June 03, 2025

“The U.S. dollar remains under pressure as US-China trade tensions heated up and lower than expected ISM Manufacturing data exacerbated the risk off sentiment. Investors will look towards April’s JOLTS report for further signs of US slowdown”

Sam Cornford – Head of Trading

USD

The dollar continues to sell off amid further tariff uncertainty and weaker US data. Yesterday’s ISM manufacturing survey fell short of consensus expectations, contrasting the recent resilient US data. The decline in the exports to a five-year low may indicate that retaliatory trade measures are having a significant impact, intensifying pressures on the broader manufacturing industry already grappling with trade policy uncertainty and weaker consumer demand. Trump and Xi Jinping are set to speak this week after tensions seemed to have cooled giving the potential for a positive surprise and a dollar boost. The focus today will be on April’s JOLTS report, where job openings and layoffs will be closely examined. Any downside surprise, particularly in the labour market, could add more fuel to the sell off.

GBP

The UK’s economic growth will be slower than expected this year and next, as the damage caused by Donald Trump’s tariff war hits trade and investment, according to a gloomy forecast by the Organisation for Economic Co-operation and Development (OECD). With fiscal spending squeezed and higher than expected inflation the international body downgraded its expectations from its previous forecast in March.

EUR

The highlight today for the Eurozone will be the flash inflation estimates for May published this morning. The ECB is widely expected to revise its projections lower with the signal that inflationary pressures have cooled more quickly than expected in March. The CPI release today will not alter expectations for a cut on Thursday but push for a more dovish tone by the ECB President Lagarde. Markets are pricing in 55bp of cuts by year-end. EUR/USD opened this morning above 1.14 threshold with the expectations that it will lose steam close to the 1.15 mark unless there is further treasury instability.

Markets

Rising government debt levels are increasingly straining major economies, with bond investors focusing on nations that aren’t implementing sufficient fiscal reforms. A Moody’s decision to strip the United States of its last triple-A credit rating last month and weak demand for Japanese auctions highlight concerns in two of the world’s largest economies.

Main Economic Events (All Times CET)

8:30am: Swiss CPI Inflation
11:00am: Eurozone CPI Inflation
4:00pm: US JOLTS Job Openings

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