Category Currency

Written by the Market Insights Team

New tariff threats drive haven demand

George Vessey – Lead FX & Macro Strategist

President Trump confirmed a trade deal with China was done. However, markets remained cautious as the agreement lacked concrete details and still requires final approval from US and China presidents. Then, overnight, Trump said he plans to send letters to trading partners within the next one to two weeks, outlining unilateral tariff rates ahead of a July 9 deadline. Risk sentiment soured and trade uncertainty ramped up once again.

The dollar weakened against most G10 currencies, while gold, the Swiss franc, and the yen gained on haven demand. The US dollar remains a key barometer of trade sentiment, and its failure to extend higher in the wake of the so-called deal with China was telling. Now, it’s under increased selling pressure once more, with the dollar index looking poised to hit a fresh 3-year low.

As the US engages with India and Japan to negotiate lower tariffs, some view Trump’s latest remarks as a tactic to increase pressure in trade discussions. Scepticism also remains about whether he will follow through on his pledge, given his track record of setting tight deadlines that often shift or go unfulfilled.

As ever, this persistent uncertainty continues to weigh on businesses, consumers, and investors, making it difficult to plan for potential policy shifts. Markets remain on edge, awaiting clearer signals on whether tariff adjustments will materialize or simply remain a negotiating tool.

Other updates on the tariff front

Kevin Ford – FX & Macro Strategist

On the tariff front, the US Appeals Court ruled that the IEEPA tariffs can stay in place until at least July 31st, when the case will be argued. A final decision on their legality might not come until August or later. If the administration loses again, they’d likely appeal to the Supreme Court, meaning the tariffs are probably sticking through the summer.

On the other hand, the U.S. and China have agreed to temporarily reduce certain tariffs for 90 days, until around August 12th, in an effort to ease trade tensions. The U.S. will suspend the 34% reciprocal tariff imposed on April 2nd and remove retaliatory tariff hikes from April 8th and 9th that had raised rates to 125%. However, a 10% baseline tariff remains on imports from China, Hong Kong, and Macau. Other tariffs, including those on fentanyl, autos, aluminum, steel, and long-standing Section 301 tariffs, remain unaffected. Additionally, the U.S. continues to enforce the removal of de minimis duty exemptions for Chinese imports.

China, in response, has agreed to lower its retaliatory tariffs on U.S. goods from 34% to 10% for the same 90-day period while removing the steep tariff increases from early April that had raised rates to 125%. However, previous tariffs of 10–15% on certain U.S. goods from February and March remain in place, as do longstanding retaliatory measures from 2019. Alongside these tariff adjustments, both countries have committed to ongoing trade discussions, with meetings led by senior officials from both sides to address broader economic relations beyond immediate tariff relief.

Slow grind lower

Kevin Ford – FX & Macro Strategist

Wednesday’s soft US CPI data has effectively reset rate expectations, bringing them back to where they stood at the end of last month, two cuts between now and year-end. Despite this shift, and yields dropping across the curve, there’s still no clear evidence of economic deterioration, keeping bearish sentiment firmly in control of USD trading across G10 currencies. Looking ahead, the June calendar offers little in the way of major macro catalysts, suggesting that, barring any surprises, this trend is likely to persist in relatively calm market conditions.

The Canadian dollar has been oscillating between 1.365 and 1.369, until today in overnight trading where it dropped below 1.365 and making a new 2025 low at 1.3625. The 1.365 will keep serving as a critical short-term support level. A decisive break lower hinges on sustained USD weakness or an unexpected boost from trade discussions ahead of the G7 summit this Sunday. Despite dollar softness, losses throughout the week have come mainly from the euro and pound. The CAD has remained range-bound between 1.372 and 1.365, struggling to build momentum below its weekly low.  On the other hand, bullish bets in options markets have eased recently. Canadian pension funds and asset managers, known for low hedge ratios on U.S. assets, have ramped up hedging activity since late April. Given the size of the pension and insurance sector, their actions have had a notable market impact. At this point however, the FX market sentiment on the CAD has turned neutral.

Continued momentum

Kevin Ford – FX & Macro Strategist

The Mexican peso has maintained its recent momentum, breaking below its 200-week moving average support at 19 and reaching as low as 18.82 in intraday trading, its weakest level in nine months. In the short term, the peso is expected to consolidate its breakout and establish support near 18.9, with a potential rebound toward its 20-day moving average at 19.1.

A softer U.S. inflation report drove front-end Treasury yields lower, sparking a broad dollar selloff. At its peak, the peso surged more than 1.2% against the dollar, sending USD/MXN to its lowest level since last August. Meanwhile, one-year USD/MXN risk reversals dropped to their lowest point since January, suggesting a shift toward a structurally bullish stance on the peso rather than a short-term positioning play, reinforcing confidence in its medium-term outlook.

Euro’s tug-of-war: trapped in uncertainty

Antonio Ruggiero – FX & Macro Strategist 

The euro climbed back above $1.15 versus the USD following a softer-than-expected US inflation report and Trump’s tough talk on tariffs again. The rally was underpinned first by heightened Fed rate cut expectations, which helped narrow the yield differential that still favours the dollar, offering some support to the euro. Still, the move stood out, as rate differentials have recently had a diminished role in driving price action, with broader US sentiment acting as the dominant force instead. Then came Trump’s latest tariff threat, which sent traders flocking to safe haven alternatives to the dollar.

EUR/USD has managed to break out of its well-worn and frustrating range between $1.1380 and $1.1445, although the move may prove short-lived. The common currency continues to struggle in mounting a sustained push toward April’s highs, with resilience in the US economic outlook proving a key headwind.

Underneath it all, volatility remains a crucial driver of short-term direction for the euro. Since the start of Trump’s presidency, the euro has been a primary beneficiary of heightened market uncertainty: Investors have piled into long euro positions, using it as a dollar alternative to hedge against US-driven volatility.

Over the past two months, however, EUR/USD risk reversals in favor of euro calls have softened across the volatility curve. While trade developments have curbed euro bullishness, other factors—some even euro-driven—may have quietly contributed to less aggressive positioning: Lagarde’s hawkish stance was undeniably supportive for the euro, but ultimately removed the very fuel that had been driving it higher for months—volatility. Markets now have clarity on the ECB’s policy path, with no rate cuts until after summer and only a 47.7% probability of a September cut. This reduced policy uncertainty has dampened speculative positioning around the July meeting, pulling down options market volatility. In other words, while the euro still benefits from dollar hedging, the lack of ECB-driven volatility as a catalyst weakens the case for a sustained bullish EUR/USD uptrend. After all, lower ATM volatility tends to drag down wing volatility, having a multiplier effect that weakens appetite for aggressive euro bets and ultimately reins in momentum.

