Summary

• The Trump-Xi meeting is the highlight this week, and we have argued to keep expectations modest.
• The dollar is mostly firmer, though the Canadian dollar and Norwegian krone are slightly firmer. Equities are mostly lower, yields higher, alongside oil.
• After President Trump rejected Iran’s counter-proposal, the euro fell about $1.1745 in early turnover today. It recovered to slightly above $1.1780 before stalling in Europe.
• A poor Canadian jobs report and its contrast with the US weighed on the Canadian dollar. The greenback settled above the 20-day moving average (~CA0D1.3670 today) for the first time in a month. Still, it is consolidating in quiet, if choppy, action today between about CAD1.3660 and CAD.3700.
• Equities are mostly lower. Japan's indices  were mixed, while China’s CSI 300 gained almost 1.65%. Europe’s STOXX 600 is nursing a small loss, which, if sustained, would be the third consecutive decline. US index futures are also slightly in the red.

News that the US rejected Iran’s counter-proposal is set the tone for today’s session. The dollar (DXY) is mostly firmer, though the Canadian dollar and Norwegian krone are slightly firmer. Equities are mostly lower, yields higher, alongside oil. Appreciating the seeming reluctance of the US to renew “kinetic” operations, the North American market may view the US position as predictable negotiation tactics.

This week, US Treasury Secretary Bessent is in Tokyo. He has indicated that the weak yen is on the agenda. President Trump will be in Beijing later this week. The Trump-Xi meeting is the highlight, and we have argued to keep expectations modest. Meanwhile, UK's Prime Minister continues to fight for a high political future after Labour’s drubbing in last week’s local elections. His speech earlier today does not appear to have done the trick. Sterling and gilts are lower than before the speech.

Prices

G10

• Given the unexpectedly poor German industrial output figures and the first back-to-back gain in US nonfarm payrolls last April and May, the euro performed amazingly well before the weekend. It recorded a session high into the close, slightly below $1.1790. After President Trump rejected Iran’s counter-proposal, the euro fell about $1.1745 in early turnover today. It recovered to slightly above $1.1780 before stalling in Europe. There are 2.1 bln euros in options struck at $1.1750 that expire today and almost another 1.7 bln euros that expire there tomorrow.

• Despite the US jobs data and the bounce in oil prices, the yen held firm ahead of the weekend. It held below JPY157 though barely, even after the $620 mln options struck there rolled off. The greenback fell to session lows after the jobs data, near JPY156.45. It approached JPY157.20 today, a three-day high. The high for the day does not look to be in place, but the market may be turning cautious

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