The big news to start the week was the trade truce between the U.S. and China which sent the dollar and risk assets rallying.
Markets opened on a nervous note while details of the weekend talks remained limited, before crude oil and equity futures surged on confirmation that a 90-day pause has been called.
Here are headlines you may have missed in the last trading sessions!
Headlines:
- Over the weekend, China reported its headline CPI dipped 0.1% y/y as expected in April while its PPI fell from -2.5% to -2.7% as expected
- Japan Current Account for March 2025: ¥3,678.1B (¥3,000.0B forecast; ¥4,061.0B previous)
- Japan Bank Lending for April 2025: 2.4% y/y (2.8% y/y forecast; 2.8% y/y previous)
- Japan Eco Watchers Survey Outlook for April 2025: 42.7 (45.5 forecast; 45.2 previous)
- U.S. Treasury Secretary Scott Bessent announced that the U.S. reached an agreement with China for a 90-day pause to lower tariffs
- During Q&A, Greer mentioned that the U.S. is on a “constructive path” to move forward with China
- BOE official Lombardelli reiterated that caution remains appropriate, as further disinflation and trade uncertainty supported rate cut, but latest U.S.-China update is good news
- BOE official Greene acknowledged that wage and inflation metrics are moving in the right direction but remains too high
- U.S. President Trump announced in a press conference that the U.S. achieved a “total reset” with China and that he’s looking to speak with Chinese President Xi soon
- U.S. Monthly Budget Statement for April 2025: 258.0B (235.0B forecast; -161.0B previous)
- Fed official Goolsbee warned that earlier tariffs on China would still have a stagflationary impact despite latest agreement
- ECB policymaker Nagel noted that they shouldn’t overreact to latest trade announcements
- Fed official Kugler acknowledged shift in trade policy but also pointed out that higher prices and slower growth are possible
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Market participants were biting their nails while waiting for more deets on the weekend talks between the U.S. and China, before risk rallies picked up during Treasury Secretary Bessent’s announcement that they have indeed struck a 90-day agreement to lower tariffs.
WTI crude oil, which had been edging slowly higher on optimism, surged sharply upon hearing the news as this eased demand concerns in the near-term. The commodity sustained its gains throughout the London session as investors were relieved to hear about de-escalation and the possibility of even more positive developments in future discussions.
Gold, on the other hand, sold off sharply as traders dumped safe-haven holdings on the improved global economic outlook. Bitcoin also appeared to mirror the precious metal’s slump to a lower extent, with the altcoin slipping from the $104K mark to dip close to $102K by day’s end.
U.S. equity futures soared early on, with its early gains nearly doubling as New York markets opened, leading the S&P 500 index to close more than 3% higher while the Nasdaq rallied over 4.5% as tech sector firms cheered the lower restrictions on imports.
Treasury yields also held on to gains throughout the day, as the possibility of more trade deals led to a rosier outlook for the U.S. economy and kept Fed easing expectations in check.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The Greenback started the day with a bit of anxiety while traders held their breath, waiting for more details on U.S.-China talks to emerge. Treasury Secretary Bessent’s announcement confirming de-escalation plus a 90-day trade truce turned out to be much better than expected news for dollar bulls, leading to a strong rally across the board.
Another leg higher was seen later in the European session, as traders turned their attention to Trump’s upcoming press conference, during which he confirmed that they have achieved a “total reset” with China. He further touted a likely meeting with President Xi soon, leading market participants to price in more tariffs progress down the line.
By session’s end, USD closed higher across the board, most notably against JPY (+1.72%) followed by CHF (+1.67%) while commodity currencies and GBP (+0.95%) put up a decent fight.
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. Employment Report at 6:00 am GMT
- U.K. BoE Pill Speech at 8:45 am GMT
- Germany ZEW Economic Sentiment Index at 9:00 am GMT
- U.S. NFIB Business Optimism Index at 10:00 am GMT
- U.S. CPI at 12:30 pm GMT
- Germany Current Account at 12:45 pm GMT
- U.K. BoE Pill Speech at 3:00 pm GMT
- U.S. API Crude Oil Stock Change at 8:30 pm GMT
- New Zealand Visitor Arrivals at 10:45 pm GMT
- New Zealand Electronic Card Retail Sales at 10:45 pm GMT
- Japan PPI at 11:50 pm GMT
The spotlight could shift back to fundamentals today, as the U.K. gears up to print its latest jobs report that could support the BOE’s less dovish tilt while the U.S. will be releasing its highly-anticipated CPI figures that would likely influence Fed policy expectations.
As always, stay nimble and don’t forget to check out our Forex Correlation Calculator when taking any trades!