The US Dollar (USD) may continue to weaken against the Chinese Yuan (CNH), with the major support level at 7.1700 being currently out of reach. There is, however, another support level at 7.1840, with resistance levels at 7.2100 and 7.2180.

In the short term, the USD experienced a decline, closing at 7.1993. Over a broader timescale, renewed downward momentum implies that a revisit to the 7.1700 level may occur.

Corrective Phase Of The US Dollar

Previously, the USD was expected to range-trade with a target of 7.1700. Initially, downward momentum decreased, but a recovery is now suggested. The strong resistance level has adjusted from 7.2600 to 7.2420, indicating potential changes in trading dynamics.

This analysis suggests that the US Dollar is currently in a corrective phase against the Yuan, gradually easing from its earlier strength. The short-term slide below 7.2000, landing it at 7.1993, signals a hesitance in buying interest at these levels. While previous moves hinted at consolidation, recent action implies a shift—momentum is tipping back in favour of weaker dollar positions, though not aggressively so.

Support at 7.1840 appears to be the next line to test if the pressure continues. It’s not implausible for the pair to slowly gravitate towards 7.1700 again, especially given the lack of urgency seen in recent recovery attempts. That former lower target sits just below where the market seems to be comfortable in the current environment, making a retreat to that level possible if selling resumes modestly.

The earlier resistance, once set higher near 7.2600, has now been brought down to 7.2420. This revision reflects that recent rallies have lacked momentum. The pair has struggled to break past its nearer hurdles, highlighting hesitance or a cap in upside enthusiasm. That revision should not be ignored—it shows where the ceiling might be if there is a bounce.

Strategic Resistance And Support Levels

It would be reasonable now to treat any rise into that resistance zone as an opportunity to re-examine positions, especially since the failure to maintain strength above 7.2100 has become more apparent. That level, coinciding with our recalibrated resistance area, may continue to act as a roadblock unless there’s a marked shift either from a fundamental injection or speculative drive.

Two things stand out. First, the reversal from expectations of a range-bound movement toward a recovery phase suggests momentum trading may be more effective than range setups for now. Second, the narrowing of resistance tells us that topside attempts are likely to meet friction sooner than before, giving us clearer points of invalidation.

We might do well to treat the current narrow range—with resistance at 7.2180 and support at 7.1840—as a short-term battle zone. Moves outside it would either confirm continued weakening of the dollar or herald a small relief reversal. With downside support holding for now, but not yet convincingly, any inaction may favour the gradual bleed lower. Keep an eye on volume and daily closes—price alone isn’t the whole story anymore.

Timing remains everything. If momentum stalls near 7.2100 again, it may set up a rolling reversal pattern. That, combined with muted recovery highs, continues to set the tone rather than trigger large-scale changes. Positions should reflect that—it’s not about chasing, but about reacting. It’s best to stay nimble—with enough room above resistance and below support to manage risk intelligently.

Create your live VT Markets account and start trading now.

The UK’s ILO unemployment rate for March remained steady at 4.5%, aligning with expectations. The previous month’s rate was 4.4%. Employment change was recorded at 112,000, which was slightly less than the expected 115,000, with a downward revision of the prior figure to 206,000.

Average weekly earnings increased by 5.5%, exceeding the anticipated 5.2%, though the previous figure was adjusted to 5.7%. When excluding bonuses, earnings rose by 5.6%, slightly less than the expected 5.7%, with the prior rate at 5.9%.

April Payroll Changes

April payrolls reflected a reduction of 33,000, with the prior data revised to show a decrease of 47,000, down from an earlier estimate of 78,000. These unemployment figures point to a continued weakness in the labour market, as payrolls decreased further in April.

Real earnings have shown a minor decline but still remain high. Despite inconsistencies in the data, the trend indicates no immediate pressure on policymakers at the Bank of England to implement a rate cut next month.

We’ve had a good look through the labour market numbers, and on the surface, they paint a picture that’s mostly aligned with broader expectations. The unemployment rate hasn’t moved much—it edged slightly higher, but barely enough to change the narrative. The slight tick up to 4.5% won’t cause too many raised eyebrows, particularly as the rise came alongside confirmed downward revisions to previously reported employment gains.

Average weekly earnings told a slightly different story. The figure excluding bonuses didn’t quite reach forecasts, whereas the overall average did manage to climb past them. But with both series seeing prior revisions lower, the take-home is that wage growth, while still elevated, is perhaps not accelerating the way once feared.

