A Week Ending on a High Note:

Markets are closing the week with a notable sense of optimism, largely driven by the finalized US-China trade truce agreement. This significant development is injecting renewed confidence into global equity markets.

The positive sentiment is palpable: US stocks have climbed, with the S&P 500 nearing record highs. This upward momentum is further bolstered by the US Treasury Department's recent announcement of a crucial agreement with G-7 allies. This deal will exempt American companies from certain foreign taxes, a key move that effectively dismantles the "Section 899" tax proposal.

Navigating Economic Data:

While trade news provides a tailwind, recent US economic data presents a nuanced picture.

We've seen softer readings, including:

• A wider-than-expected US goods trade deficit in May.
• A downward revision to Q1 GDP growth, primarily reflecting a dip in consumer spending and a slowdown in the services sector.

However, a bright spot emerged with initial jobless claims unexpectedly falling to a five-week low. This, despite an increase in continuing claims, offers a complex view of the labor market's current health.

What This Means for You:

The confirmed US-China trade truce is a powerful positive signal, potentially easing global trade tensions and boosting overall investor confidence. For businesses with international operations, the Section 899 tax removal provides a welcome relief, which could positively impact corporate earnings and stock valuations.

Today, all eyes are on the Core Personal Consumption Expenditures (PCE) inflation data. This is the Federal Reserve's preferred inflation gauge and will be a critical factor in determining the dollar's immediate direction and solidifying market expectations for potential Fed rate cuts this year.

Softer PCE data could reinforce the case for earlier rate reductions, potentially leading to further dollar depreciation.

This, in turn, could see GBPUSD and EURUSD test their 2021 highs, affecting the purchasing power for those transacting in these currencies.

Next week, the upcoming nonfarm payrolls data will be vital in providing clearer insights into the US labor market's vigor. We will continue to monitor these developments closely to provide timely insights on how they may impact your financial strategy.

27th June 2025

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