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The U.S. dollar edged lower in early Tuesday trade, giving back some of its sharp gains from the prior session, as investors remained upbeat following a tariff pause agreement between Washington and Beijing. The deal, which marked a significant de-escalation in trade tensions between the world’s two largest economies, helped boost risk sentiment globally and triggered a rally across currencies and equities.
At last check, the Dollar Index (DXY) was hovering near a one-month high at 101.54, supported by declining expectations of near-term Federal Reserve rate cuts.
Tariff Truce Spurs Relief Rally
On Monday, the U.S. and China jointly announced a 90-day tariff reduction agreement, with both countries slashing punitive duties on each other’s imports. The announcement came after weekend trade talks in Geneva and offered a much-needed reprieve for global markets. The dollar surged on the news as investors rotated into U.S. assets on improving economic outlook hopes.
The de-escalation also helped temper fears of a prolonged global slowdown and lessened the urgency for further Fed easing, sending U.S. Treasury yields higher:
- 2-year yield: steady near a one-month high at 4.009%
- 10-year yield: last at 4.465%
Futures pricing now reflects just 56 basis points of rate cuts by December, down from more aggressive expectations earlier in the month.
FX Market Moves: Yuan Hits 6-Month High
China’s offshore yuan climbed to a six-month high, reaching 7.1855 per dollar, driven by easing trade tensions and renewed capital inflows. This strength spilled over into risk-sensitive currencies:
- AUD/USD rose 0.64% to $0.6412
- NZD/USD climbed 0.55% to $0.5889
The euro recovered from Monday’s 1.4% slide, rising 0.25% to $1.1114, while the yen rebounded 0.48% to 147.76 after dropping over 2% in the previous session.
The Swiss franc firmed 0.25% to 0.8429, and GBP/USD ticked up 0.16% to $1.3199.
CPI Data in Focus
Markets are now turning attention to the U.S. consumer price index (CPI) due later on Tuesday. A stronger-than-expected inflation print could reinforce the Fed’s cautious stance and bolster the dollar further, especially after the central bank indicated a data-dependent path forward.
Consensus estimates point to a modest monthly uptick in both core and headline CPI figures for April.
Bitcoin Tops $100K on Risk-On Mood
Bitcoin (BTC) continued to rally, last trading at $102,600, following Monday’s surge to a near three-month high. Optimism over global trade and improving market conditions has fueled renewed inflows into cryptocurrencies, especially as speculative appetite strengthens.
Ether (ETH) eased 1.1% to $2,458.36, holding near recent highs, while broader crypto sentiment remains buoyant amid reduced geopolitical and macroeconomic friction.
