* President Trump-Xi summit in focus, weighing tariffs cuts

* Trump to announce tariff truce extension, aircraft from Boeing, in China

* Burnham camp scramble to challenge a Wes Streeting leadership bid

* Chip stocks bounce back, Nvidia pushes Nasdaq to record highs

FX: USD rose for a third straight day though both the 100-day and 200-day SMAs sat 98.45/52 acted as resistance. The 50-day sits above at 98.98. PPI data came in hot with the biggest gains since early 2022 and added to the hot CPI angst which hit a three-year high of 3.8% in April. Notably ‘supercore’ which is core services ex housing printed the highest since early 2025 while services were also sticky. That said, core goods inflation was flat, signalling no meaningful pass‑through from commodities or tariffs at this stage. All-in PCE, the Fed favoured inflation metric, is forecast at 3.8% y/y, the hottest since May 2023.  There’s now around a 38% chance of a 25bps rate hike by year-end.

EUR dipped for a second day but found support at the 100-day SMA at 1.1708. Sentiment remains key as markets balance the US/Iran conflict with fresh political uncertainty in the UK and consider the German government’s halting attempts at reform.

GBP dipped but was mid-pack among its peers. The 100-day SMA is at 1.3480. We’ve had another barrage of headlines related to PM Starmer’s government, even though it was the King’s Speech and a raft of new policies. The show of support for Starmer (100+ MPs) is offset by a growing number of key ministerial departures. Importantly, the Health Secretary Streeting is said to be lining up a leadership challenge, if he has 81 MPs backing him. For markets, UK borrowing costs are holding in relatively well, and yields are not making fresh highs suggesting some measure of confidence on the part of bondholders.

JPY stayed above the 100-day SMA at 157.35 as fundamental headwinds and wider rate differentials were balanced by fears of intervention. ‘Price checking’ is meant to have taken place on Tuesday while US Secretary Bessent offered some support to the MoF actions. The 50-day SMA sits at 158.68.

US stocks: The S&P 500 added 0.58% to close at 7,444, the Nasdaq closed up 1.04% at 29,367 and the Dow Jones settled lower by 0.14% at 49,698. Sector performance saw six sectors in the green, with Communication Services the big outperformer (+2.65%) with Tech and Consumer Discretionary next strongest. Utilities, Financials and Real Estate were the main laggards. The Mag 7 were strong with Nvidia, Apple and Alphabet posting fresh record highs. The former rose as CEO Huang made the trip with Trump prompting hope about a H200 chip deal with China. Nebius soared 15.7% on top and bottom line beats. Ford jumped 13.1% on news its new energy business will sell US-assembled battery systems to utilities, data centres and large industrial and commercial customers.

Asian Stocks: Futures are mixed. APAC stocks traded mixed with similar Wall Street performance amid higher oil and inflation. The ASX 200 slid as financials dragged due to CBA slumping 10% post-earnings. The Nikkei 225 rebounded from initial losses and even with a high chance of a June BoJ rate hike. The Shanghai Composite and Hang Seng were mixed as all eyes were on the Trump-Xi summit and talks on trade, AI, Iran, Taiwan, agricultural products among other topics.  

Gold consolidated in a tight range with prices capped to the upside by the 50 and 100-day SMAs at 4,780 and 4,749. Treasury yields and the dollar were higher, with above a 35% chance of a rate hike by year end.

Day Ahead – Trump-Xi Summit, US Retail Sales

The Trump–Xi meeting will cover many areas, with trade deals and tariff reduction, critical minerals supply and tech restrictions, plus bilateral investment the major areas of focus. The summit is unlikely to change the long‑term direction of US–China relations, which is still shaped by strategic rivalry and selective uncoupling. Any constructive outcome may also prove short‑lived with headline‑driven progress built on tactical, transactional deals rather than broad, structural breakthroughs. That is especially the case given Trump’s shortened visit (two days instead of three). As a result, outcomes are likely to centre on economic and trade issues, with ‘winners’ on both sides.

Consensus expect US headline retail sales to rise 0.6%, ex autos 0.7% and the control group 0.4%, all lower than the prior prints. Rising gasoline prices should lift the data as it is a nominal dollar figure, but auto sales are expected to be a drag. Higher tax refunds and tax cuts are providing some support to consumers though the ongoing US-Iran conflict could act as a drag on some activity.

Chart of the Day – EUR/JPY consolidation mode

This popular pair is similar to yesterday’s in that it has been in a long-term uptrend since early 2025. It found a bottom around 156 with upside really kicking off when it broke above 166.68 in June last year. Since then, it has been in a bull channel with a series of higher highs and higher lows. Peaks from July 2024 around 174-175 were broken in October with prices rising to 185.53 in January 2026. The cross then paused for breathe in a symmetrical triangle, a bullsih consoldiation pattern which then broke to the upside. But the very long-term high from 1990(!) held off the bulls, which sits at 188.22. The 100-day and 50-day SMA are acting as support at 184.22 and 184.79. The 200-day is below at 180.30.