The US dollar recorded its first weekly gain since mid-March, boosted by signs of decreasing trade tensions between the US and China and overall decrease in market volatility that improved investor sentiment. The US currency increased by nearly 0.3% this week, ending a prolonged losing streak fueled by advancing trade tensions. The currency’s slight upsurge was credited to China waiving tariffs on a measure of select American exports and reassuring words from US policymakers that eased investor nerves.”
Trade Optimism Sparks Recovery
The US dollar was set for its first weekly gain since mid-March, supported by rising confidence in US-China trade relations. Optimism improved dramatically when China announced partial tariff exemptions for US imports, signaling movement toward ending the long-standing economic stalemate.
The dollar remained volatile during the week, as both governments issued conflicting signals. President Donald Trump asserted that direct talks were in progress and suggested tariff reductions. By Friday, many reports suggested that China had exempted a number of US products from the high 125% tariffs and was soliciting comments on other eligible products.
According to Reuters,
“Trump, in an interview with Time magazine published on Friday, said his administration was talking with China to strike a tariff deal and that Chinese President Xi Jinping has called him. Beijing, however, continues to dispute the U.S. characterization of the talks.”
However, the dollar picked up around 0.07% against various currencies by Friday, earning a small weekly increase marking its first increase in nearly a month. While the overall impact of the trade war was still on the radar, investors saw initial signs of downscaling, suggesting a steady recovery in the US dollar. City Index market strategist Fiona Cincottas said in a statement that,
“I don’t think that anything’s necessarily much clearer now, but it does feel like there’s no more ramping up. It feels like it’s coming the other way and if anything, it seems to be heading more towards de-escalation than escalation.”
Cautious Optimism Ahead
Although recent developments offer some optimism, economists warn that fundamental issues are still left unresolved and significant progress remains to be made. Currency markets next week will be heavily influenced by upcoming economic data from the US and China, together with remarks from major policymakers. Simultaneously, traders are anticipating yet another round of negotiations between Washington and China, and that the prevailing optimism will translate into sustainable deals.
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