid-to-cover ratios and indirect bidder participation for signs of strain. A weak auction could rekindle fears of waning demand for US debt, driving yields higher and possibly stoking volatility across asset classes.

    Technically, the 10-year yield has remained within a broad range since peaking at 4.997 in 2023. While it spiked to 4.629% in May following Moody’s downgrade of the US credit rating, the move was limited and quickly retraced. As long as the 4.809 resistance level caps upside attempts, the bond market appears relatively calm—though not immune to future shocks.

    Japan’s CGPI cools to 3.2% in May, but food inflation continue to rise

    Japan’s corporate goods price index slowed more than expected in May, easing from 4.1% to 3.2% yoy, versus the anticipated 3.5% yoy. The decline reflects the broader disinflationary trend in upstream prices, aided by the recent rebound in Yen. Yen-based import price index plunged -10.3% yoy, a sharper drop than April’s -7.3% yoy.

    Falling raw material costs were evident across sectors, with steel prices down -4.8% yoy, chemicals -3.1% yoy, and non-ferrous metals -2.1% yoy

    However, consumer-related categories showed more persistence in inflation. Prices of food and beverages accelerated to 4.2% yoy from April’s 4.0% yoy, suggesting that inflationary stickiness in essential goods remains a challenge despite broader producer-side cooling.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3650; (P) 1.3689; (R1) 1.3711; More…

    Intraday bias in USD/CAD remains neutral at this point. Considering bullish convergence condition in 4H MACD, firm break of 1.3741 will indicate short term bottoming at 1.3633. Intraday bias will turn back to the upside for stronger rebound to 1.4014 resistance, as a correction to fall from 1.4791. Nevertheless, decisive break of 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603 will pave the way to 100% projection at 1.3349.

    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
    23:50 JPY PPI Y/Y May 3.20% 3.50% 4.00% 4.10%
    12:30 CAD Building Permits M/M Apr 0.30% -4.10%
    12:30 USD CPI M/M May 0.20% 0.20%
    12:30 USD CPI Y/Y May 2.50% 2.30%
    12:30 USD CPI Core M/M May 0.30% 0.20%
    12:30 USD CPI Core Y/Y May 2.90% 2.80%
    14:30 USD Crude Oil Inventories -2.4M -4.3M

     



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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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  • Markets Eye US-China Trade Talks for Fresh Catalyst

    Markets Eye US-China Trade Talks for Fresh Catalyst


    Asian equity markets opened the week on a positive note, supported by cautious optimism surrounding the high-stakes US-China trade negotiations in London. US Treasury Secretary Scott Bessent, along with Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer, are meeting Chinese counterparts as efforts to revive dialogue intensify. The outcome of these talks could set the tone for broader risk sentiment in the coming sessions.

    Despite the upbeat market tone, traders appear restrained in their positioning. While recent developments — such as China’s approval of rare earth export licenses — hint at a willingness to de-escalate, there’s little in the way of concrete breakthrough yet. White House economic adviser Kevin Hassett tempered enthusiasm by pointing out that China’s release of critical minerals remains below what the US believes was agreed to previously in Geneva. As such, expectations for a definitive deal remain muted, limiting any aggressive risk-on trades for now.

    Currency markets reflect this tempered tone. Aussie and Kiwi are modestly firmer, benefiting from the underlying improvement in sentiment, Dollar and Loonie are trading on the softer side. European majors and Yen are relatively steady in the middle. With most major pairs holding inside Friday’s ranges, the currency space is clearly in wait-and-see mode.

    Beyond trade, inflation will be the other key macro theme this week. The US will release its May CPI and PPI data, alongside the University of Michigan’s consumer sentiment and inflation expectations. Markets are keen to assess whether signs of tariff-driven are beginning to firm. A surprise to the upside could challenge the current market view that the Fed’s next move will be no earlier than Q4, particularly if inflation expectations also pick up.

    Technically, Gold’s extended decline argues that rebound from 3120.34 might have completed at 3403.39 already, with break of near term channel support and bearish divergence condition in 4H MACD. Further fall is now in favor to 3245.23 support first. Firm break there will the solidify the case that corrective pattern from 3499.79 is already in its third leg, and target 3120.34 support and possibly below.

    In Asia, at the time of writing, Nikkei is up 0.89%. Hong Kong HSI is up 0.88%. China Shanghai SSE is up 0.26%. Singapore Strait Times is up 0.15%. Japan 10-year JGB yield is up 0.011 at 1.470.

    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).

    ECB’s Nagel signals Pause, cites maximum flexibility at current rates

    German ECB Governing Council member Joachim Nagel indicated over the weekend that the central bank is likely entering a pause phase after last week’s eighth rate cut in the current easing cycle, which brought the deposit rate to 2.00%.