Meanwhile, the euro’s ambition to rival the dollar as a global reserve currency remains distant. The ECB’s latest annual report, released yesterday, showed international euro usage remained flat in 2024 at 19%, while its FX reserve share held steady at 20%—just a third of the dollar’s dominance. Though the report doesn’t yet reflect recent market shifts, it underscores the long road ahead for the euro to challenge the dollar’s role. Meanwhile, rising demand for crypto and gold, with the latter having recently overtaken the euro as the second-largest central bank reserve asset, adds further obstacles to broader euro adoption.

Sterling struggles as gilt yields diverge

George Vessey – Lead FX & Macro Strategist

The weaker US dollar allowed the pound to claw back towards $1.36, but this morning’s softer-than-expected GDP data has forced the UK currency to pare gains. Still, GBP/USD continues to trade in the higher echelons of $1.35, over six cents higher than its 5-year average. GBP/EUR is looking vulnerable though after slipping below key daily moving averages of late, as the euro sweeps up a chunk of the demand flowing away from the dollar.

Away from the trade drama, the UK data this week has been a drag on the pound. The British economy shrank 0.3% m/m in April, the first decline in six months, and the biggest since October 2024. Services output fell by 0.4%, following growth of 0.4% in March, and was the largest contributor to the fall in GDP. Industrial and manufacturing production also came in below forecasts. The gloomy numbers follow a sharp decline in payrolls, with over 100,000 jobs lost in May, and means the likelihood of an August Bank of England rate cut has solidified further. Markets are pricing in two more rate cuts this year now, and as a result, two-year gilt yields are expected to trend lower in anticipation of easier policy, which could prove a strong headwind for sterling.

Long-end rates are expected to stay elevated though. The three-year spending plan outlined by UK Chancellor Rachel Reeves yesterday suggest sustained demand on public finances raising the likelihood of further borrowing and potential tax hikes down the line. Hence 10- and 30-year gilt yields keep pressing higher, widening the divergence with 2-year yields.

Dollar sinks to 2025 low. Euro shines as trade risk ramp up

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: June 9-13

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by the Market Insights Team

Inflation chills, dollar spills

George Vessey – Lead FX & Macro Strategist

The latest Consumer Price Index (CPI) data showed headline and core inflation rising 0.1% m/m in May, down from April’s prints and below forecasts. This means, on a year-over-year basis, headline CPI ticked up to 2.4% (vs. 2.3% prior), while core remained steady at 2.8%. It marks the fourth straight month of weaker-than-expected core inflation, reinforcing the disinflation trend. Markets responded by pricing in more Federal Reserve (Fed) easing this year. Treasury yields declined and the US dollar index dropped by the most in a week.

The string of below-forecast inflation prints suggest consumers have yet to fully experience the effects of President Trump’s tariffs, likely due to temporary tariff pauses, companies absorbing costs, or pre-emptive inventory stockpiling. However, domestic service prices, including housing, appear restrained too, hinting at consumer caution and income insecurity – offsetting any inflationary pass-through from tariffs.

The broader impact of the trade war remains disinflationary at this stage, which, all else being equal, is supportive for financial assets. However, anecdotal signs that corporations are preparing price hikes could keep the Fed wary, hence the rather muted reaction in equities.

Investors are also likely focusing on tariffs’ reflationary effects and long-end supply dynamics, which point to continued steepening of the yield curve. This is a dynamic we’ve referenced frequently in relation to driving USD weakness too.

New tariff threats drive haven demand

George Vessey – Lead FX & Macro Strategist

The other important news is that President Trump said a trade deal with China was done. However, markets remained cautious as the agreement lacked concrete details and still requires final approval from US and China presidents. Then, overnight, Trump said he plans to send letters to trading partners within the next one to two weeks, outlining unilateral tariff rates ahead of a July 9 deadline. Risk sentiment soured and trade uncertainty ramped up once again.

The dollar weakened against most G10 currencies, while gold, the Swiss franc, and the yen gained on haven demand. The US dollar remains a key barometer of trade sentiment, and its failure to extend higher in the wake of the so-called deal with China was telling. Now, it’s under increased selling pressure once more, with the dollar index looking poised to hit a fresh 3-year low.

As the US engages with India and Japan to negotiate lower tariffs, some view Trump’s latest remarks as a tactic to increase pressure in trade discussions. Scepticism also remains about whether he will follow through on his pledge, given his track record of setting tight deadlines that often shift or go unfulfilled.

As ever, this persistent uncertainty continues to weigh on businesses, consumers, and investors, making it difficult to plan for potential policy shifts. Markets remain on edge, awaiting clearer signals on whether tariff adjustments will materialize or simply remain a negotiating tool.

Euro’s tug-of-war: trapped in uncertainty

Antonio Ruggiero – FX & Macro Strategist 

The euro climbed back above $1.15 versus the USD following a softer-than-expected US inflation report and Trump’s tough talk on tariffs again. The rally was underpinned first by heightened Fed rate cut expectations, which helped narrow the yield differential that still favours the dollar, offering some support to the euro. Still, the move stood out, as rate differentials have recently had a diminished role in driving price action, with broader US sentiment acting as the dominant force instead. Then came Trump’s latest tariff threat, which sent traders flocking to safe haven alternatives to the dollar.

EUR/USD has managed to break out of its well-worn and frustrating range between $1.1380 and $1.1445, although the move may prove short-lived. The common currency continues to struggle in mounting a sustained push toward April’s highs, with resilience in the US economic outlook proving a key headwind.

Underneath it all, volatility remains a crucial driver of short-term direction for the euro. Since the start of Trump’s presidency, the euro has been a primary beneficiary of heightened market uncertainty: Investors have piled into long euro positions, using it as a dollar alternative to hedge against US-driven volatility.

Over the past two months, however, EUR/USD risk reversals in favor of euro calls have softened across the volatility curve. While trade developments have curbed euro bullishness, other factors—some even euro-driven—may have quietly contributed to less aggressive positioning: Lagarde’s hawkish stance was undeniably supportive for the euro, but ultimately removed the very fuel that had been driving it higher for months—volatility. Markets now have clarity on the ECB’s policy path, with no rate cuts until after summer and only a 47.7% probability of a September cut. This reduced policy uncertainty has dampened speculative positioning around the July meeting, pulling down options market volatility. In other words, while the euro still benefits from dollar hedging, the lack of ECB-driven volatility as a catalyst weakens the case for a sustained bullish EUR/USD uptrend. After all, lower ATM volatility tends to drag down wing volatility, having a multiplier effect that weakens appetite for aggressive euro bets and ultimately reins in momentum.

