Dollar Holds Steady as U.S.-China Trade Truce Offers Limited Certainty
The U.S. dollar and Chinese yuan remained largely unchanged following trade talks in London, where U.S. and Chinese officials reached a framework agreement aimed at easing tensions in their ongoing trade dispute. Though the agreement signaled a possible thaw in the trade war, few concrete details were revealed. The framework, based on a truce outlined in Geneva last month, aims to resolve China’s export curbs on rare earth elements and ease certain U.S. export restrictions.
Despite what would typically be viewed as a positive development for global trade, analysts noted that investor behavior remained cautious. James Kniveton of Convera remarked that this kind of news would usually weaken the dollar due to improved risk sentiment, but recent trends suggest the greenback is no longer behaving like a traditional safe-haven currency. Instead, investors may be redirecting funds toward Wall Street, especially as concerns over former President Trump’s erratic trade policies continue to linger.
The dollar showed a slight uptick, nudging the euro lower by 0.08% to $1.1416 and holding steady at 145.05 yen. Meanwhile, China’s yuan hovered near two-week lows, with the onshore unit at 7.1867 per dollar and the offshore at 7.1875. A broader dollar index rose 0.17% to 99.129. Analysts emphasized that despite the trade truce, the newly agreed tariffs still exceed levels from late 2024, and their impact on both economies has yet to be fully revealed.
Further complicating the trade landscape, a U.S. federal appeals court permitted Trump-era tariffs to remain in place during an ongoing legal review. While U.S. stocks rallied on Tuesday amid optimism about the talks, investor nerves remained visible. Markets are also eyeing a major consumer inflation report and a $39 billion 10-year Treasury bond auction, both of which could influence the Federal Reserve’s future interest rate path.
Across the Atlantic, UK markets focused on upcoming public spending announcements from finance minister Rachel Reeves, who is expected to outline budget allocations through 2029. With limited fiscal flexibility, analysts warned that without tax hikes, the government will struggle to lower long-term borrowing costs. Sterling slipped 0.1% to $1.3484, and UK gilt yields ticked higher. Meanwhile, the Fed is anticipated to hold interest rates steady next week, with inflationary pressures from tariffs posing an added complication to its policy decisions.
Source: Reuters