    Speaking on Deutschlandfunk radio, Nagel also noted that the current level of interest rates offers “maximum flexibility.” And, “We can now take the time to look at the situation first.”

    BoE’s Greene warns on inflation sensitivity, risk of wage-price spiral

    BoE Monetary Policy Committee member Megan Greene acknowledged at a Saturday conference that while UK inflation is moving “in the right direction,” the pace of decline is slower than she would prefer.

    Speaking candidly about April’s upside inflation surprise, Greene stated that while the MPC believes it can “look through” the jump, there remains a “pretty big risk” that price pressures could become more entrenched, especially if second-round effects materialize.

    Greene also highlighted the behavioral shift triggered by the recent cost-of-living crisis, warning that past inflation shocks may have left households and businesses more reactive to even small price increases. That, in turn, could “feed through the wage-price behavior.” S

    He noted that private-sector wage growth remains “way above” the level consistent with the BoE’s 2% inflation target.

    Tariff effects under scrutiny as US CPI, PPI and inflation expectations take center stage

    A relatively quiet week for global economic releases will nevertheless carry key signals for monetary policy in both the US and UK.

    US May CPI report will be front and center, offering insight into whether there is an emerging inflation pickup from tariffs. Headline CPI is expected to accelerate from 2.3% yoy to 2.5% yoy. Core CPI is seen rising to 2.9% after troughing at 2.8% for two months. A rise in both measures would raise concerns that 2025’s slow disinflation trend is reversing just as tariffs begin to seep into consumer prices.

    Additional confirmation may come from upstream price pressures in PPI data, alongside consumer inflation expectations in the University of Michigan’s sentiment survey. If all three elements—CPI, PPI, and expectations—firm, the Fed’s cautious stance would harden further. While markets currently lean toward a September cut, such an inflation environment could shift expectations toward Q4.

    In the UK, attention will turn to April GDP and labor market data. GDP is expected to show a mild contraction of -0.1% mom. But that may be less concerning given signs that post-trade deal clarity with the US could support stronger growth later in Q2. The more pivotal element will be wage growth, which has remained stubbornly high and continues to feed into sticky services inflation—a key concern for BoE.

    Diverging views within the Monetary Policy Committee remain apparent. While some members are inclined to ease, Chief Economist Huw Pill has warned last month that the UK’s weak productivity growth and embedded wage pressures could mirror past inflationary episodes. His remarks highlight that underlying structural risks—especially in the labor market—may prevent BoE from loosening policy too quickly, even if growth remains uneven.

    Here are some highlights of the week:

    • Monday: New Zealand manufacturing sales; Japan GDP final; China CPI, PPI, trade balance.
    • Tuesday: Australia Westpac consumer sentiment, NAB business confidence; UK employment; Swiss SECO consumer climate; Eurozone Sentix investor confidence.
    • Wednesday: Japan PPI; Canada building permit; US CPI.
    • Thursday: Japan BSI manufacturing; UK GDP, industrial and manufacturing production, goods trade balance; US PPI, jobless claims.
    • Friday: New Zealand BNZ manufacturing; Japan tertiary industry index; Germany CPI final; Eurozone industrial production, trade balance; Canada wholesale sales, manufacturing sales; US U of Michigan consumer sentiment.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6476; (P) 0.6497; (R1) 0.6513; More…

    AUD/USD recovers mildly today but stays below 0.6536 resistance. Intraday bias remains neutral for the moment. Further rise is in 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
    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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  • Markets Eye NFP as Trump-Xi Call Fails to Lift Sentiment

    Markets Eye NFP as Trump-Xi Call Fails to Lift Sentiment


    There was a fleeting uptick in sentiment overnight after US President Donald Trump spoke by phone with Chinese President Xi Jinping, calling the conversation “very positive” and announcing renewed lower-level trade talks. However, the initial optimism quickly faded, with major US indexes reversing early gains to end the session lower.

    The Chinese readout was more cautious, stressing that the US should “withdraw negative measures” and warning Washington to handle Taiwan “prudently.” The divergence in tone reinforces the sense that the two sides remain far apart. The agreement to more talks appears to be little more than a tactical delay rather than genuine progress.

    Elsewhere, US Treasury called on BoJ to continue policy tightening to support a normalization of Yen and correct bilateral trade imbalances. The statement, part of the Treasury’s semiannual currency report, suggested Tokyo had more to do on the policy front.

    However, Japan’s Finance Minister Katsunobu Kato offered a restrained response, reiterating that monetary decisions lie with the BOJ and avoiding direct comment on the US call for further tightening. Yen, meanwhile, barely reacted, continuing its technical consolidation as it drifts slightly lower against Dollar.

