Dollar recovered as markets focus on London negotiations
The US Dollar Index (DXY) witnessed a remarkable recovery on Tuesday, rising above the level of 99.20 points to make up for its losses in the previous session, as investors focused on the new round of trade talks between the United States and China being held in London.
U.S. Treasury Secretary Scott Besant and other senior officials met with their Chinese counterparts on Monday to discuss sensitive issues such as rare earth shipments and export restrictions, with more talks expected on Tuesday.
Factors supporting the dollar
- Markets are optimistic about the easing of trade tensions
There are expectations in the markets that a customs truce could be reached between the world's two largest economies, which contributed to supporting the dollar, which has faced great pressure this year due to President Donald Trump's trade policies that have weakened investor confidence in US assets, and although there are no confirmed details so far, only some positive comments from Trump and US negotiators, markets expect some additional concessions and a promise of another round of negotiations soon.
- Strong performance against major currencies
The US dollar recorded widespread gains, making the biggest rises against the Japanese yen, the euro and the British pound.
Challenges to the dollar's trajectory
- Watch the US inflation data
The markets are closely awaiting the reports of the Consumer Price Index and the producer price index due later this week, which are expected to provide new insights into the course of inflation.
The US Consumer Price Index report, which will be released tomorrow, is of particular importance, as it may have a significant impact on the markets before the Federal Open Market Committee meeting scheduled for next week.
- The pressures of Trump's trade policy
President Trump's trade policies continue to be a drag on the dollar, as they have weakened investor confidence in US assets throughout the year.
Expectations that the Federal Reserve will start cutting interest rates later this year (possibly in October) are an additional pressure factor on the US currency.
In the end, the US dollar is experiencing a temporary recovery driven by market optimism about the US-China trade talks, but its future course still depends on several key factors:
- The results of the London trade negotiations.
- US inflation data due this week.
- Directions of the monetary policy of the Federal Reserve.
- Developments in the global trade scene.
The index remains subject to sharp fluctuations in the coming period as investors focus on these fundamental catalysts.
