FX.co ★ Dollar Rallies as US and China Slash Tariffs

On Monday, the dollar index advanced by over 1% to exceed 101.5, reaching its highest level in more than four weeks. This increase followed fruitful trade discussions between the U.S. and China in Switzerland over the weekend, resulting in an agreement to significantly reduce tariffs. Under this preliminary accord, U.S. tariffs on Chinese products will decrease from 145% to 30%, while China will reduce its tariffs on American imports from 125% to 10%. This development is widely regarded as a crucial move towards alleviating bilateral trade tensions. The rollback of these tariffs has reinvigorated investor confidence in the U.S. dollar, which had faced challenges earlier this year due to concerns that President Trump’s trade policies were diminishing the attractiveness of American assets. Additionally, robust economic data and the Federal Reserve's cautious strategy towards interest rate policy have bolstered the dollar. Moving forward, investors are keenly anticipating Tuesday's release of U.S. consumer inflation data, followed by retail sales and producer price statistics on Thursday, to better assess the short-term economic effects of the ongoing trade dispute.