    In currency markets, Dollar remains the worst performer of the week heading into Friday’s crucial non-farm payrolls release. With a string of weak labor-related indicators earlier this week—ADP, ISM employment components, and initial claims—markets are bracing for a soft headline. Yen and Swiss Franc are also lagging this week, underperforming alongside the greenback

    On the other hand, Kiwi leads the pack, while Aussie and Sterling also posted modest gains Euro and Loonie Dollar are positioning in the middle. However, all these standings remain subject to sharp realignment depending on the tone of the upcoming US employment data and its interplay with broader market sentiment.

    In Asia, at the time of writing, Nikkei is up 0.51%. Hong Kong HSI is down -0.09%. China Shanghai SSE is down -0.06%. Singapore Strait Times is up 0.16%. Japan 10-year JGB yield is flat at 1.462. Overnight, DOW fell -0.25%. S&P 500 fell -0.53%. NASDAQ fell -0.83%. 10-year yield rose 0.029 to 4.394.

    Looking ahead, Germany will release industrial production and trade balance in European session. Swiss will publish foreign currency reserves while Eurozone will release retail sales and GDP revision. Later in the day, Canada will also release job data along with US non-farm payrolls.

    US NFP: Muted Hiring or Major Miss?

    Markets are awaiting today’s US non-farm payrolls release, with little doubt that hiring had slowed meaningfully in May amid heightened tariff threats and elevated uncertainty. The key question now is just how sharp the slowdown was.

    Consensus forecasts see NFP at 130K, unemployment steady at 4.2%, and average hourly earnings rising 0.3% mom. Recent labor indicators have painted a dismal picture. ADP private employment came in at just 37k, a stark miss. ISM Manufacturing employment stayed subdued at 46.8 and the Services component barely rose back into expansion territory at 50.7. Meanwhile, 4-week average of jobless claims has crept up to 235k.

    While a modest softening in job growth would likely be tolerated as a natural response to macro headwinds, any significant downside surprise could reignite recession fears. An NFP reading below 100K could provoke a sharp risk-off response in equities. However, such a result would likely weigh further on Dollar, as markets would begin pricing in earlier Fed rate cuts in response to labor market deterioration.

    Technically, S&P 500 extended the near term rise from 4835.04 this week, but continued to lose upside momentum as seen in D MACD. This rise is seen as the second leg of the corrective pattern from 6147.43. Hence, while further rise cannot be ruled out, given that S&P 500 is now close to 6000, upside potential is limited. On the other hand, break of 5767.41 support will signal that a short term top was already formed. Deeper pull back should be seen back to 38.2% retracement of 4835.04 to 5999.70 at 5554.79, with risk of bearish reversal.

    Fed’s Kugler: Tariffs may entrench inflation via expectations, pricing power, and productivity

    Fed Governor Adriana Kugler cautioned that disinflation “has slowed” and that tariffs are beginning to exert upward pressure on prices, a trend she expects to continue into 2025. Speaking overnight, Kugler emphasized that the balance of risks has tilted, with “greater upside risks to inflation” now emerging, even as downside risks to employment and growth loom on the horizon. As a result, she reaffirmed support for holding the current policy rate steady.

    Kugler outlined three channels through which tariffs could entrench inflationary pressures. First, she noted that rising short-term inflation expectations may grant businesses “more leeway to raise prices”, thereby increasing inflation persistence.

    Second, she flagged the risk of “opportunistic pricing”, where firms use tariff headlines as cover to hike prices even on unaffected goods. This, combined with higher costs on intermediate goods, could generate “second-round effects” on inflation.

    The third concern relates to “lower productivity”. As firms contend with elevated input costs and weaker demand, they may reduce capital investment and resort to less efficient production methods, reinforcing inflationary pressure through lower productivity.

    Fed’s Schmid: Tariff impact uncertain, policy must stay nimble

    Kansas City Fed President Jeff Schmid acknowledged in a speech overnight that monetary theory may suggest to “looking through a one-time price shock”, he would be “uncomfortable staking the Fed’s reputation and credibility on theory alone.”

    Despite the expected drag from tariffs, Schmid remains “optimistic” about the economy’s momentum. However, he acknowledged that both the inflationary and growth implications of tariffs are highly uncertain.

    As a result, he argued that Fed will “need to remain nimble”, and be prepared to adjust its stance as needed to maintain both price stability and maximum employment.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3645; (P) 1.3665; (R1) 1.3694; More…

    Intraday bias in USD/CAD stays on the downside as decline from 1.4791 is in progress. . 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, above 1.3741 minor resistance will turn intraday bias neutral and bring consolidations first.

