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• Prior month -8.10
• For the full report CLICK HERE
• May Empire manufacturing index -9.2 vs -10.0 estimate
• New orders 7.0 versus -8.8 last month
• Prices paid 59.0 versus 50.8 last month.
• Prices received 22.9 versus 28.7 last month.
• Shipments 3.5 versus -2.9 last month
• Employment -5.1 versus -2.6 last month.
• Average work week -3.4 versus -9.1 last month.
• Unfilled orders 4.8 versus 4.1 last month.
• Delivery time 1.0 versus 0.0 last month.
• Inventories 4.8 versus 7.4 last month.

Six month forward business conditions:

• General business conditions -2.0 versus -7.4 last month
• new orders -2.7 versus -6.6 last month.
• Number of employees 11.6 versus 3.4 last month
• average work week -4.8 versus -4.1 last month
• Shipments -3.4 versus -4.8 last month.
• Unfilled orders -9.5 versus -7.4 last month.
• Delivery time -3.8 versus +1.6 last month
• Inventories 1.9 versus -15.6 last month.
• Prices paid 66.7 versus 65.6 last month.
• Prices received 35.2 versus 45.9 last month.
• Capital expenditures -6.7 versus 1.6 last month
• Supply availability -27.6 versus -18.0 last month

This article was written by Greg Michalowski at www.forexlive.com.

The report notes that although the US is considering to revise the agreement, the Japanese camp is not anticipating such a change. As such, there is a possibility that negotiations will meet a deadlock. The revision to the agreement seems to be centered around the possibility of the US requesting further concessions on agriculture and livestock products, according to the sources. And that is something that Japan has refused to budge from the initial discussions.

For now, we’ll just have to wait and see. But at least there’s a possible timeline to look out for. Japan’s top trade negotiator, Ryosei Akazawa, could be travelling to Washington as soon as next week for a third round of trade talks.

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

The takeaway from the earnings call today comes from these remarks by Doug McMillon. He warned that Walmart is planning to raise prices on some items as Trump’s tariffs are weighing on the firm’s costing. And that these price hikes will begin later this month, despite the recent temporary reprieve between the US and China.

“We will do our best to keep our prices as low as possible but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.”

If even Walmart has to be one to raise prices, you can surely expect smaller firms to also do so. That especially as it is going to be a messy logistical summer in sorting out supply chains. From before: Tariffs policy can change overnight but supply chains cannot

Adding to McMillon’s remarks, Walmart finance chief, John David Rainey, also said that:

“I’m concerned that consumer is going to start seeing higher prices. You’ll begin to see that, likely towards the tail end of this month, and then certainly much more in June.”

We’ll see how this all plays out in the months ahead. But if you’re in the Fed’s position, it continues to reaffirm that the wait-and-see approach remains the most prudent stance at the moment.

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

Headlines:

• US Bessent: We are going into a series of negotiations with China
• EU trade commissioner Šefčovič says will meet with Lutnick at OECD meeting
• EU must respond to US tariffs with unity and determination, says German finance minister
• Trump: India offered the US a deal, one with zero tariffs
• Trump: We’re getting close to doing a deal with Iran
• ECB’s de Guindos: Trade tensions add to sources of financial market volatility
• Eurozone March industrial production +2.6% vs +1.8% m/m expected
• Eurozone Q1 GDP second estimate +0.3% vs +0.4% q/q prelim
• France April final CPI +0.8% vs +0.8% y/y prelim
• Germany April wholesale price index -0.1% vs -0.2% m/m prior
• UK Q1 preliminary GDP +0.7% vs +0.6% q/q expected
• Russia says Putin currently has no plans to go to Istanbul for peace talks
• IEA sees more supply flowing through oil market for the year

Markets:

• JPY leads, NZD lags on the day
• European equities a little lower; S&P 500 futures down 0.4%
• US 10-year yields down 1.1 bps to 4.516%
• Gold down 0.1% to $3,174.94
• WTI crude down 3.5% to $60.88
• Bitcoin down 1.2% to $102,295

There wasn’t too much on the session today, with markets continuing to absorb the breather from the recent trade reprieve.

In terms of data, we saw the UK economy perform modestly in Q1 with the Eurozone economy also reaffirming decent growth on the quarter. That being said, all of this is outdated data as we haven’t seen the impact of tariffs yet.

Besides that, we got some tidbits on trade but nothing that really stands out. The EU and US only look to set up a meeting in three weeks’ time while Trump touted a proposal by India on zero tariffs.

The dollar remained more sluggish throughout though, continuing with the mood from yesterday. EUR/USD pushed up to a high of 1.1228 before keeping around 1.1187 currently – still up 0.1% on the day. Meanwhile, USD/JPY is continuing to track lower as it tests waters below the 146.00 mark. The low earlier touched 145.48 before keeping near the figure level again now.

The dollar is holding more modest against the commodity currencies though. USD/CAD is flattish around 1.3985 while AUD/USD is down 0.3% to 0.6405 on the day. For the aussie, it’s a bit of a setback after the better jobs report here.

In other markets, equities are keeping more sluggish today as the upside momentum begins to run into a bit exhaustion. European indices are mostly down again, though losses are relatively light. Meanwhile, S&P 500 futures are down 0.4% and that comes even with Walmart earnings turning out for the better but there is a word of warning about prices there.

