Dollar Index Rises Amid US-China Trade Talk Optimism
The dollar index (DXY00) has increased by +0.23%. The rise comes as optimism grows over easing US-China trade tensions, following an agreement between the two nations to engage in trade talks this weekend. This marks the first discussions since President Trump’s tariffs on US trading partners were implemented. Meanwhile, caution lingers ahead of the results from the 2-day FOMC meeting later today, where Fed Chair Jerome Powell may adopt a hawkish stance.
Upcoming Trade Talks and Economic Outlook
US Treasury Secretary Bessent and US Trade Representative Greer are set to travel to Switzerland for trade discussions on Saturday and Sunday with Chinese Vice Premier He Lifeng. Bessent emphasized that these talks aim to reduce the tariff conflict between the two countries, stating that current tariff rates are unsustainable and resemble a trade embargo.
Markets currently assign a 2% probability for a -25 basis point rate cut following today’s FOMC meeting.
Eurozone Economic Indicators
The EUR/USD (^EURUSD) is down by -0.11%. The euro is facing slight losses today as the dollar strengthens ahead of the upcoming US-China trade talks. Additionally, reports indicate the Eurozone’s retail sales declined by -0.1% in March, the first drop in five months, which adds bearish pressure on the euro. However, losses in the euro are somewhat mitigated by a stronger-than-expected increase in German factory orders, which rose by +3.6% month-over-month, surpassing expectations of +1.3%.
Swaps indicate a 96% probability for a -25 basis point rate cut by the European Central Bank at its policy meeting on June 5.
Yen Performance and Precious Metals Trends
The USD/JPY (^USDJPY) has increased by +0.61%. The yen is facing downward pressure as reduced safe-haven demand follows the easing of US-China trade tensions. Although today’s upward revision to the Japan April Jibun Bank services PMI supports the yen, the overall sentiment remains negative.
Specifically, the Japan April Jibun Bank services PMI was revised upward by +0.2, reaching 52.4 from a previously reported 52.2.
In the commodities market, June gold (GCM25) is down -29.20 (-0.85%), while July silver (SIN25) is down -0.521 (-1.56%). Precious metals have relinquished early gains and are trading lower, driven by the stronger dollar and long liquidations. This shift follows the announcement of trade negotiations between the US and China in Switzerland this weekend. Additionally, strength in the stock market contributes to bearish sentiments for precious metals. Caution persists ahead of the FOMC meeting’s conclusion today, as Fed Chair Powell may adopt a hawkish tone.
Initially, precious metals experienced a rise due to heightened safe-haven demand following geopolitical tensions in South Asia after India’s military response to a militant attack in Kashmir. Pakistan has labeled India’s actions as an “act of war,” asserting its right to retaliate. The ongoing global trade instability, attributed to US tariff policies, has also heightened demand for safe-haven assets. Likewise, geopolitical risks in the Middle East, particularly the ongoing Israel-Hamas conflict, continue to encourage safe-haven investment in precious metals.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data herein are for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
More news from Barchart
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
