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Dollar fades as US inflation slows; China deal in spotlight
Published by Global Banking & Finance Review®
Posted on June 11, 2025
4 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 11, 2025
4 min readLast updated: January 23, 2026
The US dollar fell as inflation slowed, hinting at potential rate cuts by the Federal Reserve. A new trade deal with China also influenced market dynamics.
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The U.S. dollar slid on Wednesday after data showed inflation in the world's largest economy rose less than expected last month, suggesting that the Federal Reserve could resume cutting interest rates sooner rather than later.
The greenback, however, briefly trimmed losses after President Donald Trump said a U.S. trade deal with China is done, with Beijing to supply magnets and rare earth minerals while the U.S. will allow Chinese students in its colleges and universities.
A White House official also said the agreement allows the U.S. to charge a 55% tariff on imported Chinese goods. This includes a 10% baseline "reciprocal" tariff, a 20% tariff for fentanyl trafficking and a 25% tariff reflecting pre-existing tariffs. China would charge a 10% tariff on U.S. imports, the official said.
In afternoon trading, the dollar slid 0.2% against the yen to 144.58, while the euro rose 0.5% to $1.1484, after briefly paring gains earlier as sentiment on the U.S. currency somewhat improved with the China news.
On the data front, the consumer price index (CPI) increased 0.1% last month after rising 0.2% in April, the Labor Department's Bureau of Labor Statistics (BLS) said. Economists polled by Reuters had forecast the CPI climbing 0.2%.
Underlying price pressures were also muted in May, with core CPI increasing just 0.1% after a 0.2% rise in April. But year-on-year inflation advanced advanced 2.4% after gaining 2.3% in April.
"Inflation momentum is slowing and that has led to the downward adjustment to U.S. interest rate expectations. Fed funds futures have started to firm up the chances of 50 basis points in cuts by yearend," said Elias Haddad, senior markets strategist, at Brown Brothers Harriman in London.
"Inflation from higher tariffs have so far been subdued, considering average tariffs in the U.S. have gone up from 2% in January to over 15%. We're not seeing the full effects yet of tariffs on inflation. I suppose we'll see the impact in the second half of the year."
Following the CPI data, traders of short-term interest rate futures had priced in a 71% chance that the Fed would cut rates by a quarter of a percentage point by September, compared with 57% before the data. Futures also factored in 50 bps in cuts, compared with 45 bps earlier this week.
The currency market, meanwhile, showed little reaction to comments from U.S. Commerce Secretary Howard Lutnick on Wednesday that the 55% tariffs imposed by the United States on China will not change. He added that trade deals with other countries can be expected starting next week.
"The worst-case scenario is probably behind us. There's a little bit of face-saving for both sides. From the U.S. point of view, the rare earth thing was a big deal," said John Praveen, managing director, at investment firm Paleo Leon in Princeton.
"They got an agreement. The question is whether it will be implemented. The fact they have some kind of agreement is probably at least a relief for the market. ... The fact that things are de-escalating is the important point," Praveen said.
Against the Swiss franc, the greenback was 0.3% lower at 0.8205 franc.
Versus China's offshore yuan, the dollar edged higher, up 0.1% at 7.197.
Sterling, meanwhile, rose against an overall weak dollar, gaining 0.3% to $1.3542. Britain's multi-year spending review underlined fiscal challenges, dividing up more than 2 trillion pounds ($2.7 trillion) of public spending to boost growth.
Currency
bid
prices at
11 June
07:45
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 98.647 98.964 -0.31% -9.07% 99.224 98.5
index 22
Euro/Doll 1.1484 1.1426 0.52% 10.94% $1.15 $1.1
ar 406
Dollar/Ye 144.57 144.9 -0.23% -8.13% 145.31 144.
n 37
Euro/Yen 166.03 165.48 0.33% 1.72% 166.42 165.
39
Dollar/Sw 0.8205 0.8229 -0.26% -9.56% 0.8233 0.81
iss 88
Sterling/ 1.3539 1.3498 0.32% 8.27% $1.3568 $1.3
Dollar 466
Dollar/Ca 1.3667 1.3669 0% -4.95% 1.3689 1.36
nadian 5
Aussie/Do 0.6498 0.6521 -0.33% 5.04% $0.6546 $0.6
llar 497
Euro/Swis 0.9421 0.9392 0.31% 0.3% 0.9429 0.93
s 89
Euro/Ster 0.8479 0.846 0.22% 2.49% 0.8488 0.84
ling 58
NZ 0.6026 0.6054 -0.44% 7.71% $0.6066 0.60
Dollar/Do 24
llar
Dollar/No 10.0707 10.0976 -0.27% -11.39% 10.1313 10.0
rway 546
Euro/Norw 11.564 11.5415 0.19% -1.74% 11.578 11.5
ay 356
Dollar/Sw 9.5647 9.5892 -0.26% -13.18% 9.6167 9.54
eden 66
Euro/Swed 10.9849 10.9608 0.22% -4.2% 10.9929 10.9
en 6
(Reporting by Gertrude Chave-Dreyfuss; Additional reporting by Sinead Carew, Will Dunham and Sandra Maler)
The US dollar slid after data showed inflation rose less than expected, suggesting a potential shift in Federal Reserve interest rate policy.
President Trump stated that a trade deal with China is complete, involving the supply of magnets and rare earth minerals from China in exchange for tariff adjustments.
The currency market showed little reaction to the inflation data, although traders began pricing in a higher chance of interest rate cuts by the Federal Reserve.
Traders have priced in a 71% chance that the Federal Reserve will cut rates by a quarter of a percentage point by September, reflecting the slowing inflation momentum.
The agreement allows the US to charge a 55% tariff on imported Chinese goods, including a 10% baseline 'reciprocal' tariff and additional tariffs for specific issues like fentanyl trafficking.
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