The dollar remained steady against major global currencies on Monday as investor focus shifted from Friday’s upbeat U.S. jobs report to a high-stakes round of U.S.-China trade negotiations set for later in the day in London.
The talks come at a sensitive time. China is battling deflationary pressures, and sentiment in the U.S. has been fragile, shaken by trade uncertainty and a decline in consumer confidence. This has led many to question the dollar’s appeal as a traditional haven.
Top U.S. officials, including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer, are expected to meet their Chinese counterparts, likely led by Vice Premier He Lifeng.
While hopes for a breakthrough are tempered, markets are watching closely. “A deal to keep talking might be better than nothing, but unless we see a concrete breakthrough, the impact on sentiment is likely to remain muted,” said Charu Chanana of Saxo Markets.
The recent rally in the dollar was fueled by Friday’s employment data, which offered some relief after a string of underwhelming reports. Although the dollar index (DXY) recovered more than half of its weekly losses, it remains down over 8.6% for the year.
In early Monday trading, the yen strengthened 0.10% to 144.75 per dollar. This came after data showed Japan’s economy contracted in Q1, but not as sharply as expected, easing some investor concerns.
Meanwhile, the Swiss franc held steady at 0.8221, and the euro hovered at $1.1399. The British pound was flat at $1.3535. The dollar index was last seen at 99.169, showing limited movement as traders held their positions ahead of the trade talks.
The 10-year U.S. Treasury yield, which had jumped more than 10 basis points on Friday, remained flat during Asian hours.
Trading volume was light in Asia due to public holidays in Australia and New Zealand. The Kiwi dollar was last seen at $0.6020, while the Aussie ticked up 0.1% to $0.65.
Attention is also turning toward the U.S. inflation report for May, due later this week. It will be the first full month showing the effect of Trump’s 10% tariff on imports, excluding USMCA countries. This could influence the Federal Reserve’s policy outlook.
Fed officials are currently in a blackout period ahead of next week’s meeting, but signs suggest they are in no rush to lower rates. Futures indicate a possible rate cut of 25 basis points, with the earliest move expected in October.
“May is the first month where the impact of Trump’s 10% universal tariff is expected to show,” analysts at ANZ noted. “The Fed will want a few months of inflation data to judge both the impact and its persistence.”
China’s offshore yuan (USDCNH) was last at 7.187 per dollar as traders braced for upcoming economic data. Inflation and trade figures from China are expected to give more clues about the health of the world’s second-largest economy.
