News

Retailers including Costco and Best Buy have already raised prices as a way to mitigate the tariff impact.

Morgan Stanley expects the U.S. dollar to fall around 9% by the middle of next year, driven by slowing U.S. economic growth and aggressive Federal Reserve rate cuts. In a note dated May 31, via Bloomberg, gated, strategists led by Matthew Hornbach said the dollar could reach levels last seen during the COVID-19 pandemic, as financial markets shift into a new phase marked by steeper yield curves and a sustained downtrend in the greenback.

The bank forecasts:

• Euro to rise to 1.25 from around 1.13

• British pound to climb to 1.45 from 1.35

• Japanese yen to strengthen to 130 from 143

• 10-year U.S. Treasury yields to hit 4% by end-2025 before falling sharply as the Fed cuts rates by 175 basis points next year

Morgan Stanley joins other major institutions, including JPMorgan, in turning bearish on the dollar amid persistent trade tensions under President Trump. The euro, yen, and Swiss franc — all seen as safe-haven rivals — are likely to benefit most from dollar weakness.

—

The USD has lost ground during the session here so far:

This article was written by Eamonn Sheridan at www.forexlive.com.

Responding to recent U.S. accusations that China violated the trade consensus reached in Geneva, a spokesperson from China’s Ministry of Commerce said Monday that Beijing is aware of the claims. The ministry stated that following the May 12 release of the Joint Statement from the China-U.S. Economic and Trade Meeting, China acted in line with the agreement by cancelling or suspending relevant tariff and non-tariff measures aimed at U.S. “reciprocal tariffs.”

The spokesperson emphasised that China has taken a responsible and consistent approach, faithfully implementing the terms of the agreement and working to uphold the outcomes of the Geneva talks. The ministry also reaffirmed China’s firm stance on defending its rights and said its actions reflect both sincerity and integrity.

China commerce ministry headlines:

• China is firm in safeguarding its rights and interests, and it is honest in implementing the consensus
• US has successively introduced a number of ‘discriminatory restrictive measures’ against China after talks in Geneva
• These practices by the US seriously violate the consensus reached by both sides
• US has made ‘groundless accusations’ against China for violating the consensus
• These practices by the US seriously violate the consensus reached by both sides
• China resolutely rejects these ‘unreasonable accusations’
• Urge the US to immediately correct the relevant ‘wrong practices’
• If the US insists on going its own way and continues to undermine China’s interests, China will continue to resolutely take forceful measures to safeguard its legitimate rights and interests
• Urge the US to immediately correct the relevant ‘wrong practices’
• If the US insists on going its own way and continues to undermine China’s interests, China will continue to resolutely take forceful measures to safeguard its legitimate rights and interests

This article was written by Eamonn Sheridan at www.forexlive.com.

Fed’s Waller:

• None of what drove pandemic inflation surge is in place now
• Just doesn’t see how tariffs would create persistent inflation
• Policy should look at real side of economy if inflation is close to target
• Fed is close to reaching inflation target
• Doubts a 10% tariff can get inflation up to 3%
• Markets determine long term yields
• Long term yields up in part on government fiscal worries
• Doesn’t see a problem selling government bonds
• Long term yields also up amid foreign buyer anxiety

Earlier from Waller is here:

• Fed’s Waller says rate cuts remain possible later in 2025

Waller swinging over the dark dovish side!

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan Jibun Bank PMI Manufacturing (final ) for May 2025 49.4, confirming an 11th consecutive month of contraction for the sector

• preliminary 49.0
• prior 48.7

Japan’s manufacturing sector edged closer to stabilisation in May, according to the latest survey from S&P Global, which showed milder declines in key indicators alongside a notable uptick in employment.

Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, said the May Purchasing Managers’ Index (PMI) pointed to a softening of recent weakness:

“Manufacturing conditions in Japan moved closer to stabilisation in May, according to latest PMI data, with companies signalling a softer decline in sales and improved jobs growth. The downturn in output was meanwhile relatively mild and similar to that seen in April.”

While output and new orders continued to fall, the pace of contraction was less severe than in previous months. Firms continued to grapple with subdued global demand, with many citing U.S. tariffs and rising client caution as key drags on both production and order volumes.

“Businesses noted that subdued global demand conditions, influenced by US tariffs and increased client hesitancy, negatively impacted new orders and production schedules,” Fiddes added.

Despite the challenges, manufacturers showed signs of growing confidence. Optimism about future output rose in May, with firms increasingly hopeful about a recovery in global conditions. This growing sentiment was reflected in hiring trends:

“There were tentative signs of a potential improvement in the sector’s performance over the coming year… Staffing levels increased at the fastest pace in over a year, as firms aimed to build capacity in anticipation of improvements in global demand conditions.”

The data suggests Japan’s industrial sector is beginning to stabilise after months of weakness, though global trade headwinds remain a key risk.

Out at the same time were:

South Korea Manufacturing PMI (May) 47.7

• prior 47.5

Taiwan 48.6

• prior 47.8

Vietnam 49.8

• prior 45.6

This article was written by Eamonn Sheridan at www.forexlive.com.

Goldman Sachs oil price forecasts:

• Brent crude (2025 average): $60 per barrel

• WTI crude (2025 average): $56 per barrel

• Brent crude (2026 average): $56 per barrel

• WTI crude (2026 average): $52 per barrel

Goldman Sachs expects OPEC+ to deliver one last production increase of 410,000 barrels per day in August before keeping output steady from September onward, according to a note published Sunday.

The bank held to its conservative outlook on oil prices, citing robust supply growth outside U.S. shale as a key factor behind weaker price expectations.

This article was written by Eamonn Sheridan at www.forexlive.com.

We keep getting thrown off, and the lack of predictability is driving investors elsewhere.

US Treasury Secretary Scott Bessent said on Sunday that US President Donald Trump and Chinese President Xi Jinping are likely to speak soon to iron out trade issues including a dispute over critical minerals, per Reuters. 

The AUD/USD pair extends its upside to around 0.6445 during the early Asian session on Monday. Tariff uncertainty continues to undermine the US Dollar (USD) against the Australian Dollar (AUD).

China’s official Manufacturing Purchasing Managers’ Index (PMI) rose to 49.5 in May, compared to 49.0 in the previous reading. The reading came in line with the market consensus in the reported month.