US Dollar Surges as US-China Trade Optimism Fuels Market Rally

The US Dollar kicked off the trading week with a robust rally on May 13, 2025, climbing close to a five-week peak as optimism from successful US-China trade talks over the weekend lifted global markets. The Dollar Index (DXY) surged to just shy of 102.00, driven by renewed confidence in trade relations, while major currency pairs like EUR/USD and GBP/USD faced sharp declines. Commodities showed mixed responses, with WTI crude oil nearing $63.00 per barrel and gold retreating to monthly lows near $3,200 per ounce, reflecting the Dollar’s strength and a risk-on mood across financial markets.

Following the US-China trade discussions, which resulted in a 90-day tariff suspension and reduced levies to 10% on US goods and 30% on Chinese imports, the US Dollar gained significant traction. EUR/USD plummeted to multi-week lows around 1.1060, while GBP/USD fell to 1.3140, pressured by the Dollar’s broad resurgence. USD/JPY also advanced, hitting a six-week high near 148.60, buoyed by the positive trade sentiment. AUD/USD broke below the 0.6400 support, weighed down by the Dollar’s rally, as Australian economic releases like the Westpac Consumer Confidence survey and NAB Business Confidence data loomed on the horizon.

Commodity markets displayed divergent trends amid the Dollar’s strength. WTI crude oil rose to a three-week high above $63.00 per barrel, supported by expectations of increased demand from improved US-China trade ties. Conversely, gold prices dipped to a monthly low near $3,200 per ounce, pressured by the stronger Dollar, higher US Treasury yields (10-year at 4.371%), and fading trade war fears that had previously driven safe-haven demand. Silver prices, however, staged a modest recovery, rebounding from daily lows below $32.00 per ounce to close with minimal losses, showing resilience despite the risk-on environment.

Market focus now shifts to key US data releases, with Tuesday’s April Consumer Price Index (CPI), expected at a steady 2.4% year-over-year, set to influence Federal Reserve rate expectations. A higher-than-anticipated CPI could further bolster the Dollar, while a softer reading might ease pressure on gold. The NFIB Business Optimism Index and API’s weekly US crude inventory report will also provide directional cues. Across the Atlantic, ZEW Economic Sentiment surveys in Germany and the euro area, alongside UK labor market figures and the BRC Retail Sales Monitor, will shape EUR/USD and GBP/USD movements, as global markets navigate this wave of trade-driven optimism.