USD maintains soft undertone in quiet trade – Scotiabank

The US Dollar (USD) is tracking a little lower to start the week. The AUD and NZD are leading gains among the major currencies on the day so far, suggesting a pro-risk mood among investors. But the JPY is also well-supported and stock trends are mixed. European stocks are marginally softer while US equity futures are in the green, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD slips broadly lower, focus on US/ China trade talks

"With little economic news to focus on overnight, US/China trade talks taking place in London today are drawing most attention. Over the weekend a WH official expressed confidence that the talks would be productive and result in a deal. But reports have indicated that recent trade talks with some countries have been slowed by vague US demands, or in the case of recent talks with Japan, the three senior officials who are meeting with China arguing openly with each other about objectives. The USD bounced Friday following the release of better than expected NFP data for May."

"But the data looked less impressive when the net revisions of –95k for the past two months were factored in. Revisions reflected fewer than initially reported jobs in government, trade and transport—perhaps reflecting the impact US DOGE and tariff policy steps in the past few months. Overall, last week’s run of US data tilted towards the negative. President Trump called on the Fed to cut rates by a full point Friday. It seems most likely though that the data will persuade the Fed to remain on hold at the June 18th meeting—and perhaps again in July. This week’s US inflation data is expected to reflect a small acceleration in prices."

"By late summer, tariff-driven price rises may be more evident in the data which may further complicate the outlook for policy— and bolster the president’s frustration with the Fed. Prolonged uncertainty over trade and tariffs will likely slow growth momentum and underpin inflation, a mix that will curb the appeal of the USD and US assets. Late week gains in the DXY appear to have peaked around 99.25/30 Friday. The broader bear trend in the index remains intact (major resistance at 99.50) but the DXY may hold in a tight trading range around the 99 point in the near term as investors await trade developments. Support is 98.35/40. We think the longer term trend is geared towards a drop to the 90-95 zone for the index."