Articles

• Prior 0.0%
• Core CPI +0.5% y/y
• Prior +0.6%

This article was written by Justin Low at www.forexlive.com.

• German DAX futures +0.2%
• UK FTSE futures +0.1%

It’s a tentative start to the new week/month for European equities. There was a slightly softer mood yesterday but is going to be balanced out at the open later. This comes with US futures leaning back lower with S&P 500 futures down 0.3% currently. Trade developments remain paramount and we’ll see what comes of the US-EU meeting later this week.

This article was written by Justin Low at www.forexlive.com.

It’s still all about trade uncertainty at the moment, as we await more headlines to work with during the week. There’s still only 36 days to go before Trump’s deadline for trade deals, so time’s a-wasting. That being said, the courts are also still doing battle on the reciprocal tariffs so we’ll have to see how that plays out in the week ahead too.

Amid the uncertainty and policy incoherence, the dollar’s struggle for confidence continued yesterday. The greenback fell to start the new week/month but is now holding a little steadier today at least. It is still put in a vulnerable spot and the pressure remains despite dollar sellers taking their foot off the pedal for now. USD/JPY is hugging closer to 143.00 but the low earlier touched 142.36, pushing close to some short-term support:

The inability to hold a break above 145.00 last week then led to three straight days of declines for the pair, so this for now looks to be a bit of a breather.

Elsewhere, EUR/USD is down 0.2% today but still above the 1.1400 mark at 1.1415 currently. GBP/USD is also down 0.2% but keeping above the 1.3500 level at 1.3518 at the moment.

The antipodeans are the laggards on the day, with AUD/USD down 0.5% to 0.6457 after once again failing at another bid to break the 0.6500 mark:

Besides trade headlines, we are also slowly gearing towards the US jobs report on Friday. So, there’s that to be mindful of alongside the ECB policy meeting on Thursday.

This article was written by Justin Low at www.forexlive.com.

Trump’s tariffs are still the main thing that is keeping markets on edge as we get into June trading. Wall Street managed a modest recovery yesterday, led by tech shares. But even so, there’s still a lot of uncertainty up in the air on the trade front at the moment. Let’s try and take stock of what is happening as we look to the days ahead.

• The US federal court moved to temporarily reinstate reciprocal tariffs on Friday
• That follows from Trump’s appeal, so the ruling by the trade court is paused in the meantime
• However, the plaintiffs are ordered to respond by 5 June and the administration by 9 June
• Trump has now called for a longer pause amid ongoing trade negotiations
• And he has also warned countries to make their “best offers” by 4 June
• As much as Trump’s aides have talked about closing trade deals, we’re still yet to see any until now
• The supposed “easier” negotiations with Japan and India continue to run into roadblocks
• There is now just 36 days to go for trade deals to be struck
• And despite a “truce” period with China now, it doesn’t seem like talks are going anywhere
• US claims that Trump and Xi will “likely” speak this week but China remains silent on the matter

On that final point, go figure. When it comes to analysing Trump and the narrative he wants to sell, always remember that there are two sides to the coin.

It feels like we’re running in circles and maybe oblongs over the past 54 days since we began this 90-day negotiation period. The question now is, will Trump extend that as we get no closer to any trade deals? Or will he even have the power to do so as the courts are still doing battle on legitimising his tariffs? And what about China? As talks go nowhere, will Trump lose his patience and snap on China with higher tariffs?

Plenty of questions. Not much answers. That pretty much sums things up.

And in the case of the US dollar, that’s not a good sign of confidence for a currency that is already lacking in that department amid the ongoing policy incoherence and uncertainty.

This article was written by Justin Low at www.forexlive.com.

