Dollar Drops on China Tariff Talks Report
The dollar fell against all the Group-of-10 currencies except the pound on Friday after news on China mulling trade talks with the US boosted risk sentiment.
The Bloomberg Dollar Spot Index pared its losses to 0.4% amid upside pressure in short and medium-term treasury yields and banks reigning in their Federal Reserve rate cut forecasts.
5-year Treasury yields rose more than 13 bps to 3.93% and 10-year Treasury yields rose 10 bps to 4.32% while euro area bonds retreat and global stocks advance.
EUR/USD rose 0.1% to 1.1300, trimming weekly loss to 0.6%; one-week risk reversals traded earlier at 80bps, the tightest topside premium since April 16, before sliding down to 72bps.
Euro-area inflation unexpectedly held steady and an underlying measure jumped in an awkward report for officials weighing how to respond to the economic hit from US tariffs.
“EURUSD has had a muted effect on the back of this hotter-than-expected inflation print but looking longer term, if Europe and the US fail to reach a tariff agreement — despite reports that the EU is prepared to offer a €50 billion trade package — further pressure on interest rates is likely,” said Valdius Risk Management analyst Pierre Roke. “EURUSD has been range bound between 1.13 and 1.14, but continued negative economic data could push the pair lower.”.
Source: Bloomberg
