The U.S. dollar tripped over its own feet on Monday, sliding against major currencies as the glow from a surprisingly decent U.S. jobs report faded faster than a cheap candle.
Investors, suddenly nervous about U.S.-China trade talks kicking off in London, decided to rethink the dollar’s usual role as the world’s financial security blanket. With everyone holding their breath for the outcome, the currency markets looked like they were playing a high-stakes game of musical chairs.
In London, the U.S. is sending a trio of heavy hitters—Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer—to face off with China’s Vice Premier He Lifeng.
These talks are a big deal, especially since China’s wrestling with deflation worse than a flat soda, while U.S. businesses and consumers are jittery about trade uncertainties. Kit Juckes, Societe Generale’s chief FX strategist, noted that how these talks play out could make or break market moods, especially for Asia Pacific currencies.
Speaking of which, the Japanese yen, Australian dollar, and New Zealand dollar are expected to do some serious dancing depending on the trade talk headlines. The yen already nudged up, with the dollar dropping 0.55% to 144.04 yen after two weeks of strutting its stuff.
Japan’s economy also threw in a plot twist, contracting slower than expected in early 2025, while Prime Minister Shigeru Ishiba chimed in about interest rates stirring the economic pot.
Over in Europe, the euro flexed its muscles, climbing 0.34% to $1.1433. The European Central Bank’s recent hint that it might slam the brakes on its easing cycle gave markets something to chew on. Meanwhile, the British pound hopped up 0.47% to $1.35814, proving it’s not just tea and biscuits keeping the UK in the game.
China’s offshore yuan, meanwhile, was lounging at 7.1844 per dollar, barely blinking after data showed export growth slowing to a three-month low in May.
Factory-gate deflation also hit its worst level in two years, making China’s economic scene look about as cheerful as a rainy Monday. This backdrop only adds more pressure to the London talks, where both sides are hoping to avoid a trade war that could make a cage match look tame.
Down under, the New Zealand dollar perked up 0.66% to $0.60585, and the Australian dollar climbed half a percent to $0.6529, though trading was quieter than a library on a holiday.
Markets in Australia were closed for a public holiday, leaving traders to sip coffee and speculate from the sidelines. The kiwi and Aussie dollars are likely to keep their eyes glued to any trade talk updates, ready to jump or slump at the slightest hint.
Then there’s the elephant in the room: President Trump’s 10% universal tariff on imports outside the U.S.-Mexico-Canada Agreement, which started making waves in May.
ANZ Bank analysts pointed out that the Federal Reserve is itching for more inflation data to figure out if this tariff is a one-hit wonder or a persistent pest. The Fed’s in no rush to cut rates, especially with trade policies tossing curveballs at the economy.
The dollar’s slip wasn’t just a one-day blip; it’s part of a bigger picture where global markets are on edge. The U.S. jobs report last Friday gave a brief boost, cutting weekly declines in the dollar index by more than half. But with trade talks looming, investors are acting like they’re waiting for the season finale of a cliffhanger series.
China’s economic woes aren’t helping the mood. With export growth slowing and deflation digging in, the pressure’s on He Lifeng to bring something solid to the table.
The U.S. team, meanwhile, is juggling the challenge of keeping trade relations from spiraling into a full-blown economic soap opera.
The yen’s slight gain also got a nudge from Japan’s less-than-disastrous economic data. Prime Minister Ishiba’s comments on interest rates added a dash of intrigue, hinting at potential ripples across currency markets. It’s a reminder that every economic report is another plot point in this global financial drama.
As for the euro and pound, they’re holding steady, but the European Central Bank’s hawkish stance is keeping traders on their toes.
The possibility of tighter monetary policy is making the euro look like it’s ready to arm-wrestle the dollar. Sterling, meanwhile, is enjoying a moment in the sun, even if it’s a cloudy London day.
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