• Australian data for Q1 2025, Business Inventories biggest increase since Q1 2024
• More from Ueda: Various opinions on desirable pace of BOJ’s bond taper
• Bank of Japan Governor Ueda comment has slammed the yen lower
• China Caixin May 2025 Manufacturing PMI 48.3 (prior 50.4!)
• RBA May meeting minutes – not yet time to move monetary policy to an expansionary setting
• PBOC sets USD/ CNY reference rate for today at 7.1869 (vs. estimate at 7.1872)
• Bank of Japan Governor Ueda says Japan economy moderately recovering
• Deutsche Bank expect ECB to cut on June 5, but path to 1.5% terminal rate now less certain
• Australia raises its minimum wage by 3.5%, according to Reuters
• BoJ expected to halt its quarterly reductions in JGB purchases starting next fiscal year
• BOJ faces calls to slow taper beyond 2026 amid yield volatility concerns
• ICYMI: US presses trade partners for final offers by Wednesday as tariff deadline nears
• China Chamber of Commerce directs harsh words to the EU
• UK trade minister to meet US Trade Rep to discuss tariff deal
• New Zealand Q1 2025 terms of trade +1.9% q/q (expected +3.1%)
• Standard Chartered sees EUR/USD holding around 1.14 amid mixed push and pull factors
• Japan PM Ishiba may call a snap election if main opposition submit no-confidence motion
• Trump on Iran – “WE WILL NOT ALLOW ANY ENRICHMENT OF URANIUM!”
• BoE’s Mann says policy in the US is a contributing factor to high volatility in UK assets
• Forexlive Americas FX news wrap 2 Jun: USD declines as traders fear US/China trade issues
• European Union says it will make strong case for US tariff cuts this week
• Trump to eliminate federal protections banning drilling and mining in Alaska wilderness
• Major US indices close higher to start the new week
• Trade ideas thread – Tuesday, 3 June, insightful charts, technical analysis, ideas

The US dollar slipped to a six-week low (before rebounding) as a cocktail of poor economic data and rising concerns over President Trump’s escalating trade war weighed on sentiment. Softer-than-expected factory figures, combined with fiscal risks tied to newly announced tariff hikes, drove fresh selling in the greenback. Commodity-linked currencies outperformed, with the Australian and New Zealand dollars gaining ground ahead of key labour market reports and amid rising investor caution over global growth.

In Asia, China’s manufacturing sector took a hit in May as the Caixin PMI dropped to 48.3, snapping an eight-month expansion streak. The decline, attributed largely to a slump in export demand amid renewed US tariffs, saw output, new orders, and employment all fall. Input and output prices remained weak, though firms expressed cautious optimism for a trade recovery, particularly if tensions with Washington ease.

The Japanese yen fell sharply after Bank of Japan Governor Kazuo Ueda said the central bank is prepared to raise interest rates—provided economic and price conditions rebound in line with forecasts. Ueda pointed to rising domestic wages and underlying inflation as justification for future hikes, while noting that the recent jump in food prices was likely transitory. Still, he warned against pre-committing to a path amid heightened global trade uncertainty.

Ueda also touched on the BoJ’s JGB tapering plans, see points above. The comments reinforced the view that the central bank is slowly preparing to exit ultra-easy policy, but will remain sensitive to volatility in global markets and fiscal policy moves elsewhere, including the U.S.

Australia’s Fair Work Commission announced a 3.5% increase in the national minimum wage, effective from July, offering a boost to low-income workers as inflation pressures ease. The hike comes amid tentative signs that real wages—measured against inflation—are beginning to turn positive again after a long stretch of negative growth. The move is also expected to feed into upcoming wage and employment data, which the Reserve Bank of Australia will closely monitor ahead of future policy decisions.

Minutes from the Reserve Bank of Australia’s May meeting revealed the Board weighed rate cuts of 25 or 50 basis points, ultimately settling on the smaller move to maintain a cautious and predictable policy path. While progress on inflation and signs of tightness in the labour market supported a rate reduction, the RBA was not convinced that a larger cut was necessary, especially given the risk of needing to reverse course if global conditions improved.

The minutes highlighted concerns over downside risks to household consumption and the potential fallout from worsening global trade tensions. While US tariff policy was flagged as a significant negative for the global outlook, the RBA noted it had not yet materially affected the Australian economy. The Board agreed it wasn’t time to shift to a clearly expansionary stance but stressed policy was well positioned to respond swiftly if global conditions deteriorate further.

Elsewhere, geopolitics edged back into focus after Donald Trump declared the U.S. “will not allow any enrichment of uranium” by Iran, renewing concerns over tensions in the Middle East. The remark adds a layer of uncertainty to an already jittery market navigating trade battles and shifting central bank signals.

—

As mentioned, the USD declined early but rebounded. JPY strengthened early but slost ground on Ueda.

EUR, AUD, NZD, GBP, CAD have all given gains back during the session, AUD and NZD are notably weak as I update.

This article was written by Eamonn Sheridan at www.forexlive.com.

