June 10, 2025

“While the dollar awaits the outcome of US-China talks and this week’s inflation figures, the pound has fallen more than 0.5% this morning following a significant jump in job losses in May.”

Sam Cornford – Head of Trading

USD

FX quietened down yesterday as traders prepared to react to the outcomes of the US-China trade talks and tomorrow’s inflation data. Few headlines came out of the talks in London, though Trump expressed some optimism that progress was being made. The market may already be pricing in some thawing of the relationship, so we might need a surprisingly positive result to push the dollar higher at this point. Meanwhile, the White House’s escalating clashes with California over the LA deportation protests has had little impact on the dollar so far, even with the calling in of the military, but it is a simmering risk that might spook investors if it evolves into a constitutional crisis. Today, the main data release is the NFIB small business index, which the consensus hopes might improve slightly after suffering in the first half of the year. There will also be a lot of eyes on Treasury demand ahead of a $58bn 3-year auction.

GBP

Sterling is struggling significantly this morning after data showed the biggest drop in jobs since the pandemic alongside cooling wage growth. The UK economy shed 109K payrolls in May – far worse the 20K loss expected – and ex-bonus wage growth fell from 5.6% to 5.2%. There are a couple of mitigating factors, given that ONS data can rarely be trusted too much and often the losses are revised down by the following month, but the picture is not pretty. If the figure sticks, or the trend accelerates, the concern will be that the Bank of England will rapidly fall behind the curve without picking up the pace of rate cuts. The market is now cementing bets on two further cuts before the end of the year.

EUR

The euro is a touch softer this morning but remains anchored around the 1.14 mark. The first ECB speeches following last week’s decision have begun, with Villeroy this morning stating that policy and inflation are now in a ‘favourable zone’ and that the ECB has now completed its job in nomalising policy. Holzmann’s speech later this morning will be of particular interest, as he was the only one to vote against the 25bp cut. We also get some Sentix investor confidence data today for June.

Markets

Trading in equities was fairly muted yesterday as markets waited for headlines to come out of the US-China trade talks, with the US closing slightly higher and most European indexes cooling modestly.

Main Economic Events (All Times CET)

8:00am: Norway CPI
8:00am: UK Wage Growth
10:30am: Eurozone Sentix Investor Confidence

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