Sterling fell in European trade on Tuesday against a basket of major rivals, resuming losses against the dollar and backing away from a three-year peak on profit-taking. 

The US dollar gained ground amid progress in US-China trade talks with negotiations extended for another day in London.

The Bank of England is facing divisions on monetary policy easing, hurting the odds of a rate cut in June, with traders awaiting fresh UK labor data this week to gather more clues.

The Price

GBP/USD fell 0.25% to $1.3520, with a session-high at $1.3564.

The pound rose 0.2% on Monday against the dollar after a 0.35% drop on Friday on profit-taking away from a three-year high at $1.3617.

US Dollar

The US dollar rose 0.25% on Tuesday and approached a two-week high against a basket of major rivals.

It comes amid concerns about an economic slowdown in the US and China receded with both sides conducting important talks in London for a second day.

UK Rates

The recent vote in the BOE showed a clear division between members on the path ahead for interest rates, with current odds of a 0.25% rate cut in June settling below 30%.

Now traders await important UK jobless claims, unemployment, and wages data for April to gather more clues.

The yen fell in Asian trade on Tuesday against a basket of major rivals, plumbing a two-week low against the dollar and on track for the third loss in four sessions on slower haven demand.

The decline comes amid signs that progress is being achieved in US-China trade talks in London, with negotiations extended for another day.

The Bank of Japan is convening next week to discuss policies, with less than a 50% chance that it would raise interest rates by 25 basis points.

The Price

The USD/JPY price rose 0.5% today to 145.29, the highest since May 29, with a session-low at 144.40.

The yen rose 0.15% on Monday against the dollar, the first profit in three days on haven demand before the US-China trade talks.

Trade Talks 

High-level talks between US and Chinese officials commenced this week in London, with the hopes of reaching some sort of an initial agreement on tariffs and trade.

It comes after the Trump-Xi phone call which was described as “very positive” and paved the way for deeper communication. 

Trump adviser Kevin Hassett said that reducing US chip exports restrictions could be discussed, and in return, China would accelerate shipments of rare-earth minerals. 

According to the Wall Street Journal, Trump allowed his chief negotiator, Treasury Secretary Scott Bessent to set limits on tech sales and readjust export restrictions. 

Japanese Rates

The Bank of Japan is meeting on June 16-17 to discuss the latest economic developments and suitable policies.

Following recent GDP growth data, the odds of a Bank of Japan 0.25% interest rate hike in June rose from 40% to 45%.

Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.

Now traders await more Japanese data on inflation, unemployment, and wages to gather additional clues.

Oil prices edged up on Monday as the dollar lost ground while investors await the results of US-China trade talks in London in hopes of reaching a deal that would boost global economic performance and fuel demand.

Brent futures rose 44 cents, or 0.7% to $66.91 a barrel, while US West Texas rose 59 cents, or 0.9% to $65.17.

Brent rose 4% last week, while US crude rose 6.2% on a surging risk appetite amid hopes for US-China trade talks. 

Earlier today in London, The US and China started new trade talks following the crucial Trump-Xi phone talk last week, which helped accelerate the momentum of negotiations between both sides.

However, the prices remain under pressure after data showed Chinese exports fell to a three-month low in May, while producer prices hit a two-year nadir.

Such a weak performance for the Chinese economy doesn’t bode well for the prospects of fuel demand in the world’s largest fuel importer.

Recent data already showed China’s crude imports fell in May to a four-month low as refining companies start scheduled maintenance shutdowns. 

OPEC+ Production

Prices were pressured for weeks due to OPEC+ decision to raise output in July once more after similar decisions for May and June.

However, a Reuters survey showed OPEC production rose in May by less than expected, as Iraq reduced its output to compensate for recent increases, while Saudi Arabia and the UAE made small production hikes below their limits. 

The yen rose against most major rivals on Monday following a batch of positive data.

Japan’s GDP was unchanged in the first quarter, beating estimates of a 0.2% contraction.

Lending by Japanese banks rose 2.4% last month, slightly above estimates. 

On trading, the dollar fell 0.2% against the yen as of 20:23 GMT to 144.5.

Aussie

The Australian dollar rose 0.5% against its US counterpart as of 20:39 GMT to $0.6525.

US Dollar

The dollar index fell 0.2% as of 18:07 GMT to 98.9, with a session-high at 99.2, and a low at 98.8.

High-level talks between US and Chinese officials commenced today in London, with the hopes of reaching some sort of an initial agreement on tariffs and trade.

Markets also closed await US consumer prices data later on Wednesday, followed by producer prices data on Friday to gather more clues on the path ahead for the Fed’s interest rates.