The US dollar weakened against the euro, Chinese yuan, and Australian dollar as optimism grew about a potential US-China trade deal.
President Trump expressed confidence that a trade agreement with China would be reached during his upcoming meeting with President Xi Jinping in South Korea.
The big picture: Global stock markets rallied on hopes of easing trade tensions, new trade frameworks with East Asian countries, and a positive election outcome in Argentina favoring President Javier Milei.
- The Chinese yuan strengthened after the People’s Bank of China set a higher midpoint rate, signaling goodwill ahead of Trump’s meeting with Xi or a push to boost domestic demand.
- The Australian dollar gained on hawkish comments from the Reserve Bank of Australia, which indicated inflation data could influence upcoming interest rate decisions.
- The dollar index dropped slightly to 98.87, while the euro rose to $1.164 and the offshore yuan hit a one-month high at 7.1015 per dollar.
What we’re watching: Market participants await key central bank meetings later in the week, with the Federal Reserve and Bank of Canada expected to cut rates, and the European Central Bank and Bank of Japan likely to maintain current rates.
- Focus is also on whether the Fed signals winding down quantitative tightening alongside the expected 25-basis-point rate cut.
Go deeper: The US dollar rose modestly against the Japanese yen, supported by concerns over Japan’s new Prime Minister potentially pursuing expansionary policies.
- Bitcoin also gained, climbing 1.20% to $114,750 amid broader risk appetite.
