The US dollar maintains its gains, the yuan jumps after the US-China trade agreement
Global markets on Tuesday witnessed positive movements supported by continued optimism about the US-China trade agreement, which eased tensions between the two economic giants.
Despite a slight decline in the value of the dollar, it maintained most of its recent gains, while the Chinese yuan jumped to a 6-month high.
Trade agreement raises hopes
Washington and Beijing announced on Monday an agreement to reduce mutual tariffs for 90 days, which exceeded market expectations and sparked a wave of optimism among investors.
This led to a rebound in global stocks and a rise in the value of the dollar, and the Chinese yuan also jumped, surpassing the level of 7.1855 against the US dollar.
This optimism was also reflected in currencies linked to the Chinese economy, where the Australian dollar rose by 0.64% to 0.6412 US dollars, and the New Zealand dollar rose by 0.55% to 0.5889 US dollars.
The impact of the agreement on the outlook for monetary policy
As trade tensions eased, traders lowered their expectations on the likelihood of the Federal Reserve cutting interest rates, as it is believed that the US central bank may face less pressure to ease monetary policy to support economic growth.
Futures indicate that the markets now expect a cut of about 56 basis points in interest rates by the end of the year, compared to earlier, more hawkish forecasts.
US Treasury yields also rose, as the two-year bond yield settled near its highest level in a month at 4.009%, while the decimal bond yield recorded 4.4650%.
Markets are waiting for US inflation data Today
investors are waiting for the release of US inflation data for April, which is expected to witness a rise in the basic and general indicators on a monthly basis.
These data are pivotal in determining the Fed's future steps, especially in light of recent developments in the global trade landscape.
In general, the recent performance of the markets shows how sensitive investors are to any developments in US-China trade relations, as the current agreement remains a key factor in strengthening confidence and stabilizing the economic outlook in the near term.
