As the U.S. and China edge closer to their upcoming talks, tensions are rising not only over policy but also over protocol—each side now disputes who initiated the negotiations. The potential fallout could be a downgrade or even cancellation of the meeting, so expectations should remain conservative. Meanwhile, the U.S. is anticipated to announce its first post-Brexit trade deal with the UK today. However, this development hasn’t buoyed the British pound, which remains under pressure ahead of the Bank of England’s likely dovish rate cut. The dollar continues to strengthen, boosted by the Federal Reserve's hawkish stance, gaining ground against both G10 and most emerging market currencies.

Asia Pacific Markets

In Asia-Pacific currency markets, the dollar is regaining strength against both the Japanese yen and the Australian dollar. The yen weakened as the dollar pushed toward ¥145, reflecting a disconnect from U.S. Treasury yields, which had dipped. Despite last week's pullback from ¥146, upward momentum persists, with potential to reach ¥148. The Australian dollar also slipped, following a bearish key reversal. After initially rising to $0.6515, it dropped below recent support levels, reflecting investor reaction to both the Fed’s firm hold and President Trump's decision not to roll back tariffs on China. Further declines could bring it closer to $0.6285.

European Markets

The euro is under pressure despite Germany's surprisingly strong industrial production, which saw its biggest monthly gain since 2021. Though the euro briefly dipped to around $1.1270 after the Fed’s announcement, it remains within a stable range. A clear break below $1.1260 could spark a downward correction.
Meanwhile, the British pound is also facing challenges. Even news of a U.S.-UK trade deal failed to lift it for long. Sterling is now testing key support levels near $1.3260, and a break below this could signal a further slide toward $1.3050. Markets expect the Bank of England to cut rates by 25 basis points, with further easing likely.

American Markets

The U.S. dollar continues its upward trajectory, with the Dollar Index climbing above the critical 100.00 level. If this move holds, it could discourage bearish sentiment and confirm a broader corrective rally. A trade agreement with the UK is expected today, adding to the bullish outlook. Still, hopes for U.S.-China negotiations remain fragile after President Trump reaffirmed high tariffs on Chinese goods, while China downplayed the nature of the talks. Upcoming economic data, including productivity and labor costs, are derived from earlier GDP results and are unlikely to shift market sentiment significantly. The Fed's refusal to signal future rate cuts reinforces confidence in the greenback.