Meanwhile, the euro’s ambition to rival the dollar as a global reserve currency remains distant. The ECB’s latest annual report, released yesterday, showed international euro usage remained flat in 2024 at 19%, while its FX reserve share held steady at 20%—just a third of the dollar’s dominance. Though the report doesn’t yet reflect recent market shifts, it underscores the long road ahead for the euro to challenge the dollar’s role. Meanwhile, rising demand for crypto and gold, with the latter having recently overtaken the euro as the second-largest central bank reserve asset, adds further obstacles to broader euro adoption.

Sterling struggles as gilt yields diverge

George Vessey – Lead FX & Macro Strategist

The weaker US dollar allowed the pound to claw back towards $1.36, but this morning’s softer-than-expected GDP data has forced the UK currency to pare gains. Still, GBP/USD continues to trade in the higher echelons of $1.35, over six cents higher than its 5-year average. GBP/EUR is looking vulnerable though after slipping below key daily moving averages of late, as the euro sweeps up a chunk of the demand flowing away from the dollar.

Away from the trade drama, the UK data this week has been a drag on the pound. The British economy shrank 0.3% m/m in April, the first decline in six months, and the biggest since October 2024. Services output fell by 0.4%, following growth of 0.4% in March, and was the largest contributor to the fall in GDP. Industrial and manufacturing production also came in below forecasts. The gloomy numbers follow a sharp decline in payrolls, with over 100,000 jobs lost in May, and means the likelihood of an August Bank of England rate cut has solidified further. Markets are pricing in two more rate cuts this year now, and as a result, two-year gilt yields are expected to trend lower in anticipation of easier policy, which could prove a strong headwind for sterling.

Long-end rates are expected to stay elevated though. The three-year spending plan outlined by UK Chancellor Rachel Reeves yesterday suggest sustained demand on public finances raising the likelihood of further borrowing and potential tax hikes down the line. Hence 10- and 30-year gilt yields keep pressing higher, widening the divergence with 2-year yields.

Euro shines as trade risk ramp up

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: June 9-13

All times are in BST

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

Trade FX lower despite deal

The US dollar weakened across markets after lower-than-expected US inflation data, but positive news on the US-China trade deal failed to lift equity markets or the Australian dollar.

The annual US inflation rate for May was 2.4%, in line with forecasts, while the core inflation rate came in at 2.8%, below the expected 2.9%. Both monthly readings also missed forecasts, causing the US dollar to drop.

The bigger news came from US-China trade talks, with President Trump announcing on social media: “Our deal with China is done, subject to final approval with President Xi and me.” Commerce Secretary Howard Lutnick expects final details to be completed in the coming days, although the agreement is unlikely to be made public.

Despite the announcement, trade-sensitive markets didn’t benefit. US stocks fell, with the S&P 50 down 0.3% and the Nasdaq losing 0.5%.

In currency markets, trade-exposed currencies like the Australian and New Zealand dollars fell. The AUD/USD dropped 0.3%, reversing after testing resistance above 0.6500, while NZD/USD fell 0.4%. Meanwhile, USD/CNH and USD/CAD both edged up 0.1% as the Chinese yuan and Canadian dollar eased.

The US dollar weakened elsewhere, with USD/SGD down 0.2%, nearing its lowest level since October 2014. EUR/USD and GBP/USD gained, with the euro the best overnight, while USD/JPY declined.

USD/SGD at decade lows as Bessent gains momentum in Fed Chair race

US Treasury Secretary Scott Bessent is emerging as a top contender to replace Jerome Powell as Federal Reserve Chair, according to Bloomberg.

With Powell’s term ending in May 2026, President Trump has pledged to name a successor well in advance. However, Bloomberg reports that interviews for the role have yet to begin, keeping markets uncertain.

Bessent’s potential nomination is already affecting the US dollar, as traders anticipate his approach to monetary policy.

In Asia-Pacific markets, the US dollar’s continued weakness has pushed USD/SGD toward decade lows, where buyers may soon step in.

At the time of writing, USD/SGD is hovering at 1.2864, with key resistance at the 21-day EMA of 1.2911, followed by the 50-day EMA of 1.3025—levels that could shape the pair’s next move.

RBNZ Governor Orr’s resignation raises concerns for NZD

Newly released documents reveal that former Reserve Bank of New Zealand Governor Adrian Orr resigned in March due to government funding cuts, contradicting earlier speculation that his departure stemmed from a dispute over bank capital rules.

Orr abruptly stepped down on 5 March, cutting short his second five-year term with three years remaining.

From a technical perspective, NZD/USD is hovering above the key psychological support level of 0.6000. The next critical support levels are at the 21-day EMA of 0.5987, followed by the 50-day EMA of 0.5923.

Euro surges in Asia

Table: seven-day rolling currency trends and trading ranges  

Key global risk events

Calendar: 9 – 14 May

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by the Market Insights Team

Can the dollar hold its ground?

Kevin Ford – FX & Macro Strategist

Maybe you recall back in March, when markets were rattled by the Atlanta Fed’s GDPNow model, which predicted a sharp 2.8% contraction in Q1 GDP. We know now that the actual contraction was far more modest at -0.2%. So, what was wrong with the model? One key reason for the discrepancy is how the GDPNow model processes import data; it includes gold inflows linked to arbitrage, which the U.S. Bureau of Economic Analysis (BEA) excludes in its own calculations. But perhaps more importantly, the GDPNow model didn’t fully account for how swings in imports are often offset by inventory investment. When imports fluctuate dramatically, businesses typically adjust their inventories in response. The GDPNow model underestimated inventory contributions, skewing its overall forecast. For the same reasons, given how businesses and governments have adjusted to U.S. trade policy, the current Q2 forecast may not be the most reliable indicator.

Between March and April, recession fears surged. Based on Polymarket odds, the probability of a U.S. recession jumped from 30% to 65% following the news of reciprocal tariffs. However, as of today, that probability has dropped to 24%. The base case for the U.S. economy still favors a soft landing. Tariffs may cause inflation to rise temporarily, but markets are hopeful that the broader economic slowdown will counterbalance those effects, keeping inflation in check. Today’s May CPI report should offer insights into how recent tariffs are affecting goods prices.

As recession fears fade and market volatility settles, U.S. equities are nearing all-time highs. However, one of the most surprising trends this year has been the underperformance of U.S. stocks compared to global equities. While the S&P 500 Index is up around 2% year-to-date, the MSCI ACWI ex USA Index, which tracks large and mid-cap stocks across developed and emerging markets and covers approximately 85% of the global equity opportunity set outside the U.S., has surged to a new all-time high, surpassing previous peaks from 2007 and 2022. Year-to-date, the index is up 14%. A similar trend in FX majors has unfolded, where the DXY US dollar Index has lagged, down 8.5% year-to-date.

