Dollar Dances, Euro Pauses, Pound Pushes Ahead.

  • USD holds firm on jobs data and stable risk sentiment, with attention now on the Trump-Xi call and key US economic releases.

  • JOLTS data showed labour tightness but softening wage pressures; the dollar’s bounce looks more like positioning than strength.

  • EUR/USD slips below 1.140 on short-covering and soft inflation; ECB may sound dovish, but EUR downside could be cushioned.

  • GBP/USD gains supported by a bearish USD outlook; BoA sees 1.54 by end-2026 despite weak UK growth and persistent inflation.

  • BoA warns of US economic slowdown and capital outflows, suggesting longer-term pressure on the dollar.

USD: Dollar Holds Ground, Markets Eye Trump-Xi and Data

Despite a late-session uptick in Treasury yields, the US dollar remained resilient, buoyed by strong April JOLTS job openings. Still, this data does little to shift the broader jobs narrative: the labour market remains tight, but declining quit rates hint at easing wage pressure. The dollar’s bounce seems more about market positioning and a lack of fresh bad news than any major economic shift.

Markets may be anticipating a slight improvement in US-China relations with an upcoming Trump-Xi call. Historically, such conversations have reduced trade anxiety, so a short-lived dollar boost is possible. However, lasting gains are unlikely. Trump has now formalised 50% tariffs on steel and aluminium, and while he described President Xi as someone he “likes”, he also noted Xi is “extremely hard to make a deal with”. No confirmation of the call having taken place yet.

Today’s focus turns to the ISM services index, expected to edge up to 52.0 from 51.6, and the ADP payrolls report, forecasted to rise to 114k. The Fed’s Beige Book release this evening could also influence sentiment.

We’d be wary of re-entering short dollar positions before the Trump-Xi call concludes. Post-call, downside pressures may re-emerge for the USD.

EUR: Stuck Below 1.140 with Soft Inflation Pressures

As expected, EUR/USD faced resistance near 1.145 and has since pulled back below 1.140, likely due to short-squeeze dynamics. Hopes of eased US-China tensions argue against an immediate rebound toward Tuesday’s highs unless US data significantly disappoints.

Eurozone inflation data increased the likelihood of a more dovish tone from the ECB. Not only was headline inflation below the 2% target, but core inflation fell sharply from 2.7% to 2.3%. Our ECB outlook suggests dovishness is expected, though some support for the euro might come from discussions of its global relevance.

Today is light on eurozone data, with final May PMIs and April industrial production due. Trade talks between US and EU officials are ongoing in Paris.

Our EUR/USD stance is unchanged: we see the pair drifting toward 1.1300 over the coming weeks, with rallies likely fizzling below 1.150.

GBP: Pound Stays Firm as Dollar Risks Mount

The pound climbed to a 39-month high near 1.3600 in late May before easing slightly to the 1.3500 area. Bank of America (BoA) remains upbeat on GBP/USD, expecting further USD weakness in the medium term.

BoA projects GBP/USD to rise to 1.43 by end-2025 and 1.54 by end-2026, supported mainly by a softer dollar rather than UK strength. It forecasts sluggish UK growth and sticky inflation but sees risks tilting toward fewer Bank of England rate cuts than the three currently expected (down to 3.50% by year-end).

While the US economy has shown resilience, BoA warns of cracks in high-frequency data and sees signs of a broader slowdown. It also expects more capital outflows from the US, reinforcing a bearish long-term dollar outlook.

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