Australian data for Q1 2025 from earlier:

Current Account Balance -14.7bn AUD

• expected -13.1bn, prior -12.5bn

Gross Company Profits -0.5% q/q

• expected +1.3%, prior +5.9%

Business Inventories +0.8% q/q will add to GDP growth (around +0.1 of a point)

• expected +0.1%, prior +0.1%
• +0.7% y/y
• biggest increase since Q1 2024, driven by a sharp rise in inventories for miners and electricity providers, also rebounded in manufacturing

Net Exports Contribution to GDP -0.1%

• expected 0.0%, prior +0.2%

–

I was slow on this data, time taken up with some important remarks from Bank of Japan Governor Ueda torpedoing JPY lower.

• Bank of Japan Governor Ueda comment has slammed the yen lower

This article was written by Eamonn Sheridan at www.forexlive.com.

Ugly number this one. A big, big miss.

China Caixin May 2025 Manufacturing PMI 48.3, lowest since September 2022 and the first contraction in eight months

• expected 50.7, prior 50.4

Over the weekend we had an improving, though still in contraction, official manufacturing PMI:

• China May Manufacturing PMI rose to 49.5 (prior 49.0), Non-manufacturing 50.3 (prior 50.4)

The private-survey Caixin manufacturing PMI is awful though. China’s manufacturing activity weakened sharply in May, with the Caixin Manufacturing PMI falling to 48.3 — its lowest since September 2022 and the first contraction in eight months. Dr. Wang Zhe of Caixin Insight noted that both supply and demand deteriorated amid worsening market conditions:

• Output & Orders: Manufacturing output and total new orders both contracted, with export orders falling to their weakest since July 2023. Investment goods saw the steepest declines.

• Jobs: Employment shrank at an accelerated pace, especially among producers of investment goods.

• Prices: Input and output prices dropped further, reflecting weak demand and falling raw material costs. May marked the sixth straight month of output price contraction.

• Logistics & Inventory: Supplier deliveries faced slight delays, but inventories remained stable as companies cut back on purchases.

• Outlook: Business confidence improved slightly, with firms more hopeful about external conditions, including easing U.S.-China trade tensions.

Dr. Wang warned that downside risks to the economy have intensified in Q2, and existing stimulus measures appear insufficient. He called for targeted efforts to raise household incomes, boost employment, and improve consumer confidence to support recovery.

—

The two PMIs are quite different. If you are unfamiliar with this, the following will set you up for next year!

The PMIs (Purchasing Managers’ Indexes) from China’s National Bureau of Statistics (NBS) and Caixin/S&P Global differ primarily in survey scope, methodology, and focus. Here’s a breakdown of the key differences:

1. Provider and Affiliation

• NBS PMI:

  • Compiled by the National Bureau of Statistics of China, a government agency.
  • Seen as the official PMI, closely aligned with government policies and priorities.

• Caixin/S&P Global PMI:

  • Compiled by Caixin Media in collaboration with S&P Global.
  • A private-sector index, often considered more market-driven.

2. Survey Scope

• NBS PMI:

  • Focuses on large and state-owned enterprises.
  • Covers a broader range of industries, including manufacturing and non-manufacturing sectors (e.g., construction and services).
  • Reflects conditions in sectors heavily influenced by government policies and infrastructure spending.

• Caixin PMI:

  • Focuses on small to medium-sized enterprises (SMEs), particularly in the private sector.
  • Captures the performance of companies that are more exposed to market-driven forces and less influenced by state interventions.

3. Sample Size and Composition

• NBS PMI:

  • Larger sample size, with about 3,000 enterprises surveyed for the manufacturing PMI.
  • Emphasizes state-owned enterprises and larger companies, which tend to dominate traditional industries.

• Caixin PMI:

  • Smaller sample size, surveying around 500 enterprises, with a stronger focus on export-oriented and technology-driven firms.
  • Provides insights into the private sector and its responsiveness to global economic conditions.

4. Release Dates

• NBS PMI:

  • Released monthly, typically on the last day of the month.
  • Provides separate PMIs for manufacturing and non-manufacturing sectors.

• Caixin PMI:

  • Released a few days later, usually on the first business day of the following month.
  • Includes only the manufacturing PMI and services PMI, with no equivalent for non-manufacturing activities like construction.

5. Interpretation and Use

• NBS PMI:

  • Reflects the overall economic landscape, especially trends in industries influenced by government policy.
  • Analysts use it to gauge the impact of fiscal and monetary policies on the broader economy.

• Caixin PMI:

  • Viewed as a better indicator of the health of the private sector and market-driven segments of the economy.
  • Considered more sensitive to external shocks (e.g., global trade conditions).