Could the shift from U.S. assets to international markets accelerate and drive the dollar into another leg down? What’s worrying is that despite U.S. interest rates remaining well above those in other developed economies, the dollar is still hovering near recent lows. Also, the rally in U.S. equities has been largely fueled by retail investors, with only 52% of S&P 500 members trading above their 200-day moving average.

If the dollar is to weaken further, the catalyst would likely come from rising trade tensions, weak demand in Treasury auctions, or the long-awaited downturn in the U.S. economy that investors have been expecting for the past three years. But with no clear signs of economic deterioration, bearish sentiment remains the dominant force in USD trading among G10 currencies. And with nothing on the June calendar pointing to a major macro shift, in calm waters, this trend looks set to continue.

Carry revival amid still markets

Kevin Ford – FX & Macro Strategist

The Mexican peso has hit the 19 level, extending its impressive 2025 rally. What stands out in 2025 is the strong demand for carry currencies, those that benefit from high-interest rate differentials, where the peso has taken the lead alongside the Brazilian real among Latin American currencies. Investors are keeping a close eye on this trend, as it underscores the peso’s resilience amid a challenging domestic backdrop and the evolving economic relationship between the U.S. and Mexico.

Investors are riding the wave of low volatility and renewed enthusiasm for emerging market and Latin American carry trades., fueled by easing trade tensions. With traders borrowing in low-yield currencies to invest in higher-yielding emerging markets, stability remains critical, any sudden shifts, especially from Trump, could disrupt the trend. A global currency volatility measure recently dropped to 8.3%, lifting Bloomberg’s EM carry trade index to a seven-year high. Meanwhile, moderating inflation is making EM bonds more appealing, with currencies like the Brazilian real. Asset managers have also ramped up bets on EM currencies, with positions in Mexico’s peso hitting an eight-month high.

Euro resilience rested as macro forces shift

Antonio Ruggiero – FX & Macro Strategist

That bullish push on the euro from last week’s press conference was reinvigorated this week, as ECB’s Olli Rehn and Francoise de Villeroy reinforced the bank’s recent hawkish stance, helping EUR/USD reach intraday high of $1.1446. The Sentix Investors’ Confidence Index for the eurozone, which jumped to positive levels for the first time in one year, also supported the euro’s rise.

Euro, however, continues to struggle to break decisively above $1.14, with the pair gently dipping in the $1.13 area so far this week. The euro is likely to remain range-bound until a trade or macroeconomic catalyst emerges.

For the remainder of the week, we believe that the net impact of macro forces on price action could remain slightly more bearish than bullish, with the pair likely to finish below $1.14 by week-end. The key potential bullish driver for the euro remains the uncertainty surrounding the US-China trade deal, which could revive the Sell America trade. While the two parties have agreed on a preliminary plan, no further meetings are scheduled, and approval is still pending from both Trump and Xi, leaving markets in wait-and-see mode.

On the data front, had NFP disappointed last week, a hotter-than-expected US inflation print today would have been more constructive for the euro. However, a stronger print may now be viewed as a sign of economic resilience, rather than triggering stagflation fears. Meanwhile, inflation data for Spain, France, and Germany—set to be released on Friday—could come in softer than expected, reinforcing deflationary concerns, ECB rate cut expectations, and broader sluggish economic activity.

Overall, EUR/USD is up just over 2% month-over-month, compared to a year-to-date gain of over 10%. The fading momentum suggests that US sentiment remains the primary driver of euro strength, rather than organic euro demand. Meanwhile, US economic data remains mixed, failing to paint a unified picture of weakness, and continued trade tensions have kept bearish dollar sentiment in check.

Paring positive punts on pound

George Vessey – Lead FX & Macro Strategist

After falling in the wake of the dovish UK jobs data yesterday, GBP/USD bounced modestly off its 21-day moving average in a sign that uptrend in the short term still holds for now, but FX options traders are turning less optimistic on the pound’s outlook. Having hit a 3-year high of $1.3616 last week, the currency pair has been in retreat, but the mid-$1.34 region, which has offered decent support of late, could be a key pivot point.

The pound was on track for its steepest selloff against the dollar in nearly a month, as UK employment figures showed their biggest drop in five years and wage growth slowed more than expected. The data cements the probability of an August rate reduction and increased traders’ conviction a further second quarter-point cut is on the cards for Q4. UK gilt yields fell, dragging sterling lower across the board.

The prospect of lower interest rates and falling gilt yields has dampened sterling’s appeal, pushing GBP to its lowest level against the euro in nearly four weeks, with eyes on the 50-day moving average support just under €1.18. However, downside may be limited given sterling remains one of the highest-yielding G-10 currencies, as demand for carry trades increases, bolstered by rising risk appetite and particularly as market volatility eases amid improving trade conditions.

Nevertheless, the pound’s outlook has turned more uncertain according to options markets One-week risk reversals, which measure the imbalance between bullish and bearish bets, are hovering near parity, reflecting indecision. But as traders continue to pare their bullish sterling outlook, they now expect almost no gains in the British currency over the next 1 to 3 months and a depreciating pound over a longer horizon.

Today’s focus will be on US inflation data mainly, but it’s worth keeping one eye on UK Chancellor Rachel Reeves’ Spending Review. While this is not a budget, and tax changes are off the table, it remains an important test of government credibility. Any policy missteps or signs of weakened fiscal discipline could be punished swiftly, leaving sterling vulnerable to an extended pullback.

USD/MXN hits 19.00, first time since Aug ’24

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: June 9-13

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by the Market Insights Team

Can the dollar hold its ground?

Kevin Ford – FX & Macro Strategist

Maybe you recall back in March, when markets were rattled by the Atlanta Fed’s GDPNow model, which predicted a sharp 2.8% contraction in Q1 GDP. We know now that the actual contraction was far more modest at -0.2%. So, what was wrong with the model? One key reason for the discrepancy is how the GDPNow model processes import data; it includes gold inflows linked to arbitrage, which the U.S. Bureau of Economic Analysis (BEA) excludes in its own calculations. But perhaps more importantly, the GDPNow model didn’t fully account for how swings in imports are often offset by inventory investment. When imports fluctuate dramatically, businesses typically adjust their inventories in response. The GDPNow model underestimated inventory contributions, skewing its overall forecast. For the same reasons, given how businesses and governments have adjusted to U.S. trade policy, the current Q2 forecast may not be the most reliable indicator.

Between March and April, recession fears surged. Based on Polymarket odds, the probability of a U.S. recession jumped from 30% to 65% following the news of reciprocal tariffs. However, as of today, that probability has dropped to 24%. The base case for the U.S. economy still favors a soft landing. Tariffs may cause inflation to rise temporarily, but markets are hopeful that the broader economic slowdown will counterbalance those effects, keeping inflation in check. Today’s May CPI report should offer insights into how recent tariffs are affecting goods prices.

