Insights 
VT 
Trade Talks Outcome
On June 11, 2025, during Asian trading, news emerged of unsatisfactory developments from the US-China trade talks in London. US Treasury Secretary Bessent’s early departure hinted at a lacklustre outcome, leaving Commerce Secretary Lutnick and others to continue discussions.
An agreement was reached, described as a “handshake for a framework” to start implementing what was previously decided on in Geneva, pending approval from US and Chinese leaders. While this implied a slight reduction in tensions, it was essentially a reiteration of prior commitments without new breakthroughs. Consequently, risk FX currencies such as the EUR, AUD, NZD, GBP, and CAD fell against the US dollar, although not significantly. Conversely, Chinese equities saw an increase.
Adding to this, a US Federal appeals court decided Trump’s broad tariffs would stay effective during ongoing legal proceedings, with arguments scheduled for July 31. Meanwhile, Japan’s Producer Price Index (PPI) for May weakened more than expected, indicating reduced price pressures from falling import costs. Attention now shifts to the release of US CPI data at 0830 Eastern Time on Wednesday.
That early news of sluggish progress between the two trading partners has clearly unsettled currency markets, though in a relatively calculated way. The departure of Bessent before closing talks was not taken lightly. It told us that discussions fell short of generating new momentum. That handshake, while it suggests both parties wish to avoid letting tensions rise further, is more about optics than changes in policy or outlook. It’s notable that the atmosphere appears manageable but offers no fresh clarity on tariffs or flow of goods.
Currency and Market Reactions
So, what followed? Risk-sensitive currencies edged lower, but losses were contained. It shows how market participants gauged this messaging carefully, recognising that expectations had already been dampened. Fading hopes weren’t replaced with panic—only a firmer tone for the dollar, consistent with falling appetite for directional plays near-term.
Equities in China, however, reacted more directly—with a boost that reflects local anticipation of less friction or perhaps government encouragement behind the scenes. But it’s important to acknowledge that a lot of that reaction may stem from positioning, as mainland investors are typically quicker to act on trade sentiment retrievals than foreign participants.
Now, the court ruling that affirmatively kept tariffs in place keeps uncertainty alive. Trump’s measures staying active ensures that the cost of imports remains elevated, at least for now. The fact that arguments will stretch well into the summer extends the timeline that markets will need to price in some degree of trade drag.
In addition, Japan’s May PPI report surprised on the soft side. Prices received by producers suggest lower upstream input costs, led mainly by cheaper imports. This gives monetary officials more room to navigate future inflation discussion without pressing urgency. Still, for us tracking broader direction through yen crosses, it adds to the case for caution, particularly at re-test levels against the dollar.
All of this places even more relevance on the upcoming CPI print in the United States. Traders will be watching not just the headline, but the trend within shelter and wages, to judge whether current Fed pricing remains intact. A soft reading would further strengthen dollar bids only in the event of renewed defensive positioning, especially if equities react poorly.
What’s clear here is that the combined effect of stale negotiations, lingering tariffs, and soft producer dynamics in Asia paints a picture that is neither optimistic nor outright negative. We’ve noted tightening behaviour in forwards and lower conviction in implied volatility, suggesting that options markets are being reshaped, not abandoned.
Any shifts in rate expectations after the CPI data will ripple into mid-curve derivatives first. That’s where positioning has leaned lightest, and also where carry has held up best. Directional stances should be sized knowingly, ideally hook-shaped across the curve with preference for protection sitting nearest to the July court date.
Above all, this is about choosing opportunities that don’t need momentum to yield. The path of least resistance isn’t obvious, which is why defence and patience, more than aggression, could bring steadier results in the short term.
