The EUR rose above USD 1.12, buoyed by a weaker dollar after a surprise decline in US inflation and heightened investor caution surrounding US-China trade talks. This comes despite the two countries agreeing to a 90-day pause in tariff escalations to negotiate a broader agreement. Still, tariffs remain high, with the average US rate on Chinese imports at roughly 40%, double the previous 20%. In terms of monetary policy, money markets now expect the ECB’s deposit facility rate to reach 1.79% by year-end—up from 1.67% last Friday and higher than April’s mid-month projection of 1.55%. Meanwhile, a June rate cut is nearly fully priced in, with a 95% probability, as the ECB seeks to support growth in the face of mounting US trade barriers.