empty
13.05.2025 10:07 AM
USA and China: A 90-Day Truce. U.S. Inflation Report in Focus (High probability of a decline in EUR/USD and GBP/USD)

On Monday, the markets breathed a sigh of relief following the announcement of a trade agreement between the United States and China. The deal involves mutual tariff reductions, but only for 90 days.

Trump, true to form, continues maneuvering in his attempt to calm the American public and force China into submission—submission to his will. Washington agreed to reduce customs duties for 90 days. In the West, this move is being called a "truce," clearly reflecting the nature of the current relationship between the two countries: a trade war.

Yes, the markets relaxed, but does this step resolve the core issue of the conflict? Likely not. It appears Trump took this measure because rising domestic prices are weakening his presidential standing amid fierce opposition from his political rivals. This move can also be viewed as a significant retreat in the trade war, indicating that Beijing seems to be gaining the upper hand. While the tariffs imposed vary—30% on Chinese goods entering the U.S. and 10% on American goods entering China—the retreat signifies an ideological defeat for the American president.

Market participants now view this as a temporary development, which may lead to a limited increase in demand for risk assets. After all, once the 90-day period ends, Trump may introduce a new "twist" to his trade policy, potentially throwing markets into chaos. However, it's also possible that under the guise of this truce, the tariffs will remain in place for a longer period, and the fuss surrounding Trump's "victory" will quietly fade away.

Focus Turns to the U.S. Inflation Report

After digesting the truce news, markets focus on the U.S. inflation report. According to consensus forecasts, the Consumer Price Index (CPI) is expected to maintain its annual growth rate in headline and core readings. However, on a monthly basis, a sharp rise is anticipated: the headline CPI is forecast to jump from -0.1% in March to 0.3% in April, while the core CPI is projected to rise 0.3% versus 0.15% previously. Opposition media outlets have already dubbed this rise in inflation as "Trumpflation."

How Might the Markets React?

If the data matches or exceeds expectations, it could support the U.S. dollar, which is already trading above 101.00 on the ICE Dollar Index. This could pave the way for a move above the 102.00 level. At the same time, higher inflation may negatively impact the cryptocurrency market and pressure stock indices, as rising prices would push back investor expectations for an imminent rate cut by the Federal Reserve. On the other hand, if inflation reports are lower than expected, the opposite reaction could occur.

This image is no longer relevant

This image is no longer relevant

Day's Forecast

EUR/USD

The pair is trading above the support level at 1.1080. A stronger U.S. inflation reading could trigger a renewed decline. A drop below this level would intensify the bearish momentum, potentially causing the pair to fall toward 1.0965. A suitable level for selling the pair could be 1.1092.

GBP/USD

The pair is trading below the resistance level at 1.3210. A rise in U.S. consumer inflation could put pressure on the pair and resume its decline toward 1.3085. A potential entry point for selling could be around 1.3180.

Pati Gani,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Pound Ignores Weak Data and Persistently Tries to Continue Rising

The macroeconomic data from the UK published last week looks frankly weak—everything is in the red zone, meaning worse than expected. Nevertheless, the pound continues to climb upward regardless

Kuvat Raharjo 19:36 2025-06-16 UTC+2

CFTC Report: The Dollar Is Being Sold Off Again. Awaiting New Revelations from Trump

Five weeks ago, the total short position on the U.S. dollar against major currencies stopped increasing, which gave reason to believe the dollar might begin an offensive in the currency

Kuvat Raharjo 12:14 2025-06-16 UTC+2

GBP/USD. Analysis and Forecast

Today, the GBP/USD pair is attempting to regain positive momentum while remaining on the defensive. Traders prefer to wait for the release of key data before opening directional positions

Irina Yanina 12:10 2025-06-16 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is attempting to regain positive momentum, approaching the psychological level of 1.600 and price levels last seen in 2021. Traders are eagerly awaiting the important political

Irina Yanina 12:08 2025-06-16 UTC+2

The Israel-Iran Confrontation. Fed Meeting. What's Next? (I expect further decline in USD/CAD and a local pullback in gold before a new wave of growth)

Israel and Iran are exchanging missile strikes, but it seems markets are trying to play their own game, assuming that this conflict will not cross the nuclear threshold

Pati Gani 10:51 2025-06-16 UTC+2

EUR/USD: War Is No Ally to the Greenback

At the start of the new trading week, the EUR/USD pair stayed within the 1.15 range and is even trying to approach the resistance level of 1.1600 despite the ongoing

Irina Manzenko 10:32 2025-06-16 UTC+2

What to Pay Attention to on June 16? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Monday, but the market does not lack news. This week, Donald Trump announced his intention to raise all import tariffs, as none

Paolo Greco 06:46 2025-06-16 UTC+2

GBP/USD Overview – June 16: How Trump Is Undermining the Dollar

The GBP/USD currency pair will remain under the influence of geopolitics and politics in the new week. Essentially, we've been saying the same thing every day for the past four

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD Overview – June 16: The Israel-Iran Conflict Changes Nothing

The EUR/USD currency pair moved sharply back and forth throughout Friday. The pair traded with high volatility for two consecutive days, and there is a clear and logical explanation

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD. Weekly Preview. Focus on the Middle East and the Federal Reserve

The final trading day of last week ended on an uncertain note. Reacting to Middle East developments, the EUR/USD pair sharply declined on Friday, retreating from the multi-year price high

Irina Manzenko 01:30 2025-06-16 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.