Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Trade deal sparks market euphoria
Global markets surged higher in early European trading on Monday after US Treasury Secretary Scott Bessent announced a de-escalation in trade tensions that saw both the US and China slash tariffs for a 90-day period.
The US agreed to cut tariffs from 145% to 30% while China will reduce their tariffs from 125% to 10% for the next 90 days. US president Donald Trump said the agreement achieved a “total reset” with China.
US stockmarkets led the charge higher with the US’s Dow Jones up 2.8%, the S&P 500 up 3.3% while the Nasdaq jumped and incredible 4.4%.
The greenback gained across Asia with the AUD/USD down 0.6% while the NZD/USD fell 0.9%. The USD/SGD climbed 0.6%.
The Chinese yuan outperformed, however, with the USD/CNH down 0.6%.
US leads gains
The US dollar led the gains in other markets with the stop-gap agreement helping sentiment around US economic growth.
The greenback’s biggest gains were against the safe-haven currencies with the USD/CHF up 1.7% while the USD/JPY jumped 2.1%.
The Swiss franc and Japanese yen were also weaker in APAC with the Swiss franc falling to one-month lows versus the Australian and Singapore dollars while the AUD/JPY and NZD/JPY climbed to at least one-month highs.
The European markets extend a recent reversal with the euro and British pound, previously some of the biggest winners from trade worries, down further overnight. The EUR/USD fell 1.4% with the GBP/USD down just under 1.0%.
The euro and British pound were also weaker across Asia. The AUD/EUR reached the highest level since 3 April.
US CPI in focus
Financial markets will now wonder whether this deal might have any impact on the Federal Reserve ahead of tonight’s US inflation reading.
The Fed has previously said that uncertainty around tariffs means the central bank is uncomfortable cutting rates without further evidence of the potential inflationary impact of trade barriers.
US headline annual inflation for April is forecast to remain at 2.4% while the core number is also forecast to stay steady at 2.8%.
That said, a higher number tonight could add weight to the USD’s current upside momentum. US CPI is due at 10.30pm AEST.
USD surges on trade deal
Table: seven-day rolling currency trends and trading ranges
USD surges on trade deal
Table: seven-day rolling currency trends and trading ranges
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
