What is next: European Inflation and US Jobs

As June turns to July, investors’ attention will shift from geopolitics to trade wars. The expiration date of the White House’s 90-day tariff delay is approaching. Countries are rushing to conclude trade agreements with the US to limit themselves to a universal tariff of 10%. The European Union is also rushing. However, Brussels is ready to impose retaliatory duties on imports worth $116 billion if negotiations with Washington are unsuccessful.

The escalation of trade wars could restore the direct correlation between the dollar and US stock indices. The greenback is used as a safe-haven currency when the epicentre of turmoil is outside the United States. When the threat comes from the White House, investors prefer to sell American assets such as the S&P 500 and the USD index.

The economic calendar features releases of German and European inflation data, a speech by Christine Lagarde and statistics on US business activity and the labour market.

According to Chief Economist Philip Lane, the ECB’s cycle of monetary easing is coming to an end. Markets are expecting just one more 25 basis point cut by the end of 2025. Derivatives are pricing the Fed’s 66-point cut. Divergence in monetary policy is the key driver of the EURO USD rally and the decline in the USD index.

The FxPro Analyst Team