Dollar Firm before the Trump-Xi Discussions at G20

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An Abstract of One Hundred Dollar Bills.

On Friday, ahead of the crucial meeting between the leaders of the United States and China at a Group of 20 summit over the weekend and as investors wait for signs of progress to end the heated trade, the dollar traded cautiously.

As Washington and Beijing were laying out an agreement that would help prevent the next round of tariffs on an additional $300 billion of Chinese imports, the attitude improved the day earlier after news reports were broadcasted.

Traders and analysts give so much attention on the negotiations between the world’s two largest economies seeing that a resolution at the G20 summit is far from certain.

As U.S. stocks gained and Treasury yields shifted lower, they reflected into an easing of risk aversion.

On Saturday, the much-anticipated trade talks of Trump and Xi is set to happen.

A senior foreign exchange strategist at IG Securities stated, “Market moves show there is less concern about the U.S.-China meeting, but the results of the meeting have to match these expectations for the dollar and risk assets to go higher.”

In addition, he also said, “Anything less than that will lead to a big reaction in the opposite direction.”

On Tuesday, the dollar traded at 107.73 yen, which was not so much of a movement on the day. However, it was still on its way for a 0.4% weekly gain as it recovered from a five-month through 106.7 yen hit.

On the week, measuring the U.S. currency against six of its peers, known as the dollar index, was down at 96.195, lower 0.3%.

Monetary Policy Easing

U.S. flag and China flag.

In a dispute about China’s trade practices that has lasted nearly a year, as much as up to 25% tariffs have already been imposed by the United States and China in a hundred of billions of dollars of each other’s goods.

Any sign the trade war will come to an end would be a significant boost for the global economic outlook, but the prolonged trade war has slowed global growth and pushed many central banks toward cutting interest rates to support their economies.

Due to speculation the European Central Bank will ease monetary policy, analysts say sentiment on the single currency remains weak. Staying unchanged on the week, the euro last traded at $1.1370.

Set for release on Friday are weakness in June inflation data for the euro zone that would support the argument for monetary easing. Meanwhile, in May, core inflation decelerated sharply.

Worries about whether the nation would be able to avoid a no-deal, chaotic exit from the European Union, sterling was unchanged at $1.2670, on course for a 0.6% weekly decline on uncertainty about who will be Britain’s next prime minister.

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