Dollar Falters as U.S.-China Trade Deal Gains Traction Among Central Bank Deliberations

Amid ongoing global market developments, the U.S. dollar slipped against key currencies as expectations of a U.S.-China trade agreement and significant central bank meetings influenced investor sentiment. The Federal Reserve is poised to conclude a two-day policy meeting this Wednesday, with decisions from the European Central Bank (ECB) and Bank of Japan (BoJ) anticipated on Thursday.

President Donald Trump's announcement of an impending trade deal with China further buoyed market optimism, impacting currency values such as the Chinese offshore yuan, which surged to a month-long high against the dollar. The People's Bank of China also set a stronger yuan midpoint rate, indicating potential efforts to stimulate domestic demand before the Trump-Xi summit.

The past week saw the dollar reversing its gains against the yen and euro, with analysts watching for the BoJ's response to Japan's fiscal outlook and possible rate hikes amidst easing recession concerns. The ECB, expected to maintain current policy stances, has not shifted the euro, bolstered by strong eurozone data.