US-China Talks in Focus as Dollar Slips vs Euro, Pound

June 9, 2025 - Written by Frank Davies

STORY LINK US-China Talks in Focus as Dollar Slips vs Euro, Pound

Monday’s main event is the US-China talks in London. There has been a positive tone leading into the meeting but the US dollar has faded. Friday’s NFP was seen as positive, but there were many weak points too.

The Pound to Dollar exchange rate (GBP/USD) is seen trading at 1.3558, 0.15% up on the day. The Euro is quoted at 1.14209 against the U.S. Dollar, 0.13% in the green.

Markets are off to a mixed start to the new week, with the FTSE and DAX slightly lower, and US stock futures moderately higher. Meanwhile, the US dollar is on the soft side with a –0.2% decline.

Monday’s main event is the US-China talks to be hosted in London. These are aimed at de-escalating recent tensions which have continued despite the May deal which led to a 90-day tariff rollback, with the US cutting tariffs on Chinese goods from 145% to 30% and China reducing levies on US imports from 125% to 10%. US Treasury Secretary Scott Bessent described the talks as "productive and constructive," noting "substantial progress" toward resolving the US’s $1.2 trillion trade deficit.

However, tensions persist. China accused the US of undermining the Geneva agreement after a US warning against using Chinese chips, particularly Huawei’s. A Chinese Commerce Ministry spokesperson said, "If the U.S. insists on its own way and continues to substantially damage China’s interests, China will take resolute measures to safeguard its legitimate rights." The US, meanwhile, has criticized China for slow-walking promises to export critical minerals. Bessent admitted talks were "a bit stalled" by late May, requiring leader-level intervention, saying, "Given the complexity, this is going to require both leaders to weigh in."

The language leading into the meeting has been relatively positive and there have been no threats like there were in April. Trump said on Truth Social, "We want to see, for the good of both China and the U.S., an opening up of China to American business. GREAT PROGRESS MADE!!!"

Any progress should be a positive for both the US dollar and for stocks. However, the dollar is fading on Monday and has given up around half the gains made after Friday’s Jobs Report.

NFP Shows Economic Resilience

Friday’s Jobs Report was welcomed by both the US dollar and by stock markets. It was an overall a tepid release, which included a headline beat but also significant revisions lower for previous months. The important aspect was that unemployment stayed steady at 4.2%, and there has been no hit yet from tariffs. The bullish theme for stocks can therefore continue. Here’s ING with the details:

“...manufacturing employment fell 8k, retail dropped 7k, while temporary help fell 20k, with federal government employment falling 22k - the fourth consecutive monthly decline in this component. However, the usual suspects that have been providing the job gains over the past couple of years came through once again, with private education and healthcare services up 87k and leisure and hospitality up 48k.”

This raises the question of whether these sectors can keep taking up the slack. As ING continue,

“Our suspicion is that government, private education, healthcare services, and leisure and hospitality will become much less supportive through the year and potentially even act as a drag on job creation in 4Q.”

Furthermore, the labour force participation rate dropped to 62.4%, and the household survey indicated a 696,000 employment decline, raising concerns about future labour market weakness. Revisions cut March and April job gains by 95,000. That does not bode well for a particularly healthy job market. At the moment, “not terrible” is enough to be a market positive given some of the pessimism around the economy, but this effect may sour over the coming months as more sustained weakness sets in and weighs on the dollar.

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