The US Dollar surged to its highest level in one month, gaining over 1% against major global currencies. Following a deal to temporarily lower tariffs between the US and China, it soared. A major step toward reducing trade tensions between the two economic giants, the breakthrough followed two days of negotiations in Switzerland.
US-China Trade Deal Sparks Relief in Forex Markets
The Forex market was immediately impacted by the 90-day agreement between the US and China to reduce tariffs. The US Dollar Index jumped more than 1% on Monday as a result of heightened market optimism. After the agreement, the US reduced its 145% tariff to 30% on Chinese goods. China reduced the 125% tariffs it imposed on US goods to 10%. This action greatly boosted international trade and will probably soon help the US dollar.
At a press conference in Switzerland, US Treasury Secretary Scott Bessent announced the agreement. There are discussions about potential agreements relating to China’s future purchases, and both nations have expressed their desire to ease tensions. For the time being, this transaction restores optimism to the Forex market.
How Far Can This US Dollar Surge Go?
The US dollar surged sharply after the trade agreement. About six major currencies, the US Dollar Index (DXY) tracks the US dollar’s performance. The value has risen above 101.50. Since the US dollar is currently rising toward significant resistance levels, traders are closely monitoring the DXY.
Chart 1: 1-Day Dollar Index Spot, published on TradingView, May 12, 2025.
As a psychological barrier for the US dollar, the DXY’s immediate resistance level is 101.90. The DXY may overcome this resistance and seek higher levels if the bulls keep up their momentum. The 55-day moving average, which is at 102.37, would be the next level. This scenario would point to a sustained bullish trend for the US dollar in the Forex market.
Global Markets Surge as Trade Fears Ease
The trade agreement has also contributed to a shift in broader financial sentiment. As the US Dollar rises, other global markets are seeing positive movement as well. In contrast, US futures are showing significant gains of up to 4%. European stocks have increased by about 1.50 percent.
In reaction to the positive news, the Forex market is strengthening positions in the US dollar. Investors are betting on further stabilization in global trade relations. In addition, the Federal Reserve’s upcoming interest rate moves will be influenced by this turnaround.
Could the Tariff Truce Reshape Global Trade?
Despite the US-China trade agreement being a major milestone, long-term viability is doubtful. While both sides have come to terms on a reduction of tariffs for 90 days, the root cause of the trade tensions remains unaddressed. Additional talks about trade imbalance, intellectual property rights, and overall economic cooperation might be facilitated by the agreement.
The US dollar’s position within the foreign exchange market will also be heavily affected by the longevity of this pact. If China fulfills what has been committed during negotiations, the US dollar may continue enjoying enhanced sentiment as well as continuous economic growth. But any interruptions in the negotiations in the context of trade can influence the position of the US dollar within overseas markets.
Can the US Dollar Surge Last?
The recent US dollar surge was fueled by temporary tariff reductions between the US and China. It is a positive turn of events in the forex market. Although the overall market sentiment has turned optimistic, the US dollar has appreciated, signifying investor confidence. But whether this trend will be sustained will be known only after ninety days. The US dollar’s future in the Forex market will also remain influenced by the evolution of US-China relations.
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