As recession fears fade and market volatility settles, U.S. equities are nearing all-time highs. However, one of the most surprising trends this year has been the underperformance of U.S. stocks compared to global equities. While the S&P 500 Index is up around 2% year-to-date, the MSCI ACWI ex USA Index, which tracks large and mid-cap stocks across developed and emerging markets and covers approximately 85% of the global equity opportunity set outside the U.S., has surged to a new all-time high, surpassing previous peaks from 2007 and 2022. Year-to-date, the index is up 14%. A similar trend in FX majors has unfolded, where the DXY US dollar Index has lagged, down 8.5% year-to-date.

Could the shift from U.S. assets to international markets accelerate and drive the dollar into another leg down? What’s worrying is that despite U.S. interest rates remaining well above those in other developed economies, the dollar is still hovering near recent lows. Also, the rally in U.S. equities has been largely fueled by retail investors, with only 52% of S&P 500 members trading above their 200-day moving average.

If the dollar is to weaken further, the catalyst would likely come from rising trade tensions, weak demand in Treasury auctions, or the long-awaited downturn in the U.S. economy that investors have been expecting for the past three years. But with no clear signs of economic deterioration, bearish sentiment remains the dominant force in USD trading among G10 currencies. And with nothing on the June calendar pointing to a major macro shift, in calm waters, this trend looks set to continue.

Euro Resilience Tested as Macro Forces Shift

Antonio Ruggiero – FX & Macro Strategist

That bullish push on the euro from last week’s press conference was reinvigorated this week, as ECB’s Olli Rehn and Francoise de Villeroy reinforced the bank’s recent hawkish stance, helping EUR/USD reach intraday high of $1.1446. The Sentix Investors’ Confidence Index for the eurozone, which jumped to positive levels for the first time in one year, also supported the euro’s rise.

Euro, however, continues to struggle to break decisively above $1.14, with the pair gently dipping in the $1.13 area so far this week. The euro is likely to remain range-bound until a trade or macroeconomic catalyst emerges.

For the remainder of the week, we believe that the net impact of macro forces on price action could remain slightly more bearish than bullish, with the pair likely to finish below $1.14 by week-end. The key potential bullish driver for the euro remains the uncertainty surrounding the US-China trade deal, which could revive the Sell America trade. While the two parties have agreed on a preliminary plan, no further meetings are scheduled, and approval is still pending from both Trump and Xi, leaving markets in wait-and-see mode.

On the data front, had NFP disappointed last week, a hotter-than-expected US inflation print today would have been more constructive for the euro. However, a stronger print may now be viewed as a sign of economic resilience, rather than triggering stagflation fears. Meanwhile, inflation data for Spain, France, and Germany—set to be released on Friday—could come in softer than expected, reinforcing deflationary concerns, ECB rate cut expectations, and broader sluggish economic activity.

Overall, EUR/USD is up just over 2% month-over-month, compared to a year-to-date gain of over 10%. The fading momentum suggests that US sentiment remains the primary driver of euro strength, rather than organic euro demand. Meanwhile, US economic data remains mixed, failing to paint a unified picture of weakness, and continued trade tensions have kept bearish dollar sentiment in check.

Paring positive punts on pound

George Vessey – Lead FX & Macro Strategist

After falling in the wake of the dovish UK jobs data yesterday, GBP/USD bounced modestly off its 21-day moving average in a sign that uptrend in the short term still holds for now, but FX options traders are turning less optimistic on the pound’s outlook. Having hit a 3-year high of $1.3616 last week, the currency pair has been in retreat, but the mid-$1.34 region, which has offered decent support of late, could be a key pivot point.

The pound was on track for its steepest selloff against the dollar in nearly a month, as UK employment figures showed their biggest drop in five years and wage growth slowed more than expected. The data cements the probability of an August rate reduction and increased traders’ conviction a further second quarter-point cut is on the cards for Q4. UK gilt yields fell, dragging sterling lower across the board.

The prospect of lower interest rates and falling gilt yields has dampened sterling’s appeal, pushing GBP to its lowest level against the euro in nearly four weeks, with eyes on the 50-day moving average support just under €1.18. However, downside may be limited given sterling remains one of the highest-yielding G-10 currencies, as demand for carry trades increases, bolstered by rising risk appetite and particularly as market volatility eases amid improving trade conditions.

Nevertheless, the pound’s outlook has turned more uncertain according to options markets One-week risk reversals, which measure the imbalance between bullish and bearish bets, are hovering near parity, reflecting indecision. But as traders continue to pare their bullish sterling outlook, they now expect almost no gains in the British currency over the next 1 to 3 months and a depreciating pound over a longer horizon.

Today’s focus will on US inflation data mainly, but it’s worth keeping one eye on UK Chancellor Rachel Reeves’ Spending Review. While this is not a budget, and tax changes are off the table, it remains an important test of government credibility. Any policy missteps or signs of weakened fiscal discipline could be punished swiftly, leaving sterling vulnerable to an extended pullback.

Euro gains against safe-haven currencies

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: June 9-13

All times are in BST

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Cross-border payments are a critical part of today’s global economy, enabling businesses to expand, suppliers to operate across borders and digital marketplaces to thrive. Despite their importance, international transactions remain fraught with friction, cost, and risk.

Whether you’re a multinational corporation or a small exporter, navigating the complexities of global payments can hinder business growth, delay operations, and create compliance headaches. Fortunately, companies like Convera, a global leader in commercial payments are helping businesses overcome these obstacles and unlock the full potential of seamless international commerce.

Below, we break down five of the most common pain points in cross-border payments and the modern tools helping to solve them.

Cross-border payments challenge #1: FX markups and hidden fees

Foreign exchange (FX) costs remain one of the biggest pain points in international transactions. Traditional banks often embed large markups in the exchange rate while layering on transaction fees, making it hard for businesses to predict or control costs. The lack of transparency in FX pricing also leads to mistrust and budgeting issues, particularly for companies dealing with high volumes or volatile currencies.

Commercial payments providers like Convera offer real-time FX rate visibility and pricing transparency, giving businesses more control over their international payment flows. And, with tools like forwards and options contracts, companies can manage currency risk and provide certainty of future cash flows*.

Cross-border payments challenge #2: Choosing the most suitable payment method

For many businesses, sending cross-border payments or receiving funds across markets remains a logistical nightmare. Traditional correspondent banking systems can be slow, expensive or simply unavailable in certain regions. In addition, every business is faced with the overwhelming challenge of choosing the most suitable payment method for its needs.

