empty
13.05.2025 12:24 AM
China Helped the Dollar Halt Its Decline

The CFTC report released on Friday showed minimal changes in overall currency positioning, with the net USD position against major currencies decreasing by a symbolic $0.1 billion to—$17.2 billion. Due to high overall uncertainty, investors remain in a wait-and-see mode, and the market is currently in a fragile balance awaiting new data.

This image is no longer relevant

The futures market anticipates three Federal Reserve rate cuts this year, with only minor adjustments. A slight increase in inflation expectations followed the release of secondary labor market data—unit labor costs rose by 5.7% in Q1, significantly above the previous 2% and the forecast of 5.3%. This led to an uptick in yields on 5-year TIPS (Treasury Inflation-Protected Securities).

The April consumer inflation report will be published on Tuesday. Forecasts are neutral, with headline and core readings expected to remain at the previous month's levels. However, this outlook carries considerable uncertainty, as the U.S. is currently experiencing opposing economic forces that could push inflation higher or lower.

One key factor is the tariff negotiations with China. Chinese exporters have sharply reduced shipments to the U.S.—for now, inventories are sufficient, but time is running out. Without a mutually acceptable resolution, a surge in inflation is inevitable. Meanwhile, reports suggest the U.S. and China are close to reaching a tariff agreement. The two sides have agreed to a 90-day delay in implementing reciprocal tariffs, during which they aim to formulate a balanced solution.

Markets responded instantly to this positive development. On Monday, the dollar strengthened significantly, particularly against the yen as a safe-haven currency. The U.S. Dollar Index reached a one-month high but remains below the level seen before April 2.

In recent months, the dollar has faced intense pressure due to Trump's unilateral actions, which threatened the global financial system's stability. The recent wave of optimism supports risk assets, and the dollar could also benefit.

The threat of a U.S. recession appears to be on hold for now. Recent data has not raised concerns, and the Atlanta Fed's GDPNow model currently forecasts 2.3% GDP growth in Q2, easing fears of a poor Q1. At the same time, it should be noted that markets are reacting to the potential easing of political tensions, which has triggered a wave of euphoria. However, this optimism is still based purely on rumors and speculation.

The S&P 500 made an impressive leap on Monday. If it stays above 5780, this may require a reassessment of the short-term outlook.

This image is no longer relevant

In any case, near-term expectations of a stock market correction should be put aside, as demand for risk rises and will likely continue to grow, barring any unexpected developments. Trump is likely to continue pursuing his plan to revise tariffs, meaning that any delays or preliminary agreements with China do not resolve the core issues. Once the current wave of optimism fades, markets could resume their downward movement.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Fed Is Right—It's Too Early to Cut Rates (I Expect a Decline in #SPX and an Increase in Gold Prices)

The fresh U.S. Consumer Price Index (CPI) data released on Wednesday, although below the consensus forecast, confirmed the persistence of inflationary pressure. This fully justifies the Federal Reserve's reluctance

Pati Gani 10:37 2025-06-12 UTC+2

Trump Threatens Tariffs Again – Markets React

President Donald Trump announced yesterday that he intends to send letters to trade partners within the next one to two weeks outlining unilateral tariff rates. This is ahead

Jakub Novak 09:10 2025-06-12 UTC+2

What to Pay Attention to on June 12? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are set for Thursday, but only a few are truly important. The key reports to highlight are the GDP and industrial production data from

Paolo Greco 05:52 2025-06-12 UTC+2

GBP/USD Overview – June 12: Protests Against Trump and Fed Policy

The GBP/USD currency pair continued to trade very calmly on Wednesday. Naturally, when U.S. inflation data was released, we saw a brief burst of market reaction—though it didn't last long

Paolo Greco 04:07 2025-06-12 UTC+2

EUR/USD Overview – June 12: Is There Light at the End of the Tunnel?

The EUR/USD currency pair continued to trade very calmly throughout Wednesday. The market showed no reaction whatsoever to the seemingly positive news regarding U.S.-China trade negotiations. Why? Because that positivity

Paolo Greco 04:07 2025-06-12 UTC+2

Donald Trump Plans to Suppress the Uprising

For several consecutive days, protests and unrest have continued in some major U.S. cities, sparked by Donald Trump's new immigration policy. This time, the U.S. President has decided to deport

Chin Zhao 00:35 2025-06-12 UTC+2

EUR/USD. In the Shadow of the Trade Deal: U.S. Inflation Report Pressures the Greenback

A mixed U.S. inflation report pressured the greenback. The dollar index returned to 98.00, while the EUR/USD pair refreshed its weekly high, rising to 1.1491. Additional pressure on the U.S

Irina Manzenko 00:35 2025-06-12 UTC+2

Will the Dollar Maintain the Status Quo?

To make accurate predictions about the future, one must examine the past. The more than 10% rally in EUR/USD since the beginning of the year has been driven by four

Marek Petkovich 00:35 2025-06-12 UTC+2

XAU/USD. Analysis and Forecast

Currently, the price of gold remains confined within a weekly range. The key factors supporting price growth include a decision by the U.S. federal appellate court to uphold President Donald

Irina Yanina 18:35 2025-06-11 UTC+2

USD/JPY. Analysis and Forecast

At this stage, the Japanese yen continues to trade within an intraday consolidation range, approaching the two-week low against the U.S. dollar reached yesterday. The main factors influencing the movement

Irina Yanina 18:33 2025-06-11 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.