Some modest respite for the dollar
The euro’s rally against the dollar has stalled, for now at least, with the single currency trading at around $1.17 this morning (having dipped below this level overnight), down from highs yesterday of close to $1.1750, though it is still up some two cents from the close of play last Friday. Sterling is also off yesterday’s best levels (of about $1.3770) against the US currency, trading at around $1.3740, which is some three cents higher than at the end of last week. EURGBP is little changed from yesterday morning at £0.8525, though it is almost half a penny lower on the week.
US bond yields continued to head south yesterday, led by the short end of the curve as Fed rate cut expectations firmed further, with 2-year yields declining by around 7bps and 10-year yields down some 5bps, while German and UK yields were unchanged to marginally lower on the day. In equity markets, European stocks ended in the red for a second session running, albeit only very marginally so, while US stocks had a positive day with the three main indices gaining almost 1%.
Donald Trump says the US has signed a trade deal with China, based on what was agreed between the two sides back in May, while his Commerce Secretary Lutnick says the President is set to finalise trade deals with a number of other partners over the next two weeks ahead of the July 9 deadline for imposing reciprocal tariffs. In this regard, the European Commission President, Ursula von der Leyen said yesterday that the EU is ready to do a deal with the US but is also prepared for “no satisfactory agreement” being reached.
The US economy contracted by slightly more in Q1 2025 than previously estimated, with GDP declining at an annualised rate of 0.5%, partly reflecting a downward revision to growth in consumer spending. Separately, the latest data from the labour market shows that, while the number of new jobless claimants is running at relatively low levels, the number of continuing claimants continues to rise. This suggest those who are jobless are remaining so for longer, in turn pointing to a slower pace of hiring and, ultimately, some increase in the unemployment rate ahead.
Looking to the day ahead, economic data due includes the Euro area Economic Sentiment Indicator for June and PCE inflation and the University of Michigan consumer confidence-inflation expectations survey in the US.