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USD/CAD is flirting with a break of the lows of the year.

The US dollar is sliding broadly today but the Canadian dollar is getting an extra lift from March and April retail sales data. The numbers were solid and come on the heels of a hotter CPI.

Combined, that has the odds of a June 4 rate cut down to 28% from 65% before CPI.

Economists at CIBC were one group calling for cuts and now sound like they’re just waiting for next week’s GDP report to flip.

Our forecast for a contraction in GDP in April and Q2 as a whole is driven more by expected
weakness in manufacturing and other sectors more directly impacted by US trade. Advance figures for those areas are
due to be released early next week, but if they also aren’t as weak as anticipated then we will have to revise our forecast
for monthly GDP and likely our Bank of Canada rate cut call as well.

As for the report itself, they note that consumer spending has been holding up better than anticipated. The caveat is that auto sales were a big driver of stronger retail sales and that could have been a tariff front-run trade.

Watch for stops below the May low of 1.3748.

This article was written by Adam Button at www.forexlive.com.

• Prior was 724K (revised to 670K)
• Sales monthly change 10.9% vs +7.4% prior (revised to +2.6%)

Rising long-term yields and borrowing costs aren’t helping the housing market. Shares of home builders have struggled badly this year.

This is a surprising number but it looks like some sales have simply been shifted by a month as the March number was revised far lower.

This article was written by Adam Button at www.forexlive.com.

I don’t think there is any secret on what’s happening between the US and EU at the moment; Bessent spelled it out. He said the EU has been moving too slowly on trade and Trump wants to ‘light a fire’ under the EU.

The message was strategically timed ahead of a call today that was scheduled previously. At 12:30 pm ET, there is a call scheduled between EU trade boss Sefcovic and USA counterpart Greer will take place.

The market will be waiting for a read-out (or leak) from that call afterwards.

This article was written by Adam Button at www.forexlive.com.

If you missed it, Trump earlier ‘recommended’ a 50% tariff on the EU starting June 1.

• Trump believes EU proposals have not been of good quality
• Would like to have Apple help US to make semiconductor supply chain better
• Trump trying to bring back precision manufacturing to the US
• Says US is ‘far along’ with India and Asian countries
• Most countries negotiating in good faith except EU
• These deals are moving quickly
• We will see more deals announced in 90-day period

Separate comments are coming from the German foreign minister:

• We support Commission to defend the European market
• Both markets would suffer, that’s why we want further negotiations

In hindsight, we should have been bracing for something. Trump took a break from the trade war to go to the Middle East and wouldn’t have wanted to announce something like this during the G7 on Wed/Thurs.

Notably, Trump will attend the G7 in Canada from June 15-17, so if he follows the pattern of lowering tensions during international visits, that leaves a three-week window.

This article was written by Adam Button at www.forexlive.com.

S&P 500 futures are down 1.5% shortly before the open while Nasdaq futures are down 1.8% as Apple falls 3.5% on Trump tariff threats on iPhones.

It’s a long weekend in the US so trade could taper off into the weekend but a big question will be: When to buy the dip? The lesson of the China trade war round is that Trump doesn’t have the appetite to really hurt the stock market, so the trade is to buy the dip. The question is: when?

That’s a much tougher one to answer. We’re at the end of another week and there haven’t been any trade deals this week, despite Hassett saying they were coming again. The July 9 deadline for tariffs is fast approaching.

For me, there is no edge in guessing at the timing of when to buy. At best, you can buy it when Trump tells you to.

This article was written by Adam Button at www.forexlive.com.

The knee-jerk reaction to Trump threatening tariffs on the EU was to buy the US dollar on a number of fronts but that’s quickly faded. Cable is now trading near the highs, AUD has bounced all the way back and the loonie is at its best levels.

Even the euro — which is the target of the tariffs — has rebounded 35 pips and is still up a half-cent on the day.

The trend so far this year has been to sell the US dollar as the US breaks the global consensus on trade. That should be the result of this round of tariffs as well.

