Morning Report
May 30, 2025
“The latest tariff drama in the US has triggered another set of market U-turns over the past few days, and the Trump administration’s legal battle to keep his widespread tariffs in place will be a key focus in the coming weeks. Today is all about inflation, both in the US and in Europe.”
Sam Cornford – Head of Trading
USD
The dollar’s rally was only brief yesterday, and it ended the day weaker than it started. As the market had time to digest the trade court rulings against Trump’s sweeping tariffs on Wednesday, the relatively quick realisation was that it would only be an obstacle and likely not a serious threat to his trade strategy, and the initial burst of optimism was unwound. We said yesterday that it was not the final say, and that Trump had other statutes available to implement the tariffs. The news that a federal appeals court has paused the ruling proved that point overnight – the administration now has until 9th June to respond with evidence. The jump in jobless claims to 240K and a downward revision to the GDP consumption numbers also dented the dollar, which is now heading for its fifth consecutive monthly loss for the first time since 2017.
Today, the focus is on core PCE inflation for April. The consensus here is for 0.1% month-on-month and 2.5% year-on-year, something which at the margin might support the case for further rate cuts, but that will likely make little difference for policymakers that are fretting about the incoming tariff impact. There is also a consumer sentiment print later in the afternoon.
GBP
Sterling recovered against the dollar yesterday but corrected lower against the likes of EUR and CHF, as markets priced back in some concern about global trade. The BoE’s Taylor – a known dove that favours more rapid easing – reinforced his calls for continued rate cuts in the FT this morning, dismissing the recent inflation jump as a one-off and placing more emphasis on the likely drag on growth from Trump’s tariffs. The markets are not too surprised to hear that from the newest MPC member.
EUR
Inflation continues to print lower than expected in the eurozone and is bolstering bets on an eighth 25bps cut next Thursday. After the French CPI figure sank to 0.7% on Tuesday, Spain’s number fell from 2.2% to 1.9% this morning and the data from the German regions is due throughout the morning. The bloc-wide report is due on Tuesday. The market is now pricing in around a 30% chance that there are three more cuts to come this year, which would take the deposit rate down to 1.50%. The fact that EUR/USD is still solid this morning is illustrative of just how Trump-driven the market is right now.
Markets
A jump in stocks early in yesterday’s session did not last for long, and the gradual realisation that the optimism was misplaced meant that the S&P 500 only squeezed out a 0.4% gain. European indexes slipped broadly and Japan’s Nikkei sank 1.2%.
Main Economic Events (All Times CET)
8:00am: Sweden Q1 GDP
8:00am: Norway Unemployment Rate
9:00am: Spain CPI Inflation
2:00pm: German CPI Inflation
2:30pm: US Core PCE Inflation
4:00pm: US UoM Consumer Sentiment
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