Dollar Steady as Trade Concerns Recede
The US dollar remained largely range-bound on Thursday, stabilizing near three-week lows as global trade concerns eased slightly following the announcement of a preliminary trade agreement between the United States and Japan. While the deal helped calm investor nerves, market attention remains firmly focused on ongoing US-EU trade talks and the state of negotiations with China.
Trade Secretary Bessent offered a cautiously optimistic tone, suggesting that the tariff truce with China could be extended beyond the current August 12 deadline. If confirmed, such an extension would likely support broader market sentiment and reduce fears of renewed trade friction—at least in the short term.
However, uncertainty continues to loom over monetary policy independence ahead of President Trump’s upcoming visit to the Federal Reserve. Despite reassurances from Secretary Bessent that the Fed will retain operational autonomy, traders remain wary of potential political pressure, particularly as the 2026 election cycle begins to heat up.
In the bond market, Treasury yields edged higher across the curve, with the 10-year yield rising to 4.40%, reflecting a modest unwind of expectations for immediate Federal Reserve rate cuts. The move came as risk appetite improved and investors reassessed the outlook for inflation in light of potential tariff extensions. Policymakers are expected to remain vigilant, balancing the risk of inflationary pressures against signs of economic deceleration.
Looking ahead, investor focus now shifts to a slate of key macroeconomic indicators, including today’s PMI (Purchasing Managers’ Index) figures and weekly jobless claims. These releases are expected to provide fresh insights into the strength of the US economy. Softer-than-expected data could revive speculation about a more dovish Fed stance, potentially weighing on the dollar and driving volatility in rate-sensitive assets.
In the near term, markets will remain highly sensitive to signals from both the Federal Reserve and the White House, as well as to any concrete progress—or setbacks—in global trade negotiations.
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