Then there’s the matter of monthly payrolls. April brought another net loss, and when we recheck March with the latest revisions, we see the drop wasn’t quite as deep as it looked initially—though still not a mark of strength. So, over the past two months, the direction is clear enough: job creation has softened.

Contextual Economic Insights

When we place all this into context, what emerges isn’t the sort of heat in the economy that typically discourages cutting rates. It’s more of a cooling period, with slightly weaker employment, moderated earnings momentum, and fewer signs of bottlenecks. None of this forces urgent action, and it suggests a degree of breathing space for decisions further down the line.

For those of us watching rates closely, especially through the lens of future volatility and implied curve shifts, the question is not whether conditions are firm—it’s how long the Bank feels it can observe without altering course. Based on current readings, one could infer there’s no justification for a sudden change to rhetoric, much less policy.

This current batch of data gives room—though limited—for slightly more speculative positioning. Still, it’s not about turning the boat; it’s about whether there’s an opening to lean into slightly steeper rates at the front end without inviting immediate correction. We’ll keep the forward vols on a tight leash for now, with implieds likely to drift as short-term pricing grows less reactive in absence of a new trigger.

We may find more clarity in coming wage data rather than from employment figures. With earnings now only marginally above headline expectations and prior months trimmed down, the pressure on rate setters to act based solely on inflationary wage risks appears to be retreating.

Gilts have responded quietly, which tells its own story. The market sees enough neutrality here not to make a move, and inactivity in the front end should be read not as complacency, but as measured patience. The bigger shift, if it comes, will require confirmation from further data—likely on prices. Until then, we continue watching from a distance, adjusting our positioning for premium where the curve permits and risks seem asymmetric.

Create your live VT Markets account and start trading now.

Silver, Platinum, and Palladium initially rose following a tariff announcement before succumbing to pressure in the wake of Gold’s performance. Palladium exception aside, these metals displayed a disappointing price trajectory.

Hopes for a trade conflict resolution expectedly should have increased their prices, given previous tariffs had negatively impacted them. Recently, Silver and Palladium remain below early April levels, and Platinum holds steady, while Gold trades higher despite its recent dip.

Gold Silver Ratio Insights

The Gold/Silver ratio remains high at just under 100, with Gold to Platinum and Palladium ratios well above 3:1. Doubts persist regarding a lasting tariff conflict resolution.

The information provided includes forward-looking statements, presenting risks and uncertainties. Markets and instruments discussed here are informational and not recommendations for purchasing any assets. Comprehensive personal research is advised before making any financial decisions.

What we’ve seen through the recent market action is a fairly clear case of metals reacting to sentiment rather than fundamentals. Initially, the announcement around new tariffs did push Silver, Platinum, and Palladium higher—largely on hopes that the move could bring forth a resolution to broader trade tensions. The optimism, however, faded rather quickly. Price action turned lower not long after, in parallel with a weak showing by Gold, which tends to shape broad sentiment in the precious metals space.

Looking deeper, we notice that Silver and Palladium remain below where they traded in early April, pointing to underlying scepticism despite transient optimism. Platinum, unlike the other two, has held relatively stable—its price hasn’t wandered much over the past few weeks. Gold, for its part, dipped recently, but still holds gains compared with earlier in the year. That outperformance appears to be pulling resources away from the smaller metals, with money flowing into what’s perceived as more reliable refuge.

Investor Sentiment and Market Uncertainty

We’re still seeing the Gold/Silver ratio sitting just beneath 100, which, historically speaking, reflects undervaluation in Silver but also a lack of institutional commitment to narrowing that gap. Ratios involving Platinum and Palladium are even more tilted, trading at over 3:1 relative to Gold, further illustrating both their subdued pricing and persistent hesitation among investors.

There’s also a broader uncertainty at play—one that the market isn’t ignoring. While some pinned hopes on a tariff resolution driving industrial metals higher, many remain unconvinced that we’re heading toward a permanent shift. Forward bookings and hedging behaviours reflect that doubt. We’re not observing the type of sustained buying you’d expect if traders were pricing in a longer-term easing in trade friction.

