June 09, 2025

“US-China trade talks in London today and Wednesday’s US CPI inflation data are likely to be the key movers this week. The dollar is weakening slightly this morning as the post-payrolls gains are being steadily erased.”

Tim Hallinan – Trading Director

USD

The dollar is a touch softer across the board this morning as we head into today’s US-China trade talks in London. Friday’s payrolls report handed the greenback a boost when the worst fears were avoided with a modestly beat on expectations at 139K, though significant downward revisions to previous prints, and some nerves about trade and the violence in LA, have dampened US sentiment since. While today’s trade talks may prove to be a positive for the dollar if there is some further progress towards keeping >100% tariffs at bay, all the pullbacks and reversals since ‘liberation day’ so far have not seemed to dislodge the weaker dollar narrative. Data from China this morning showed a 35.5% y/y drop in Chinese exports to the US in May. There is also some inflation expectations data this afternoon, and then the focus will be on the hard CPI and PPI inflation data in a few days’ time, where the market is expecting some uplift as the tariff impact starts to sink in.

GBP

Sterling continues to benefit from the weaker dollar and hawkish European sentiment, after tariff anxiety and the ECB’s hawkish messaging pushed GBP/USD to a fresh three-year high last Thursday. It is a busy week for UK data, beginning with a wage growth print that is expected to remain sticky tomorrow, followed by some GDP growth data for April on Thursday. PM Starmer will also make an appearance with Nvidia CEO Jensen Huang today as part of a drive to push economic growth through AI.

EUR

The euro is back on the front foot this morning after dropping slightly on Friday. The hawkish adjustment to ECB rate pricing has stuck; the market is expecting only one further rate cut over the next year. With the ECB close to the finish line and the Fed still with substantial room to move lower, there could be some support for the euro through rate differentials. While there is still significant concern around trade, slightly calmer conditions have allowed rates to step in as a dominant FX driver in recent days.

Markets

There is no shortage of optimism in the equity markets, and the large drops in April seem to have been forgotten. The S&P 500 pushed through 6,000 once again on Friday and the MSCI world index has touched an all-time high. Futures are pointing to a benign open this morning.

Main Economic Events (All Times CET)

3:30am: Chinese CPI
5:00pm: NY Fed 1Y Inflation Expectations

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