Market Overview

The week kicks off with broad U.S. dollar strength as markets respond positively to significant progress in U.S. - China tariff negotiations over the weekend.

Market Snapshot

• USD/CAD: +0.4%
• EUR/USD: −1.1%
• GBP/USD: −0.8%

The U.S. dollar is rebounding sharply, buoyed by renewed optimism surrounding trade talks.

Key Themes Driving Markets

U.S.-China Trade Talks: A Step Forward

Substantial progress was reported following two days of negotiations in Switzerland between the U.S. and China. Officials described the discussions as a meaningful first step toward easing trade tensions.

The talks were led by Treasury Secretary Scott Bessent and Vice Premier He Lifeng—both seen as capable negotiators in navigating the complexities of bilateral trade.

The upbeat tone has lifted risk appetite, with equity markets rising and the U.S. dollar strengthening against most major currencies. This marks a notable reversal from the heightened trade tensions of recent months.

Market Reaction: Dollar Surge

The euro and pound are both trading lower this morning, reflecting a flight to the U.S. dollar amid shifting sentiment.

Equity markets are rallying—particularly large-cap tech and major indices—signaling a renewed risk-on environment.

Overall, the mood is one of cautious optimism as markets respond to the potential de-escalation of trade conflicts.

Shifting Rate Expectations

Improved trade prospects are pushing U.S. 10-year Treasury yields higher, as markets scale back expectations for aggressive rate cuts.

Just two weeks ago, up to four rate cuts were priced in by year-end. Now, the consensus leans toward a more modest two cuts.

This shift in rate expectations is further supporting the dollar’s recent strength.

Looking Ahead

Markets will remain highly sensitive to further commentary from U.S. and Chinese officials, as well as upcoming economic data that could reshape the outlook. With firmer Treasury yields and a more constructive trade narrative, the U.S. dollar’s recovery may continue in the near term.

After weeks of uncertainty, the apparent breakthrough in U.S.-China trade talks has provided a much-needed boost to market sentiment. While the situation remains fluid, today’s tone is markedly more positive—risk assets are rallying, and the dollar is regaining ground.