Canada’s unemployment rises for second straight session

The US dollar fell in European trade on Friday against a basket of major rivals away from four-week highs scaled earlier in the Asian session, amid active profit-taking, while traders shun new positions before US-China trade talks. 

Despite the decline, the dollar is still heading for the third weekly profit in a row after the announcement of a US-UK trade deal, and after a more bullish than expected Federal Reserve meeting, which hurt the odds of a Fed rate cut soon.

The Index

The dollar index fell 0.3% today to 100.32, with a session-high at 100.86.

On Thursday, the index rose 0.75%, the second profit in a row, after the US-UK trade deal.

Weekly Trades

The index is up 0.5% so far this week, on track for the third weekly profit in a row.

US-China Trade Talks

US Treasury Secretary Scott Bessent is scheduled to meet Chinese trade officials on Sunday in Switzerland to conduct negotiations.

The US administration might reduce tariffs on Chinese imports by over a half according to the New York Post’s sources.

Trade Developments 

The US and the UK announced a new trade agreement, the first of its kind with the new US administration.

According to the deal, the 10% base reciprocal tariffs on UK goods will continue, but 25% tariffs on British cars will be reduced to 10%, while 25% tariffs on UK steel and aluminum will be scrapped

The UK will reduce tariffs on a range of US goods from 51% to 1.8%, while raising beef and ethanol imports from the US by $5 billion a year.

The Fed

In a step that wasn’t surprising, the Fed decided to maintain interest  rates unchanged at below 4.5%, due to ongoing economic uncertainty.

The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.

The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.

Trump described Powell as a “fool” and insisted that energy and oil prices alongside most other products have fallen with inflation barely there, and once again demanded a rate cut.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in June fell from 32% to 20%.

The odds of such a cut in July fell as well from 71% to 66%.

Now investors await important remarks by Fed officials on inflation and the future of interest rates.