There are numerous methods of transferring funds across borders, each with its own unique characteristics, benefits and drawbacks. Choosing between automated clearing house (ACH), single Euro payments area (SEPA), real-time gross settlement (RTGS), wire transfers, and crypto payments is a balancing game between speed, cost, accessibility, currency requirements, and security.

Modern cross-border payment providers simplify this choice by helping you find the most suitable payment method for your needs, and offering localized payout options to help ease costs. For example, Convera’s global footprint supports transactions in over 200 countries and territories, and access to more than 140 currencies including markets where traditional banks struggle to operate efficiently

Cross-border payments challenge #3: Lack of transparency

A major complaint from chief financial officers (CFOs) and treasury teams is the lack of visibility into payment status and settlement timelines. Funds can go missing for days in the correspondent banking chain, with no way to track their movement in real time. This uncertainty complicates cash flow forecasting and supplier relationships.

Global commercial payments providers, such as Convera, are tackling transparency issues by building end-to-end tracking tools to monitor the exact status of a payment across its entire journey. Real-time dashboards, transaction alerts and automated reconciliation are becoming the new standard, reducing the black box of cross-border transfers.

Cross-border payments challenge #4: Regulatory complexity, fraud, and compliance risk

Cross-border payments must comply with an intricate web of local and international regulations, ranging from Know Your Customer (KYC) and Anti-Money Laundering (AML) laws to sanctions screening and tax reporting. Managing this compliance burden internally is costly and risky (especially for smaller businesses, as mentioned before). At the same time, fraud attempts are growing more sophisticated, targeting B2B transactions through phishing, account takeovers, and business email compromise (BEC) scams.

Platforms like Convera use real-time sanctions screening, credit fraud screening systems, and secure user authentication to help businesses meet global standards without slowing down operations. These built-in protections allow companies to scale internationally with peace of mind.

Cross-border payments challenge #5: Slow delivery times

Despite advances in domestic payments, many international transactions still take a few business days to settle, especially when multiple banks and currencies are involved. These delays can disrupt supply chains, hobble financial forecasting, and leave accounts receivable teams chasing down confirmations.

Fintech innovations are significantly cutting delivery times. Through direct partnerships with local banks and the use of real-time payment networks, commercial payments providers like Convera can deliver funds in hours or even minutes. Their payment infrastructure is optimized for speed without compromising accuracy or compliance, helping businesses move money globally at the pace of modern commerce.

Solving commercial payments challenges, together

Cross-border payments will always involve a degree of complexity, but they don’t have to slow down business growth. With the right payment partner, organizations can reduce costs, streamline operations and improve financial control across borders.

Whether you’re a mid-sized manufacturer looking to pay overseas suppliers or a digital platform collecting funds from global users, now’s the time to evaluate your cross-border payment strategy. As the digital economy accelerates, solving cross-border payment challenges isn’t just a financial upgrade — it’s a competitive advantage.

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

USD remains stuck near lows

The US dollar remained under pressure overnight, with the USD index hovering just 1.1% above fresh three-year lows. Concerns over President Donald Trump’s tariff plans have weighed heavily on sentiment, dragging expectations for the US economy down. So far this year, the benchmark USD index has plunged 8.8%.

The USD’s steepest losses have come against European currencies like the euro and British pound, as well as safe-haven currencies like the Japanese yen and Swiss franc.

All eyes are on tonight’s US inflation data, which could set the tone for the dollar’s next move. Annual headline inflation for May is expected to climb from 2.3% to 2.4%, while core inflation is projected to edge up from 2.8% to 2.9%.

Overnight, the New York Fed reported softer inflation expectations for May, leading to a three-basis-point drop in the US two-year yield overnight. The Fed survey revealed declines across all tenors, with the five-year inflation forecast slipping from 2.7% to 2.6%, the one-year projection falling from 3.6% to 3.2%, and the three-year estimate easing from 3.2% to 3.0%.

Aussie consumer sentiment stays weak; AUD holds near highs

The June Westpac–Melbourne Institute consumer sentiment index ticked up 0.5% to 92.6, driven by cooling inflation and RBA rate cuts.

Despite the slight gain, sentiment remains below 100, signaling that pessimism still outweighs optimism. While attitudes toward big-ticket purchases improved amid easing cost-of-living pressures, concerns over the broader economy, household finances, and employment deepened.

Risk aversion has climbed, even as expectations for variable mortgage rates over the next year fell 6.8% to 84.6—the lowest level in 13 years. From a technical standpoint, AUD/USD sits above its 30-day trading range but remains capped below key resistance at 0.6550. The next support levels for AUD/USD lie at the 21-day EMA of 0.6461 and the 200-day EMA of 0.6417.

USD/HKD at top of the range as trade talks progress

The Hong Kong dollar’s roller-coaster ride has continued with the HKD back at lows as the USD/HKD returned to the top of its trading range.

According to the Wall Street Journal, President Trump has approved measures allowing US trade negotiators to ease restrictions on a broad set of products—including technology—during the London trade talks with China.

US delegates Bessent and Lutnick described the meeting as productive, though negotiations are expected to extend into a third day on Wednesday (UK time).

Looking at APAC FX, USD/HKD has faced significant upward pressure in recent sessions, pushing toward the top of its trading band. Key support levels for USD/HKD are positioned at the 21-day EMA of 7.8295, followed by the 50-day EMA of 7.8063.

USD in focus ahead of CPI data

Table: seven-day rolling currency trends and trading ranges  

Key global risk events

Calendar: 9 – 14 May

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by the Market Insights Team

Uneasy tranquility

Kevin Ford – FX & Macro Strategist

The 1-month at-the-money (ATM) implied volatility for the Canadian dollar has dipped below its 2024 average, indicating a quieter outlook in FX markets. Following a busy macro week in both Canada and the US, traders are preparing for a relatively calm transition into summer, with no major catalysts expected, aside from a potential uptick in US inflation for May, set to be revealed this Wednesday. Meanwhile, reports suggesting an increase in defense spending by Prime Minister Carney have failed to make an impression in FX and equity markets. However, the 10-year government bond yield has responded to the upside, reflecting growing concerns over a rising debt-to-GDP ratio and its implications for Canada’s long-term fiscal outlook. Investors will be watching closely to see how these dynamics unfold ahead of the G7 summit, scheduled to start this Sunday in Alberta, Canada.

The CAD has been fluctuating, hovering closer to the 1.37 level, struggling to stay below 1.365. While broader US dollar bearish sentiment remains the dominant force in FX markets, short-term yield differentials continue to be a key concern for the Loonie bulls, especially if sentiment shifts on a hotter-than-expected US CPI release.