6. Key Insights and Differences in Results

• The NBS PMI often reflects policy-driven stability, showing less volatility because it covers sectors cushioned by government support.
• The Caixin PMI can be more volatile, as SMEs are more sensitive to real-time changes in market demand, supply chain disruptions, and global economic shifts.

Why Both Matter:

• NBS PMI offers a macroeconomic view of China’s state-influenced economy.
• Caixin PMI provides a microeconomic perspective of the more market-driven and globally competitive sectors.

This article was written by Eamonn Sheridan at www.forexlive.com.

From July 1, the minimum wage will be increased from $24.10 per hour, to $24.94 an hour.

• the increase is above inflation, currently at 2.4%
• but less than the 4.5% called for by the Australian Council of Trade Unions

This article was written by Eamonn Sheridan at www.forexlive.com.

The Trump administration is urging trade partners to submit their best offers by Wednesday, aiming to wrap up negotiations ahead of a looming July 8 deadline tied to its suspended “Liberation Day” tariffs.

A draft letter from the U.S. Trade Representative, seen by Reuters, outlines requests for detailed proposals on tariff and quota levels for U.S. industrial and agricultural goods, as well as plans to eliminate non-tariff barriers.

Countries are also being asked to make commitments on digital trade, economic security, and other country-specific issues. The U.S. plans to quickly assess the responses and propose a “landing zone” that could include reciprocal tariff rates.

The urgency reflects the administration’s desire to close out complex, multi-country negotiations launched on April 9, when President Trump paused his sweeping tariffs for 90 days following turmoil in financial markets. Despite repeated White House claims that deals were close, only one has been outlined, just a limited framework with the UK.

The letter appears directed at nations with ongoing talks, including the EU, Japan, Vietnam, and India.

This article was written by Eamonn Sheridan at www.forexlive.com.

China Chamber of Commerce to the EU:

• Expresses disappointment and serious concerns about EU’s move to limit Chinese enterprises’ participation in healthcare sector
• Urges EU to reconsider the necessity and long-term implications of the approved ‘restrictive measures’ in EU procurement market for medical devices
• Will continue to maintain open communication with all relevant EU stakeholders

—

The EU and China are moving closer together in part to counteract US measures against the two. Its not all smooth sailing though.

This article was written by Eamonn Sheridan at www.forexlive.com.

UK Trade Minister Jonathan Reynolds will meet with U.S. Trade Representative Jamieson Greer on Tuesday to discuss how to implement a recent trade pact, as concerns mount over new U.S. steel tariffs. The meeting comes during Reynolds’ three-day trip to Paris and Brussels, where he will also review recent political trade understandings with both the U.S. and EU.

Although the deals struck last month aimed to lower tariffs on British car and steel exports to the U.S., they remain informal political agreements with key implementation details still unresolved. The situation has become more complicated after President Trump announced plans to double steel tariffs to 50% from Wednesday.

UK Steel has warned the move could severely hurt British producers. A UK government spokesperson said talks with Washington are ongoing to clarify how the new tariffs affect the deal. Reynolds stressed the importance of adapting relationships with the G7 and EU to support UK businesses and exporters.

Much ado about nothing back in May

This article was written by Eamonn Sheridan at www.forexlive.com.

New Zealand Q1 2025 terms of trade index +1.9% q/q

• expected +3.6%, prior +3.1%
• for the y/y +17%

–

Export Prices +7.1%, led by dairy prices

• expected +3.7%, prior +3.2%

Import Prices +5.1%

• expected +1.3%, prior +0.1%

Stats NZ cites the Reserve Bank of New Zealand’s trade weighted NZD index

• fell 5.3% y/y in the quarter
• New Zealand dollar weakening against most major currencies

• “The weaker New Zealand dollar has contributed to the rise in import and export prices”

—

Export Volumes +4.6%

• prior +1.3%
• Import volumes -2.4% q/q

—

• Terms of trade refer to the ratio between the prices of a country’s exports and the prices of its imports. In other words, it’s the relative value of a country’s exports to its imports.
• When the terms of trade of a country are improving, it means that the prices of its exports are increasing faster than the prices of its imports. This can lead to an increase in the purchasing power of the country’s exports, which can boost economic growth.
• On the other hand, if a country’s terms of trade are deteriorating, it means that the prices of its imports are increasing faster than the prices of its exports. This can lead to a decrease in the purchasing power of the country’s exports, which can negatively impact economic growth.

This article was written by Eamonn Sheridan at www.forexlive.com.