    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 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 -0.90% 3.00%
    06:00 EUR Germany Trade Balance (EUR) Apr 20.2B 21.1B
    07:00 CHF Foreign Currency Reserves (CHF) May 703B
    09:00 EUR GDP Q/Q Q1 F 0.40% 0.30%
    09:00 EUR Eurozone Employment Change Q/Q Q1 F 0.30% 0.30%
    09:00 EUR Eurozone Retail Sales M/M Apr 0.20% -0.10%
    12:30 CAD Net Change in Employment May -11.9K 7.4K
    12:30 CAD Unemployment Rate May 7.00% 6.90%
    12:30 USD Nonfarm Payrolls May 130K 177K
    12:30 USD Unemployment Rate May 4.20% 4.20%
    12:30 USD Average Hourly Earnings M/M May 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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  • Dollar Struggles, Gold Rally Stalls, Trade Uncertainty Caps Conviction

    Dollar Struggles, Gold Rally Stalls, Trade Uncertainty Caps Conviction


    Global markets remain mixed, reflecting a cautious investor mood amid heightened trade uncertainty and a lack of clear directional drivers. US stocks closed modestly higher overnight, reversing losses from earlier in the session. Asian equities broadly followed the rebound, seemingly brushing off disappointing Chinese manufacturing data. The overall tone, however, remains indecisive, with no strong commitment to risk assets or safe havens.

    In the currency markets, Dollar is recovering slightly after a brief selloff, but still stands as the week’s worst performer. Loonie and Aussie follow behind. Yen continues to lead on safe-haven demand. Kiwi and Euro are also holding firmer, with Sterling and Swiss Franc sitting mid-pack. The lack of clear directional bias reflects the broader market indecision, as traders await clarity on the outcome of key trade negotiations.

    Underlying this market hesitation is persistent uncertainty surrounding global trade. According to a Reuters report, the Trump administration is pressing trading partners to submit their “best offers” by Wednesday, as it pushes to fast-track negotiations ahead of the July 9 expiry of the current 90-day reciprocal tariff truce. The US is requesting commitments on tariff and quota concessions, along with action plans on non-tariff barriers.

    The draft communication from the US Trade Representative warns countries not to assume tariffs will be halted, even if court rulings go against the administration. The letter asserts that the White House intends to continue the tariff program under “other robust legal authorities” if necessary, signaling that tariffs remain a core policy tool in negotiations.

    With legal and diplomatic fronts both in flux, traders are taking a wait-and-see approach. Until there is clarity on the direction of US trade policy—particularly with key partners like China and the EU—market participants are likely to stay sidelined. For now, short-term positioning continues to be dictated more by event risk management than conviction.

    Technically, Gold’s rise from 3120.34 resumed by breaking through 3365.92 resistance. Further rally should be seen to retest 3499.79 high. but strong resistance could be seen there to limit upside on first attempt, to bring more sideway trading in the near term. Nevertheless, decisive break of 3499.79 will confirm larger up trend resumption.

    In Asia, at the time of writing, Nikkei is up 0.07%. Hong Kong HSI is up 1.10%. China Shanghai SSE is up 0.36%. Singapore Strait Times is down -0.26%. Japan 10-year JGB yield is down -0.025 at 1.484. Overnight, DOW rose 0.08%. S&P 500 rose 0.41%. NASDAQ rose 0.67%. 10-year yield rose 0.046 to 4.462.

    Looking ahead, Swiss CPI and Eurozone CPI flash are the main focuses in European session. US will release factory orders later in the day.

    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.

    Fed’s Goolsbee warns against repeating ‘transitory’ mistake on tariff inflation

    Chicago Fed President Austan Goolsbee said in a webcast overnight that tariffs typically lead to a one-time price increase rather than sustained inflation.

    Drawing on textbook theory, he said a 10% tariff would create a 10% rise in prices for imported goods for “one year”, after which the inflationary effect dissipates. Such shocks are usually seen as “transitory” by central banks, Goolsbee explained.

    However, he warned against underestimating potential risks, citing lessons from the pandemic-era supply chain disruptions. “We learned the last time around” not to dismiss inflation too quickly, Goolsbee said, referencing how persistent inflation caught the Fed off guard.

    He added that scenarios combining rising prices and weakening labor markets, a stagflationary mix, present the most difficult challenge for monetary policy, as “there’s not an obvious playbook”.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8139; (P) 0.8189; (R1) 0.8222; More….

    Intraday bias in USD/CHF stays on the downside as fall from 0.8475 is in progress for 0.8038 low. Strong support could be seen from there to bring rebound, on first attempt. On the upside, above 0.8248 minor resistance will turn intraday bias neutral first. However, decisive break of 0.8038 will confirm larger down trend resumption.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8732) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    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% 0.00%
    06:30 CHF CPI Y/Y May -0.10% 0%
    09:00 EUR Eurozone Unemployment Rate Apr 6.20% 6.20%
    09:00 EUR Eurozone CPI Y/Y May P 2.00% 2.20%
    09:00 EUR Eurozone CPI Core Y/Y May P 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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