The U.S. dollar initially showed signs of recovery, appearing to confirm a bottoming pattern following renewed optimism over the U.S. economy, despite the earlier contraction in Q1 GDP. However, fresh hopes surrounding possible trade talks between China and the U.S. have lifted investor sentiment globally, pressuring the greenback lower. Skepticism remains over the likelihood of these talks, especially in light of recent U.S. threats of sanctions on buyers of Iranian oil—China being the primary importer. Meanwhile, new tariffs on small Chinese imports are coming into force. As a result, the U.S. dollar has declined against most G10 and emerging market currencies, hitting its lowest level against the offshore yuan since March 20.

Asia Pacific Markets

In the Asia Pacific, markets surged as risk appetite returned. Although mainland China’s exchanges were closed for the holiday, optimism over potential U.S.-China trade discussions buoyed sentiment. The Hong Kong-listed China Enterprises Index rose nearly 2%, and Taiwan’s Taiex jumped 2.7%.
The Japanese yen drew attention after the dollar crossed above a key technical level, with potential to rise further. Meanwhile, Japan’s March jobless rate edged up slightly, though labor market conditions remain firm.
In Australia, investors focused on the upcoming national election, with polls favoring the Labor Party. The Australian dollar regained ground after a dip, although a longer-term correction remains likely if trade optimism fades.

European Markets

In Europe, the euro rebounded from a near-monthly low and now trades near $1.1350. April's CPI data showed inflation slightly higher than expected, with the core rate reaching its highest level this year. Still, markets anticipate the European Central Bank will proceed with a rate cut in June, with additional easing likely to be gradual. Manufacturing activity showed some improvement, though it remains below growth thresholds.
In the UK, sterling remains firm but appears vulnerable to a potential pullback. Markets are pricing in a rate cut by the Bank of England next week, which would reduce the base rate to 4.25%. Political instability may rise after poor performances by both major parties in local elections, with the Reform Party gaining ground.

American Markets

The U.S. dollar’s momentum weakened after a brief technical breakout. Although the move projected a possible climb toward 102.40, lack of follow-through led to a retreat back below 100. Market focus now turns to the April jobs report, with forecasts predicting a gain of 138,000 jobs, mostly in the private sector. The unemployment rate is expected to remain stable, which could influence the Federal Reserve’s stance. Despite signs that the Q1 GDP dip may have been a one-off statistical anomaly, markets are still pricing in multiple rate cuts this year, starting in June, with about a 62% chance of an initial cut already priced into futures.