The dollar slipped against all major currencies on Monday, as exuberance over a better than feared U.S. employment report gave way to caution ahead of pivotal U.S.-China trade talks set to take place in London later in the day.

The talks come at a crucial time for both economies, with China grappling with deflation and trade uncertainty dampening sentiment among U.S. businesses and consumers, prompting investors to reassess the dollar's safe-haven status.

Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are expected to represent the U.S. at the trade talks, while Vice Premier He Lifeng would likely be present with the Chinese delegation.

"How the trade talks go definitely is going to be critical for overall sentiment," said Kit Juckes, chief FX strategist at Societe Generale.

He said Asia Pacific currencies including the Japanese yen and Australian and New Zealand dollars would likely see the biggest reaction to headlines from the talks.

The dollar declined 0.55% against the Japanese currency , trading at 144.04 yen after two consecutive weeks of gains.

As well as the trade talks, investors were processing data showing Japan's economy contracted at a slower-than-expected pace in the January-March period, while Prime Minister Shigeru Ishiba weighed in on the impact interest rates could have on the economy.

The euro rose 0.34% and was last at $1.1433 as markets continued to price in the European Central Bank's monetary policy outlook issued last week, in which it indicated it may be close to ending its easing cycle, while sterling rose 0.47% to $1.35814.

Elsewhere, China's offshore yuan was last at 7.1844 per dollar after data showed China's export growth slowed to a three-month low in May, while factory-gate deflation deepened to its worst level in two years.

New Zealand's dollar rose 0.66% to $0.60585, while the Australian dollar was last up by half a percentage point at $0.6529 in light volumes as markets were closed for a public holiday.

In Australia, a much healthier fiscal position than the U.S., attractive yields and a "not too bad" economy should support the Aussie unless there are negative headlines from the talks, Juckes said.

Also on the trade front was a report that said Japan's chief trade negotiator Ryosei Akazawa is planning a sixth round of talks in Washington.

An inflation report out of the U.S. for the month of May will be in the spotlight later in the week as investors and Federal Reserve policymakers look for evidence on the damage trade restrictive policies have had on the economy.

Fed officials have signalled that they are in no rush to cut interest rates and signs of better-than-feared economic resilience are likely to further cement their stance.

Interest rate futures indicate that investors are anticipating the central bank may cut borrowing costs by 25 basis points, with the earliest move expected in October this year, according to data compiled by LSEG.

"May is the first month where the impact of Trump's 10% universal tariff on imports ex-USMCA (United States-Mexico-Canada Agreement) is expected to show. The Fed will want a few months of inflation data in order to judge the tariff impact and most importantly, its persistence," analysts at ANZ Bank said.

(Reporting by Johann M Cherian, Linda Pasquini and Rae Wee; Editing by Himani Sarkar and Susan Fenton)