June 02, 2025

“The U.S. dollar is starting the week on the back foot as markets remain cautious amid renewed trade tensions and anticipation of key economic data. With rate cut expectations building and geopolitical risks rising, investor sentiment is clearly leaning risk-off.”

Tim Hallinan – Trading Director

USD

The US dollar slipped this morning, giving back some of last week’s gains as markets reconsidered the impact of President Trump’s tariff policy. Investors are concerned tariffs may slow growth and boost inflation. Global markets started cautiously amid renewed US-China tensions, with the US doubling tariffs on steel and aluminium over the weekend. This week’s key data includes job openings on Tuesday, payrolls on Friday, and today’s ISM manufacturing report. Several Fed officials are speaking, and the Beige Book is due Wednesday. Christopher Waller reiterated support for rate cuts, with markets pricing in 53 basis points of reductions this year.

GBP

May house price data this morning came in stronger than expected, suggesting some resilience in the UK housing market. This could help support the economy as interest rate cuts begin, with two more 25bp reductions expected this year. Sterling remains relatively firm, particularly against the dollar. A key focus this week will be Bank of England commentary, especially at Tuesday’s Treasury Committee meeting.

EUR

Despite an expected ECB rate cut and soft eurozone inflation data this week, dollar weakness is keeping EUR/USD pair supported. Flash May eurozone CPI, due tomorrow, is forecast to show core inflation easing to 2.5% year-on-year. On Thursday, NATO defence ministers meet in Brussels, where Europe may respond to US criticism with renewed focus on defence spending. Euro may also find support in hints of German fiscal expansion expected later in June.

Markets

European equities started the new trading week and month mostly lower. The Stoxx 600 index slipped 0.18%, with France’s CAC 40 down 0.43% and Germany’s DAX falling 0.22%. The UK’s FTSE 100 bucked the trend, rising 0.08%, supported by a 0.57% jump in oil and gas stocks. Auto shares dropped 1.4%, hit by concerns over tougher tariffs following the US president’s surprise hike of steel duties to 50%.

Main Economic Events (All Times CET)

9:00am: Swiss GDP
10:30am: UK Mortgage Approvals
4:00pm US ISM Manufacturing PMI

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