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Trump previews major events in China and the United States! The dollar surges
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: Trump predicts major events between China and the United States! The US dollar soars." Hope it will be helpful to you! The original content is as follows:
The US dollar index soared on Monday as the United States and China reached an agreement to temporarily cut mutual tariffs to alleviate concerns about a global recession.
Under the agreement, the United States will reduce the additional tariffs imposed on Chinese imports since April from 145% to 30%, and China's retaliatory tariffs on American goods will also reduce from 125% to 10%. This move will last for 90 days and exceed investor expectations. The market previously expected that the two sides would only conduct preliminary negotiations, making it difficult to achieve specific results.
Bannockburn GlobalForex chief market strategist Marc Chandler said: "This is a 90-day respite, basically just trying to gain more negotiation space. I think this time it is the US concession." Chandler added: "I did not support these tariff measures at first, but since it has been implemented, the US concession has almost never changed. In other words, we will stop imposing tariffs on China first, and China will lift the retaliation measures, but in the end we will return to the starting point."
As the U.S.-China trade tensions ease, the market adjusted its expectations for the Fed's interest rate cut on Monday. Currently, the market predicts that the Fed may cut interest rates by 25 basis points as early as September meeting, after the previous expectation was in July.
Wells Fargo analysts pointed out that the agreement supports their view that the dollar will continue to strengthen in the near term, as the Federal Reserve may delay interest rate cuts.
Asian market
Australia's Westpac Consumer Confidence Index rose 2.2% to 92.1 in May, partially recovering from a sharp decline in April caused by trade-related uncertainty.
Western Pacific attributes the moderate rebound to stronger financial markets and the decisive results of the federal election. However, market sentiment remains sluggish, with the index still 3.9% below its March level, firmly in a pessimistic area.
Without Average All Key Inflation Measures Now Return to the 2-3% Target Range, Westpac expects the RBA to Cut Cash Rate by 25 basis points to 3.85%. The xmmarkets.cnbination of weak domestic sentiment and a more “turbulent and threatening global context” strengthens the justification for further easing.
The summary of the Bank of Japan's meeting from April 30 to May 1 shows that it is generally cautious about the impact of U.S. tariffs, with board members acknowledging potential economic damage, but not believing that this is enough to undermine the pursuit of a 2% inflation target.
One member pointed out that the Bank of Japan may enter a "temporary suspension" rate hike due to weak U.S. economic growth. But some people stressed that "should not be too pessimistic."
The member stressed that interest rate hikes could resume if the situation improves or changes in U.S. policy.
Other views highlight the high uncertainty facing Japan's economy and price outlook, which is mainly driven by global trade tensions. A board member pointed out that the policy path “could change at any time.”
Another reiterated that “the Bank of Japan’s interest rate hike position has not changed” as forecasts continue to show that inflation reaches its 2% target, while real interest rates remain very negative.
European Market
Martins Kazaks, a member of the ECB Management xmmarkets.cnmittee of Latvia, said overnight that if upcoming data confirms that inflation is making progress near the 2% target, the rate cut in June remains a "quite likely step" in line with market expectations.
Kazaks added, "Rate caution may be cut at a pace as inflation is anchored to the target of around 2%.
At the same time, German and Spanish European Central Bank members Joachim Nagel and Jose Luis Escriva added a cautionary statement in a joint interview warning that U.S. President Donald Trump's radical tariff policies cast a shadow on the economic outlook.
"With the monetary policy decisions, it is important to be cautious, not Overemphasizing specific announcements that could change soon,” Nagle stressed Alan Taylor, a member of the Bank of England’s Monetary Policy xmmarkets.cnmittee, explained his decision to vote for a 50 basis point rate cut last week, warning that both global and domestic conditions have deteriorated significantly. He noted that the international trade environment was “quite dangerous”, which was largely driven by tariffs imposed by the U.S. beyond expectations. Additionally, he added, “the erosion of confidence we are seeing continues,” with lower readings from business surveys such as PMI and REC, and preventiveSigns of increased savings and delayed investment.
Taylor also called the recent UK-US trade agreement "quite insignificant" and pointed out that most UK exports will still face 10% tariffs, with little relief to exporters in the short term.
Taylor warned that waiting for a full confirmation that all inflationary pressures have eased before further easing policies could put the Bank of England behind.
Bank of England MPC member Megan Greene said in a panel discussion today that while wages and inflation are moving in the right direction, they are still disturbingly high. More worrying, “medium-term inflation expectations have also begun to rebound.
Green last week voted for a 25 basis point rate cut, the fourth rate cut since August last year, revealing that she was initially hesitant when attending the meeting.
She noted that she was “difficult” between keeping interest rates stable and rate cuts but ultimately decided to support easing. A key factor in her decision was the sharp increase in tariffs by U.S. President Donald Trump led to global trade Tensions are intensifying.
Although a temporary trade truce between the U.S. and China was announced today, Green said that this would not change her vote.
She also pointed out that the ongoing uncertainty in U.S.-EU trade relations is a major downside risk for the UK economy, and noted that any escalation could further curb external demand.
U.S. Market
Chicago Fed Chairman Austan Goolsbee The U.S.-China tariff agreement over the weekend welcomed it as a step in the right direction, but warned that its limited scope would only provide moderate relief.
In an interview with The New York Times, he said that a temporary 90-day reduction in tariffs would "have less impact on stagflation than the path they took."
But it still puts a heavy burden on the economy. With tariffs still three to five times higher than pre-trade war levels, Goolsbee warned , the agreement will still “slow growth and increase prices”, a sign of the stagflation environment.
In view of the ongoing uncertainty surrounding U.S. trade policy, Goolsbee reiterated his support for interest rates. He noted that the Trump administration’s statement acknowledges the temporality of the current truce. “In the near future, people will revisit it,” he said.
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