Sell America: weak dollar, steep curve

Antonio Ruggiero – FX & Macro Strategist

Dollar bearishness looks set to persist, as monetary policy—once the key pillar of support for the greenback—ceased playing that role in April. The only potential upside for the dollar this week hinges on US-China trade negotiations in London, though no significant outcome has been revealed yet. Until then, with no major data releases before Wednesday’s CPI report, DXY is likely to drift lower, down nearly 9% year-to-date, reinforcing the lingering Sell America sentiment in markets.

Meanwhile, expectations for a firmer May CPI print are keeping the short end of the 1y-30y Treasury curve anchored at around 100 basis points, with traders holding off on bets for imminent Fed rate cuts. The result is a yield curve that remains steep, reflecting persistent inflation risks at the front end and fiscal or duration concerns further out.

DXY held above the 99 handle as ongoing US-China negotiations in London, despite no major developments yet, signaled broad satisfaction from both sides regarding the progress made so far. Kevin Hassett, head of the White House’s National Economic Council, told CNBC that “after the handshake” in London, “any export controls from the US will be eased and the rare earths will be released in volume” by China. Despite signaling US openness to concessions, Hassett made it clear that the most advanced US semiconductor technology—particularly Nvidia Corp.’s AI-powering chips—would remain restricted, underscoring the ongoing Indo-American race in AI dominance. Given the significance of these talks, a meaningful step toward a trade-supportive deal could push the dollar toward the key 100 level. However, for DXY to sustain levels above 100 with confidence, a more substantial agreement—alongside progress in trade negotiations with other partners—would be necessary.

USD/MXN hits lowest since Sep ‘24

Kevin Ford – FX & Macro Strategist

According to figures from Mexico’s National Institute of Statistics and Geography (INEGI), annual inflation in May 2025 reached 4.42%, the highest in six months, exceeding the upper limit of the target set by the Bank of Mexico (Banxico). This latest figure came in higher than the 4.38% average forecast by economists surveyed by Bloomberg and marked a noticeable increase from the 3.93% recorded in April. Core inflation, which excludes highly volatile items like food and fuel, also saw an uptick, rising to 4.06%. Despite the sharp increase, Banxico is unlikely to alter its easing cycle path, given that much of the surge was driven by non-core components.

The Mexican peso is kicking off the week with continued strength, extending its impressive 2025 rally. Looking back, the peso depreciated in the months following Trump’s first election in 2015 but managed to recover all its losses within a year. Fast forward to today, and the peso has gained roughly 4.8% since the most recent elections, bringing its year-to-date rise to nearly 10%. This momentum is particularly notable given the shifting macro landscape. What stands out in 2025 is the strong demand for carry currencies, those that benefit from high-interest rate differentials, where the peso has taken the lead alongside the Brazilian real among Latin American currencies. Investors are keeping a close eye on this trend, as it underscores the peso’s resilience amid a challenging domestic backdrop and the evolving economic relationship between the U.S. and Mexico.

Euro bulls step up

Antonio Ruggiero – FX & Macro Strategist

The euro remains resilient, starting the week in the $1.14 zone following Lagarde’s unexpectedly hawkish remarks last week. However, with yesterday’s Whit Monday public holiday across major Northern European countries, trading began on a subdued note, with few directional cues to guide early price action. Key bearish drivers for the euro this week include positive US-China trade negotiations and soft economic fundamentals in the euro area, with CPI data for Spain, Germany, and France, as well as industrial production figures at the aggregate level, taking center stage ahead of Friday’s releases. Overall, euro appetite remains solid, particularly in longer-term maturities within the options market, as the spread between the 1-year and 1-month 25% delta EUR/USD risk reversal recently turned positive for the first time since 2022, signaling growing long-term bullish sentiment.

However, this optimism remains largely fueled by US economic weakness, rather than underlying euro strength. Markets continue to price in one more ECB rate cut before year-end (December), and while the Fed may adopt a more dovish stance, rate differentials will still favor the dollar. The potential pivot point for the euro lies in inflation dynamics—if US inflation accelerates while remaining subdued in Europe, real rate differentials could turn euro-supportive. A crucial factor in this narrative will be whether the inflationary impact of tariffs proves temporary or more persistent.

Germany’s upcoming budget announcement later this month, as part of broader fiscal expansion efforts, alongside US CPI data due Wednesday, expected to come in hot, could provide early signals of a shift in (real) US-Eurozone rate divergence, potentially supporting the euro.

Pound slips after UK wage growth miss

George Vessey – Lead FX & Macro Strategist

The pound is marginally lower this morning after the UK labour market report revealed wages grew less than expected, whilst employment plunged. Although the ONS’s persistent data collection issues mean figures should be viewed cautiously, it might give the Bank of England (BoE) confidence that interest rates can be cut further this year.

Pay growth excluding bonuses eased to 5.2%, its slowest pace in seven months, and below forecasts of 5.3%. Private-sector wage growth, closely watched by the BoE, slipped to 5.1% from 5.5%. Still, wage growth momentum remains stubborn and inconsistent with the BoE’s 2% inflation target. Job vacancies declined though as businesses adjusted to higher payroll taxes and minimum wage hikes from April’s budget and separate tax data showed payroll employment fell by 109,000 in May, the biggest drop since May 2020, all of which are reinforcing signs of labour market cooling. The BoE meets next week, but no cut is expected, and markets are still only pricing in less than two more cuts by year-end.

Before the next UK data dump on Thursday, focus will also be on UK Chancellor Rachel Reeves Spending Review tomorrow. While Wednesday’s Spending Review is not a budget, and tax changes are off the table, it remains an important test of government credibility. Markets will be watching closely to ensure that the UK’s debt trajectory remains sustainable.

If concerns over fiscal discipline emerge, UK bond yields could push higher, as investors demand greater compensation for holding long-term UK debt. Historically, this has supported sterling, as higher yields attract foreign inflows. However, in times of elevated uncertainty bond yields and the pound can decouple, potentially signalling broader market unease. For now, the risk of a confidence crisis appears low, meaning sterling should navigate Wednesday without major disruptions. Still, any policy missteps or signs of weakened fiscal discipline could be punished swiftly, leaving GBP/USD vulnerable to a pullback.

USD/MXN hits the lowest in 9-months

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: June 9-13

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by the Market Insights Team

Sell America: weak dollar, steep curve

Antonio Ruggiero – FX & Macro Strategist

Dollar bearishness looks set to persist, as monetary policy—once the key pillar of support for the greenback—ceased playing that role in April. The only potential upside for the dollar this week hinges on US-China trade negotiations in London, though no significant outcome has been revealed yet. Until then, with no major data releases before Wednesday’s CPI report, DXY is likely to drift lower, down nearly 9% year-to-date, reinforcing the lingering Sell America sentiment in markets.

