The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, reverses sharply on Friday after hitting a near one-month high of 100.86 earlier in the day. Disappointment surrounding the so-called US-UK trade deal weighed heavily on the Greenback, with investors focusing on this weekend's critical trade negotiations between the United States and China in Switzerland.
US Dollar softens ahead of key talks
The US-UK trade deal is being written off by markets as non-substantive, with US tariffs on UK goods remaining at 10%.
Market focus shifts to US-China trade talks this weekend, where discussions are expected to be tense and inconclusive.
President Trump hinted that tariffs on Chinese goods could fall to 50% if cooperation improves, though skepticism prevails.
Chinese refineries imported 11.7 million barrels per day in April, with stockpiling driven by lower crude oil prices.
US places Chinese independent refineries on the sanctions list for purchasing Iranian oil, adding pressure before trade talks.
Federal Reserve Bank of New York President John Williams emphasized the importance of maintaining stable long-term inflation expectations.
Fed Governor Adriana Kugler highlighted the current policy rate as moderately restrictive, suggesting it will remain unchanged.
Commerzbank analysts warn that high Chinese crude imports are unlikely to sustain as US sanctions tighten further.
Fed policymakers stressed that the economy remains healthy but warned of possible downside risks from elevated tariffs.
Despite a short-term rise, the US Dollar Index faces selling pressure as stagflation risks emerge from persistent tariffs.
The market now awaits concrete outcomes from the Fed's next policy moves and potential inflation developments.
The US sanctions against Chinese refineries are expected to weigh on China's energy sector, potentially impacting trade talks.
Iranian Oil imports from China remain high at 1.5 million barrels per day but could decline following US sanctions.
Investors remain cautious, keeping a close eye on headline risks and weekend developments from the China-US meetings.
Source: fxstreet
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