In response, President Donald Trump called on the US Federal Reserve to ease monetary policy, highlighting that the European Central Bank (ECB) has repeatedly cut rates. The dollar faces additional pressure from new 50% tariffs on steel and aluminum imports, which take effect today and may trigger retaliation from the EU, Canada, and Mexico. Trump’s comments regarding difficult trade negotiations with China have further increased investor concerns about a deepening global trade conflict and the risk of economic slowdown.

Eurozone: Euro Gains Amid Mixed Business Activity Data

The euro strengthens against both the dollar and the pound, while showing mixed performance against the yen. Recent services PMI data revealed a drop from 50.1 to 49.7, indicating stagnation. The composite index edged down from 50.4 to 50.2, remaining in expansion territory but barely above the threshold. In Germany, the drop was sharper: PMIs fell to 47.1 and 48.5, though slightly better than expected. Despite this, optimism returned to markets after EU Commissioner Maroš Šefčovič stated that trade talks with the US were progressing well.

United Kingdom: Pound Supported by Robust Services Growth

The British pound outperformed the dollar, fell against the euro, and traded mixed versus the yen. May's PMI data exceeded forecasts: manufacturing rose from 45.4 to 46.4, while services jumped from 49.0 to 50.9, returning to growth territory. The composite index climbed to 50.3 (49.4 forecast). Hopes for a major UK-US trade deal, now in its final stages, and the removal of higher tariffs on steel exports (from 25% to 50%) provided further support to the pound.

Japan: Yen Strengthens, Businesses Remain Cautious

The yen strengthened against the dollar, with mixed moves versus the pound and euro. Japan's services PMI fell from 52.4 to 51.0, above consensus, while the composite PMI dropped from 51.2 to 50.2 (versus 49.8 expected). Japanese business sentiment is challenged by global demand uncertainty, labor shortages, and rising costs. Bank of Japan Governor Kazuo Ueda reassured investors that the economy can withstand higher US tariffs and ongoing inflation-wage cycles, signaling possible policy normalization in the future.

Australia: Weak GDP and Activity Data

The Australian dollar rallied against all major currencies after the release of Q1 GDP data: growth reached 0.2% q/q and 1.3% y/y (vs forecasts of 0.4% and 1.5%). The weak result stemmed from lower government spending, subdued consumer demand, and declining exports. May services PMI slipped from 51.0 to 50.6 (consensus: 50.5), while the composite index dropped from 51.0 to 50.5.

Oil Market: Canadian Wildfires and US Demand Weakness

Oil prices received support from a 344,000 bpd output cut in Canada due to widespread wildfires. However, gains remain capped by weak US employment figures, raising concerns over a slowdown in global energy demand. Later today, the US Energy Information Administration (EIA) will release data on fuel reserves, with analysts expecting a drawdown of 2.9 million barrels, which could offer some relief to oil markets.

Summary & Outlook

  • Key focus: Weak US jobs data and renewed pressure on the Fed to ease rates.
  • Euro and pound supported by resilient macro data despite pockets of weakness.
  • Yen and Australian dollar gain on domestic economic developments.
  • Oil prices balanced between production cuts and global demand concerns.