Naturally, some people will be looking to buy the dip but that’s tough to time. It’s certainly early at the moment but if you believe Trump will ultimately back down then it’s never too early. He left himself an out by waiting until June 1 and it’s notable that there is a call scheduled today.

The EU doesn’t have the backbone for a fight in the way that China does so this could go badly for them if they roll over. That said, it’s tough with so many voices in Europe. If they do fight, it could embolden the Chinese, Japanese and others as well.

Again, these are all risks for the US economy and US dollar. I don’t see how the Fed gets any closer to cutting rates now and I don’t see how US businesses will be more-willing to invest or hire in light of this development.

So far, the clearest trades are buying the yen, Swiss franc and gold.

This article was written by Adam Button at www.forexlive.com.

• The advanced March report was +0.7%
• Prior was -0.4% (revised to -0.5%)
• Ex-autos -0.7% vs 0.0% expected
• Prior ex-autos +0.5% (revised to +0.6%)
• Advance April report +0.5%

The RBC survey on Canadian consumers last week hinted at a resilient consumer in April and that’s what the advance number shows. On the flipside, that core number in March is poor.

This article was written by Adam Button at www.forexlive.com.

The trade war was never going to be one-and-done. Trump loves tariffs too much and has too long of a list of grievances.

The lack of progress on trade deals over the past two weeks was a red flag and the 90-day deadline was ticking ever closer. He’s left himself an ‘out’ here by delaying this to June 1 but at the same time, I think he’s handing some leverage to China here in negotiations. How many fronts does the US want to fight at once?

The past two weeks have been a wonderful, placid moment and a glimpse into what could be, but until Congress takes away Trump’s ability to impose tariffs, then this dance will continue.

This article was written by Adam Button at www.forexlive.com.

• Trump recommends a 50% tariff on EU.
• Says EU has been hard to deal with.
• Tariff would start on June 1st.
• No tariff if product is built or manufactured in US.
• Our discussion with them going nowhere.

It’s not been a secret that the EU would have been harder to deal with and Trump seems to get tired of it.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Trump threatens tariffs on Apple if products not made in US

• ECB’s Lane: Confident services inflation will come down
• How have interest rates expectations changed after this week’s data?
• Bulgaria Advances Toward Euro Adoption
• ECB Q1 2025 negotiated wage indicator +2.38% vs +4.12% in Q4 2024
• ECB’s Rehn: June cut ‘appropriate’ if data confirm stabilisation of inflation
• France May consumer confidence 88 vs 93 expected
• Germany Q1 final GDP 0.4% vs 0.2% q/q expected
• UK April retail sales +1.2% vs +0.2% m/m expected
• ECB’s Stournaras: I see a June rate cut and then pause
• FX option expiries for 23 May 10am New York cut
• Trump pushes EU to cut tariffs or face extra duties – FT

It’s been a pretty boring session in terms of newsflow. The UK retail sales report was the only highlight. The data beat expectations by a huge margin with good weather cited as the main reason. Nonetheless, there’s been a strong positive trend in retail sales for several months.

In the markets, the most notable mover has been the US Dollar which extended the overnight losses. There was no catalyst since yesterday’s strong US PMIs, but the fact that the market has already repriced interest rates expectations in line with the Fed’s baseline for 2025 gives the greenback little support.

We will need more to trim the rate cuts bets further and give the USD a boost. That could come with the data in June when we get ISM PMIs, NFP and CPI before the FOMC Policy Decision.

For now, we could either range here or see more losses for the greenback. For today, we are already at the daily average range limit, so there shouldn’t be much follow through in the American session and chances of a pullback are higher.

Late in the session, Trump posted on Truth Social that he would impose 25% tariffs on Apple if the iPhones were not made in the US. That saw the AAPL stock dropping more than 3% in pre-market trading.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• iPhone’s that will be sold in the US will be manufactured and built in US, not India or anyplace else.
• If that’s not the case, a tariff of at least 25% must be paid by Apple to the US.

AAPL stock is down on the news.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Confident services inflation will come down.

Services inflation in the Eurozone has been stuck around 4% for well over a year. You can see it in the chart below.

This article was written by Giuseppe Dellamotta at www.forexlive.com.