US Dollar Strengthens as US-China Tariff De-Escalation Hopes Rise – ForexNews.PRO
The US dollar has found renewed support, buoyed by improving sentiment in US markets. Currently, the dollar exhibits a higher beta to US trade-related news than any other G10 currency. Moreover, Treasury Secretary Scott Bessent’s seemingly optimistic remarks regarding a potential de-escalation in US-China trade relations may foster a stabilization of the USD.
USD: US-China De-Escalation in Sight?
Yesterday, the dollar experienced a rebound alongside US equities as market concerns regarding tariffs somewhat subsided. It is also plausible that position rebalancing contributed to the dollar’s recovery.
As previously highlighted, the dollar faced heightened downside risks stemming from President Trump’s criticism of the Federal Reserve’s autonomy. However, the greenback’s position was arguably oversold and undervalued, suggesting that improved FX liquidity could have facilitated some degree of stabilization.
Secretary Bessent’s conciliatory comments on the US-China trade dispute served as a lifeline for fragile US sentiment. Bessent characterized the current tariff situation as “unsustainable” and anticipates de-escalation soon. The dollar might experience volatility driven by conflicting headlines concerning Fed independence and market-friendly US tariff policy updates. Notably, the dollar’s positive beta to trade news surpasses that of any other G10 currency.
Overall, near-term risks for the USD remain skewed to the downside, although a repetition of the recent one-sided dollar selling is not expected. In the coming weeks, a stabilization in the dollar is more likely than further structural weakening.
Today’s release of S&P Global PMIs across various major countries, while not as crucial as the US ISM surveys, offers valuable cross-country comparisons. Unless significant deviations from the expected moderate decrease occur, the implications for FX are likely to be limited.