Besides that, the bond market continues to offer something of interest with yields staying on the higher side. We’re not quite breaching 5% yet on 30-year yields but it is still keeping thereabouts on the week, now seen at 4.95%.

Up next, we’ll have a slew of US data to work through with PPI, retail sales, and the weekly jobless claims on the agenda.

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

The meeting on the sidelines here is said to involve US trade representative, Jamieson Greer, and China’s trade envoy, Li Chenggang. This as both parties were in attendance of the Asia-Pacific Economic Cooperation (APEC) conference. No further details are given on the engagement yet. But considering that it is just a pull aside conversation, there shouldn’t be too much in it.

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

The USD got a boost across
the board on Monday as the US-China tariff relief was a much better than
expected news. The market started to look at the more hawkish scenario where we
get an average 10% global tariff rate and economic activity picks up on an
easing in growth fears and general uncertainty.

That led to a hawkish
repricing in interest rates expectations with the market now seeing 50 bps of
easing for the Fed by year-end compared to like 120 bps at the peak of the
fears in April. The short dollar trade was pretty overcrowded so the unwinding
in positioning gave the greenback even more strength.

As we repriced the interest
rates expectations, the USD started to lose ground against the major currencies
once again. We will likely need the market to price in an even less dovish path
for interest rates to give the greenback another boost. That could come from
economic data or hawkish Fed comments.

On the GBP side, there wasn’t much change in the fundamentals but the hawks are starting to get uncomfortable by the lack of meaningful progress on inflation, especially on the wage growth side. The market is pricing in 45 bps of easing by year end, which is roughly equal to two rate cuts every quarter.

On the daily chart, we can see that GBPUSD threatened a break below the key 1.32 handle on Monday, but eventually rallied back above it erasing the USD gains. If we get back to that level, we can expect the buyers to step in once again with a defined risk below it to position for a rally into new cycle highs. The sellers, on the other hand, will look for a break lower to extend the pullback into the major upward trendline.

On the 4 hour chart, we can see that we have a downward trendline defining the bearish structure on this timeframe. This consolidation has also formed what looks like a bullish flag but we will need a break above the trendline to confirm that. For now, the sellers will likely continue to lean on the downward trendline to push into new lows, while the buyers will wait for a break higher to increase the bullish bets into new cycle highs.

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

• No preparations for a Putin visit in the coming days
• Nothing has been agreed
• We do not know yet how negotiations will go (when asked if Putin will go if Trump does)
• Too early to talk about what will happen
• We do not even know if Ukraine will show up or how talks will pan out

Putin’s no-show has pretty much thrown things into disarray here. On the Ukrainian side, they’re displeased that Putin is sending a more “low-level” delegation. It sort of undermines the intention and motivation. Well, so much for the early week drama. And so the battle rages on..

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

WSJ’s Nick Timiraos shared on X the current forecasts for the US PCE price index due in a couple of weeks. The PCE price index is the Fed’s preferred inflation measure.

These forecasts can change a little after the US PPI today and the US Import prices tomorrow. It’s certainly moving in the right direction, but unfortunately inflation is a lagging indicator.

The market is now pricing better growth ahead following the positive developments on the trade front. This is taking long term Treasury yields higher as inflationary pressures could return given that we might see a surge in economic activity as uncertainty eases.

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

Bitcoin has been on a great ride since Trump’s tariff pause announcement back on April 9. We’ve seen the same with the US stock market given that the main macro drivers for both are growth expectations and liquidity.

Now, growth expectations continue to improve but a new risk is emerging: repricing in interest rates expectations. We already saw a more hawkish repricing as the market went from expecting 120 bps of easing in 2025 to just 50 bps at the moment. That was based on improving growth expectations and easing in recessionary fears.

Now the market could start focusing back on inflation as the potential surge in demand and economic activity on an easing in uncertainty, could restrain the Fed from cutting rates more than once this year. This repricing might trigger a bigger pullback in Bitcoin and the stock market in the short-term, although the uptrend would remain unchanged.

Therefore, the economic data is now back in focus, especially on the inflation side. Watch out also for hawkish Fed comments.

On the daily chart, we can see that we have an upward trendline defining the bullish momentum. The buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will look for a break lower to extend the pullback into the 93,000 price area.

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

• Prior +0.1%

That’s a marginal revision lower to the initial estimate but still reaffirms decent growth in the euro area economy in Q1. All of this of course is before we see any impact from tariffs. So, it’s pretty much outdated data.

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

• Prior +1.1%

That’s an unexpected surge in euro area industrial output. The breakdown shows it comes amid a jump in capital goods in particular. The rise there (+3.2%) was accompanied by increases in output for durable consumer goods (+3.1%) and also intermediate goods (+0.6%). That was slightly offset by a fall in energy output (-0.5%) on the month.

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

• 2025 global supply growth forecast seen at 1.6 mil bpd (up by 380k bpd)
• 2025 global demand growth forecast seen at 650k bpd for remainder of 2025 (down from 990k bpd in Q1)
• 2025 average oil demand growth forecast seen at 740k bpd (up by 20k bpd)
• 2026 average oil demand growth forecast seen at 760k bpd (previously 690k bpd)

The agency sees a further slowdown in oil demand growth, largely due to ongoing economic headwinds and rising EV sales. Adding to that is a further increase in supply as OPEC+ steps up production further. Not quite the positive outlook for the oil market as such. But at least looking to next year, IEA sees some better prospects compared to the month before.

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