Key Market Takeaways

- Renewed Tensions Between US and China

Diplomatic strain has resurfaced between the world’s two largest economies, reigniting concerns around trade and global growth. The latest exchanges suggest friction is far from resolved.

- Greenback Softens Further

The US dollar continues to edge lower as investor sentiment is weighed down by geopolitical uncertainty and reduced demand for the currency as a safe haven.

Market Recap: A Cautious End to the Week

Tensions between the US and China flared up again on Friday, with President Trump accusing Beijing of failing to uphold its trade commitments. Jamieson Greer from the U.S. Trade Representative’s office echoed these concerns, highlighting China's slow pace in rolling back trade countermeasures.

- Market Response:

The headlines triggered a brief risk-off reaction, with equities and risk assets dipping initially. However, markets quickly stabilised, and by the end of European trading, sentiment had evened out. The US dollar gained slightly, supported by cautious investor positioning.

- Data in Focus:

Germany’s Inflation: Consumer price data from Germany aligned with forecasts, showing no surprises for the euro.

US Core PCE: The Federal Reserve’s preferred inflation gauge also met expectations, suggesting no immediate pressure to alter rate outlooks.

What This Means:

Although market volatility was limited, geopolitical tensions remain a potential disruptor. The steady inflation readings offer some calm, but traders will likely stay alert for further developments on the US-China front and upcoming central bank signals.

Today’s Market Update:

Trade Tensions Pressure USD as Key Data Looms

The US dollar began the week on the defensive, weighed down by escalating trade friction with China. In a statement over the weekend, China’s Ministry of Commerce accused the US of breaching their recent trade agreement. In response, former President Trump pledged to double tariffs on steel and aluminium imports to 50%, with implementation expected midweek.

The UK has reportedly appealed to Washington to honour its zero-tariff arrangement, while EU officials have also criticised the proposed hikes, warning of possible retaliatory steps.

Looking Ahead: A Big Week for Data

- US in Focus:

Friday’s Non-Farm Payrolls: The key economic event this week, US jobs data is expected to reflect early strain from tariff tensions and growing uncertainty. Markets are on alert for signs of a slowdown in hiring.

ISM Manufacturing (Monday) and Services (Thursday): Both indices are forecast to soften, reflecting a cooling business outlook under the shadow of trade instability.

- Europe:

ECB Rate Decision (Thursday): A 25bps cut is widely anticipated as the European Central Bank looks to support a sluggish economy.

Eurozone CPI (Tuesday): Inflation data is expected to confirm a further easing of price pressures, supporting the case for looser monetary policy.

What This Means:

Markets are navigating a tricky mix of geopolitical uncertainty and weakening economic signals. With trade policy again at the forefront and central banks preparing to act, currency volatility could remain elevated. Traders will be watching data releases closely for clues on how deeply trade tensions are starting to bite.

2nd June 2025

How We Can Help...

Our team are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer guidance on the best options available to you.

Get in Touch!

P: 07441 910 897

E: FX-Admin@frank-exchange.com

This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information, or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result. Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.