US-China trade tensions persist, US dollar strengthens, central banks expected to cut rates

From Investing.com: 2025-05-12 01:11:00

US-China trade talks over the weekend did not seem to alleviate tensions, with concerns that an effective bilateral embargo may still persist even if tariffs are halved. The US dollar reached 3-4 week highs against most G10 currencies, but lacked follow-through momentum. Other central banks are expected to cut rates before the Federal Reserve. The upcoming week includes US economic data releases, UK and Australia GDP estimates, and a 50 bp rate cut by the Reserve Bank of Australia. India and Pakistan leaders show signs of pausing hostilities amid further mobilization.

In the Eurozone, the euro’s rally may be over, with the ECB likely to cut rates before the Fed. US economy contracted in Q1, while Eurozone growth updates show a slowing pace in Q2. The euro found support above $1.12 but is still in a consolidative phase. In Japan, the exchange rate correlation with US 10-year yield weakens, while the yen’s movement increasingly correlates with the dollar. Japan reports Q1 GDP data, with the dollar reaching highs near JPY146.20 against the yen.

The UK and Euro movements align against the US dollar, with the sterling pricing in a more gradual easing path. The UK reports on jobs, GDP, and real sector data. Sterling approached $1.3200 before recovering to $1.3325, still in a consolidative phase. The Canadian dollar and Australian dollar movements are influenced by broader US dollar trends. Canada reports real sector data and saw a rise in unemployment rate. The Australian dollar’s push above $0.6500 was repulsed, with key resistance at $0.6440-60. Mexico’s peso trades as a risk currency with a wide interest rate premium. The central bank meeting is on May 15, with the peso seeing highs near MXN19.7820 before closing below MXN19.50.



Read more at Investing.com: Week Ahead: Markets to React to Trade Talks, CPI, Japan and UK Q1 GDP