The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, exceeds a more than 1% rally on Monday after China and the United States (US) agreed to a 90-day pause in their trade war by slashing tariffs on both sides.
After a weekend of discussion, US Treasury Secretary Scott Bessent announced the defusing of the trade war between the two nations: China will lower its tariffs on US goods to only 10% from the original 125%, while the US will do so to 30% (from 145%) on Chinese goods, both for 90 days, Bloomberg reports. The news sent the US Dollar to its highest level in one month.
Several correlations are kicking in again on the back of this event, with the benchmark 10-year US Treasury yield hitting 4.45%. The rate differential gap between the US and other countries sees the Greenback being valued higher against the local currencies of countries with lower yields.
The repercussion of this correlation could be that Federal Reserve rate cuts for 2025 get fully priced out.
Source: FXStreet
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