Markets welcomed the first day of US-China trade talks in London, with positive signals coming from both sides. The US hinted at easing tech export restrictions, while China issued rare earth licenses to US firms in a goodwill move. President Trump reportedly allowed diplomats some flexibility on export controls, and China’s Vice President Han Zheng expressed willingness to improve ties with the EU.
Japan’s trade negotiator plans another visit to Washington to resolve auto and steel tariff issues before the G7 meeting between Prime Minister Ishiba and President Trump. Meanwhile, Canadian Prime Minister Carney is quietly preparing a warmer reception for Trump at the G7, including defense budget moves and softer rhetoric, aiming to improve US-Canada trade relations.
In the US, 700 Marines are being deployed to Los Angeles to control riots until the National Guard arrives. Trump condemned the violence and urged stronger local action. On the international front, the US and Iran are set for a sixth round of nuclear deal talks later this week.
Economic data showed Atlanta Fed’s GDPNow steady at 3.8%, while NY Fed’s year-ahead inflation expectations dropped to 3.2% from 3.6%. May’s US employment trends slipped slightly, but April’s wholesale inventories rose by 0.2%, beating forecasts.
Amid these plays, the US Dollar Index (DXY) is slightly up, pressuring Gold. Crude Oil stays strong near a 9-week high on OPEC concerns and cautious optimism. Major currencies retreat, crypto pares gains, equities are upbeat, and Antipodeans edge lower as bond yields drift.
The US Dollar’s rebound, cautious ECB comments, and mixed EU data are pressuring EURUSD bulls, putting last week’s gains at risk. Holiday closures in Germany, France, and Switzerland, along with weaker EU trade ties with the US and China, also weigh on the Euro.
In the UK, retail sales growth plunged to 1.0% in May from 7% in April, according to BRC data. This, along with ongoing BoE concerns over US tariffs, challenges GBPUSD bulls—despite their recent bullish breakout from a “Cup and Handle” pattern. Furthermore, Tuesday’s release of the UK employment clues also exert additional downside pressure on the Cable pair, with higher claimant count and unemployment rate joining softer wage growth and employment change.
In Japan, BoJ Governor Ueda signaled limited room for rate cuts, adding pressure to USDJPY. Though the government plans cash handouts and trade efforts with the US to support growth, weak bond demand complicates the BoJ's hawkish stance. Finance Minister Kato’s appeal for domestic investors to buy and hold JGBs underscores rising concern and challenges the Yen pair sellers of late.
AUDUSD holds steady as weak Australian Business Conditions in May contrast with stronger Business Confidence and improved Westpac Consumer Sentiment. Optimism over the US-China trade deal limits downside, despite pressure from a stronger US Dollar.
NZDUSD follows the Aussie’s lead amid a quiet data calendar, as concerns grow over more RBNZ rate cuts. Finance Minister Nicola Willis has urged the central bank to increase the frequency of its rate decisions, adding to policy uncertainty.
Meanwhile, USDCAD extends its winning streak to three days, even as oil prices—Canada’s key export—remain strong. The move likely reflects anticipation of positive US-Canada trade developments and a potential Bank of Canada rate cut after two pauses.
Crude Oil swings near its highest level since early April as Reuters reports OPEC’s actual output rose by just 150k bpd in May, well below the 441k bpd increase it announced. This underdelivery, combined with US-Iran talks and hopes China will avoid a trade war with the US, is helping support oil prices ahead of today’s US private inventory data release.
Gold remains directionless after bouncing off the $3,300 support confluence comprising the 21-day SMA and previous resistance line. The bullion’s latest inaction could be linked to the US Dollar’s rebound and cautious mood ahead of Wednesday’s US inflation data, while upbeat US-China trade news and dovish bias about the Fed seem to be putting a floor under the XAUUSD prices.
Elsewhere, Bitcoin (BTCUSD) and Ethereum (ETHUSD) both marked stellar run-ups the previous day, marking the biggest daily jumps in a month, before retreating early Tuesday. That said, the crypto market cheered an absence of news covering the Trump-Musk feud and growing optimism surrounding the US-China trade talks. It’s worth mentioning, however, that the latest ETF outflows and mixed on-chain details seem to challenge the crypto buyers.
With a quiet economic calendar in the West—aside from US API oil inventory data—markets will focus on updates from the US-China trade talks in London. If upbeat headlines continue, the US Dollar could stay strong, pressuring major currencies and commodities. However, crude oil may extend its rally on positive sentiment and a potential drawdown in stockpiles.
May the trading luck be with you!
