Dollar declines ahead of CPI release; pound sterling looks to public spending review

The U.S. dollar edged lower on Wednesday, as traders awaited more clarity from ongoing trade negotiations between the U.S. and China and looked ahead to the release of crucial inflation figures.

As of 04:35 ET (08:35 GMT), the Dollar Index — which measures the greenback against six major currencies — slipped 0.1% to 99.032.

Trade Talks Yield Framework, But Few Details

Following two days of intense negotiations in London, U.S. and Chinese officials reached a tentative high-level framework aimed at reviving the Geneva trade truce and resolving disputes over export controls.

U.S. Commerce Secretary Howard Lutnick said the new framework would “put meat on the bones” of last month’s Geneva agreement, which had calmed some concerns over escalating trade tensions but still appeared fragile.

Lutnick also announced progress on resolving China’s restrictions on exports of key industrial and defense-related metals. However, the agreement lacked specifics and still requires approval from President Donald Trump and Chinese President Xi Jinping.

Analysts at ING noted: “The London trade talks laid out plans to restart the flow of sensitive goods but stopped short of delivering a breakthrough. As a result, the dollar remains exposed to domestic fiscal risks.”

Stagflation Concerns Ahead of Inflation Report

Among those risks is the possibility of stagflation, with any new tariffs potentially dampening growth while pushing prices higher.

Traders are now focused on the upcoming May consumer price index report. Annual CPI is forecast to accelerate slightly to 2.5% from 2.3%, while the monthly figure is expected to remain at 0.2%. Core CPI, which excludes food and energy, is projected to rise 2.9% year-on-year and 0.3% on a monthly basis.

Sterling Eyes Spending Review

In Europe, EUR/USD was steady at 1.1425, with minimal economic data to influence the euro.

ECB President Christine Lagarde, speaking in Beijing, urged global cooperation on policy reform, warning that failure to address supply-demand imbalances could lead to damaging trade barriers.

ING analysts said the euro’s movement would largely depend on the dollar, with support seen near 1.1400 and potential for a push above 1.1500 later in the week.

Meanwhile, GBP/USD dipped 0.1% to 1.3493 ahead of a Spending Review by U.K. Chancellor Rachel Reeves. The review will outline departmental budgets for 2026–2029.

“Today’s Spending Review shouldn’t move markets significantly,” ING said. “It’s more about how already known budget totals are distributed.”

Yen and Yuan Hold Steady

In Asia, USD/JPY rose 0.1% to 145.07, while USD/CNY edged down to 7.1856, as markets assessed the implications of the new U.S.-China trade framework. The draft agreement, still awaiting formal approval from Trump and Xi, offered few details on tariff changes.