Meanwhile, expectations for a firmer May CPI print are keeping the short end of the 1y-30y Treasury curve anchored at around 100 basis points, with traders holding off on bets for imminent Fed rate cuts. The result is a yield curve that remains steep, reflecting persistent inflation risks at the front end and fiscal or duration concerns further out.

DXY held above the 99 handle as ongoing US-China negotiations in London, despite no major developments yet, signaled broad satisfaction from both sides regarding the progress made so far. Kevin Hassett, head of the White House’s National Economic Council, told CNBC that “after the handshake” in London, “any export controls from the US will be eased and the rare earths will be released in volume” by China. Despite signaling US openness to concessions, Hassett made it clear that the most advanced US semiconductor technology—particularly Nvidia Corp.’s AI-powering chips—would remain restricted, underscoring the ongoing Indo-American race in AI dominance. Given the significance of these talks, a meaningful step toward a trade-supportive deal could push the dollar toward the key 100 level. However, for DXY to sustain levels above 100 with confidence, a more substantial agreement—alongside progress in trade negotiations with other partners—would be necessary.

Euro bulls step up

Antonio Ruggiero – FX & Macro Strategist

The euro remains resilient, starting the week in the $1.14 zone following Lagarde’s unexpectedly hawkish remarks last week. However, with yesterday’s Whit Monday public holiday across major Northern European countries, trading began on a subdued note, with few directional cues to guide early price action. Key bearish drivers for the euro this week include positive US-China trade negotiations and soft economic fundamentals in the euro area, with CPI data for Spain, Germany, and France, as well as industrial production figures at the aggregate level, taking center stage ahead of Friday’s releases. Overall, euro appetite remains solid, particularly in longer-term maturities within the options market, as the spread between the 1-year and 1-month 25% delta EUR/USD risk reversal recently turned positive for the first time since 2022, signaling growing long-term bullish sentiment.

However, this optimism remains largely fueled by US economic weakness, rather than underlying euro strength. Markets continue to price in one more ECB rate cut before year-end (December), and while the Fed may adopt a more dovish stance, rate differentials will still favor the dollar. The potential pivot point for the euro lies in inflation dynamics—if US inflation accelerates while remaining subdued in Europe, real rate differentials could turn euro-supportive. A crucial factor in this narrative will be whether the inflationary impact of tariffs proves temporary or more persistent.

Germany’s upcoming budget announcement later this month, as part of broader fiscal expansion efforts, alongside US CPI data due Wednesday, expected to come in hot, could provide early signals of a shift in (real) US-Eurozone rate divergence, potentially supporting the euro.

Pound slips after UK wage growth miss

George Vessey – Lead FX & Macro Strategist

The pound is marginally lower this morning after the UK labour market report revealed wages grew less than expected, whilst employment plunged. Although the ONS’s persistent data collection issues mean figures should be viewed cautiously, it might give the Bank of England (BoE) confidence that interest rates can be cut further this year.

Pay growth excluding bonuses eased to 5.2%, its slowest pace in seven months, and below forecasts of 5.3%. Private-sector wage growth, closely watched by the BoE, slipped to 5.1% from 5.5%. Still, wage growth momentum remains stubborn and inconsistent with the BoE’s 2% inflation target. Job vacancies declined though as businesses adjusted to higher payroll taxes and minimum wage hikes from April’s budget and separate tax data showed payroll employment fell by 109,000 in May, the biggest drop since May 2020, all of which are reinforcing signs of labour market cooling. The BoE meets next week, but no cut is expected, and markets are still only pricing in less than two more cuts by year-end.

Before the next UK data dump on Thursday, focus will also be on UK Chancellor Rachel Reeves Spending Review tomorrow. While Wednesday’s Spending Review is not a budget, and tax changes are off the table, it remains an important test of government credibility. Markets will be watching closely to ensure that the UK’s debt trajectory remains sustainable.

If concerns over fiscal discipline emerge, UK bond yields could push higher, as investors demand greater compensation for holding long-term UK debt. Historically, this has supported sterling, as higher yields attract foreign inflows. However, in times of elevated uncertainty bond yields and the pound can decouple, potentially signalling broader market unease. For now, the risk of a confidence crisis appears low, meaning sterling should navigate Wednesday without major disruptions. Still, any policy missteps or signs of weakened fiscal discipline could be punished swiftly, leaving GBP/USD vulnerable to a pullback.

GBP weakens against all majors

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: June 9-13

All times are in BST

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

US-China trade talks weigh on sentiment

The Australian dollar retreated from seven-month highs this morning as uncertainty surrounding US-China trade talks in London triggered market jitters.

Although negotiations were extended for a second day, the absence of concrete announcements led to broad weakness across global markets, weighing on key FX pairs.

AUD/USD gained 0.4% by the session’s end but remained below earlier highs.

NZD/USD also eased from its peak but still closed up 0.6%, hovering near eight-month highs.

USD/CNH declined 0.2%, while USD/SGD slipped 0.3%.

’50-50′ chance tariffs will prolong US inflation

St. Louis Fed President Alberto Musalem warned that US policymakers would face uncertainty “right through the summer,” estimating a “50-50” chance that tariffs from President Donald Trump’s trade policies could lead to sustained inflation, according to the Financial Times.

While US tariffs might drive inflation for “a quarter or two,” Musalem acknowledged an equally plausible scenario in which the price impact persists longer.

Meanwhile, Philadelphia Fed President Patrick Harker suggested there could be an opportunity to lower rates in the second half of the year but emphasized the need for patience.

He described Friday’s jobs report as “solid.”

Looking at risk-sensitive commodity currency such as AUD/USD, the pair remains above the 30-day range average, providing short-term opportunity for USD buyers.

The next support levels for AUD/USD stand at the 21-day EMA of 0.6456, followed by the 50-day EMA of 0.6408.

China’s deflation adds to CNH pressure

May data showed China’s consumer deflation continuing at -0.1% year-over-year, slightly better than the -0.2% Bloomberg consensus forecast.

Despite the Golden Week holiday, weak domestic demand remains evident. Given ongoing US-China trade uncertainties and an intensifying price war among domestic automakers, deflationary pressures are expected to persist.

PPI deflation extended its streak to 32 consecutive months, dropping 3.3% year-over-year, worse than the 3.2% decline projected by analysts.

USD/CNH remains more than 3% below its April 8, 2025 peak of 7.4290.

Key resistance levels to watch include the 21-day EMA at 7.2010 and the 50-day EMA at 7.2280.

Aussie eases, but remains near highs

Table: seven-day rolling currency trends and trading ranges  

Key global risk events

Calendar: 9 – 14 May

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.