Market Moves:

• Traders are increasingly factoring in a potential Fed rate cut in September, adjusting expectations based on recent data.
• The US dollar is gaining ground, supported by optimism around ongoing trade discussions between the US and China.

Key Takeaway:

Rate cut bets are shifting to September, while positive sentiment around US-China talks is lending support to the dollar.

Market Recap:

European markets remained subdued on Monday, with little in the way of fresh data or major news to drive direction.

However, sentiment improved later in the day as US-China trade talks kicked off in London. Early reports indicated a positive tone, which lifted investor confidence.

As a result:

• US equities moved higher in late trading
• The dollar strengthened on renewed optimism

What This Means:

While markets were quiet earlier in the session, encouraging signals from US-China discussions gave risk appetite a boost. Continuation of these talks today could keep markets supported, especially if progress is seen on easing trade tensions.

Today’s Market Update:

The pound weakened this morning after UK labour data missed expectations:

• Weekly earnings came in at 5.3% year-on-year (vs 5.5% expected)
• Unemployment rose to 4.6%

As a result, markets have brought forward expectations for a BoE rate cut from November to September.

With no major data releases ahead today, focus shifts to ongoing US-China trade talks, which could influence broader FX sentiment.

What This Means:

Softer UK jobs data is fuelling speculation of an earlier rate cut, adding downside pressure to sterling. Unless trade developments drive broader market sentiment, GBP is likely to stay on the back foot.

10th June 2025

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