The US dollar is under pressure today, influenced by domestic factors and developments in trade talks. Uncertainty surrounding the US-China trade discussions and upcoming economic data are key drivers.
Reports suggest negotiators have agreed on a framework to restart the flow of sensitive goods. However, market sentiment remains cautious, with skepticism about the extent of the breakthrough.
Domestic fiscal developments are also weighing on the dollar. A soft 3-year Treasury auction reversed recent gains in US government bonds, which now face a dual test today with the highly watched 10-year auction and CPI data.
May's core inflation is expected to come in below consensus, which could ease pressure on Treasuries but might weigh on the dollar as chances of a September rate cut fade. Furthermore, reports that Treasury Secretary Scott Bessent is being considered as Powell's Fed successor are negatively impacting the dollar.
The Euro's direction today will be mostly set by the dollar, with some support likely near 1.1400 and a possible push above 1.1500 by the week's end.
The UK's Spending Review is not expected to be a major market mover. The pound lost some steam after soft UK jobs data yesterday. Budget events often stir gilt market volatility, so EUR/GBP might get a bit of bullish momentum and test 0.850 in the coming days.
The Canadian dollar is currently unattractive. The new US metal tariff hikes disproportionally hit Canadian exporters, and there are no indications of imminent high-level trade negotiations with the US. The Bank of Canada may need to react, possibly by cutting rates as soon as July.