From a risk standpoint, derivative positioning has remained relatively flat, suggesting those with exposure are not yet comfortable increasing bets in either direction. It’s telling that short-term call positioning hasn’t risen notably. That calm probably stems from the fact that absolute levels are uninformed by strong conviction.

In our view, price behaviour combined with subdued ratio compression means that any derivative strategy tied to metals other than Gold should continue to bias towards protection rather than leverage. There’s little support for directional plays unless structural macro indicators begin to shift. Watching for changes in industrial demand signals or changes in tariff rhetoric will be more meaningful than headline-driven surges. If positioning must occur, maintaining tight risk frameworks is not only wise—it’s necessary.

With that, adjustments should be tactical and nimble. Liquidity is narrowing in these contracts, particularly in the options market, so spreads can widen quickly with any uptick in volatility. It’s unlikely that we’re entering a new regime, so it’s best to assume more sideways drift until data refutes it. We’d keep a close eye on relative ratios—you learn a great deal not just from where prices are, but how they compare over time.

Create your live VT Markets account and start trading now.

The recent US-China deal to lower tariffs may not immediately restore normalcy to supply chains. Although tariffs can change rapidly, supply chains cannot adapt as quickly. The previous retaliatory tariffs effectively created a trade embargo, pausing shipments and leading to empty containers at ports. Many factories halted production due to uncertainty, conserving costs.

Even with the tariff reduction, questions about absorbing costs and potential future increases remain. Companies face the challenge of rushing orders within the 90-day reduction period, but supply chains cannot quickly react. Space limitations and port congestion are anticipated, similar to post-Covid lockdowns. Factories will also take time to resume full production, especially with potential labour reallocation during the tariff war.

Impact Of Lower Tariffs

Although lower tariffs offer some relief, backlogs need addressing and shipments must ramp up again. Delays could persist for one to four months, impacting firms reliant on Chinese supplies. Significant port disruptions are now avoided with reduced tariffs, but the anticipated bullwhip effect from increased orders may exacerbate issues. Demand spikes will likely lead to overbooked shipments, rising costs, and port congestion. If tariffs rise again, supply chain challenges will resurface, taking months to normalise.

The agreement announced between the United States and China to reduce tariffs, while a welcome change for many, does not solve several deeper issues that have accumulated through months of uncertainty. Despite the headline relief, the direct operational improvements are unlikely to be immediate. Pricing may soften, but physical flows are still hamstrung. Because companies postponed orders during the height of tension, a large portion of goods never left their origin, and the backlog needs more than diplomacy to clear. We’re seeing that supply lines, designed for long-term consistency, lack the flexibility to rebound at short notice.

When shipments restart after a pause, it’s not just the warehouses that feel it. Transport firms suddenly face mounting orders, dock times stretch, space becomes scarce, and scheduling windows vanish. The bottleneck isn’t just a question of capacity—shippers are working through accumulated in-transit disruption. We’re revisiting the same constraints last seen during peak Covid shipping delays—vessels full, terminals stretched, and long-haul transport networks bumping up against their limits. Timing these movements suddenly becomes less about efficiency and more about availability.

Manufacturers, particularly those on the mainland, are now in the position of ramping up without much preparation. During the dispute, many re-deployed their facilities—either mothballing lines or shifting effort elsewhere. Bringing machinery and people back to a standing start is awkward. Without guaranteed consistency in orders ahead, scaling up quickly is risky. That won’t stop buyers from pressing for lead times, though. A compressed 90-day reprieve means some contracts must be filled under pressure, further crowding an already overstretched schedule.

Even with tariffs lower for now, we are preparing for trouble in the weeks ahead. There will be queues at ports—not necessarily because of mismanagement, but because too many are operating on the same clock. When delays hit inland freight operators, the knock-on effect can persist for days. Freight rates are already ticking up. Based on what we’re watching in existing transpacific lanes, demand is forecast to exceed available container slots within three to five weeks, unless bookings slow.

Expected Market Reactions

We also expect bulk commodity flows to return faster than consumer products, which adds weight to the wrong end of the system. Delicate timing in foreign exchange payments, import documentation, and customs clearance makes certain arrivals prone to slippage. If those start to stack up, it will become much more expensive to miss a delivery schedule.

Derivatives pricing tied to these movements has already started reflecting a tightening cycle. Short-dated contracts are spiking in parallel with forward bookings. This compression of lead-times into a narrow time window distorts price expectations further out. It’s not just market participants anticipating higher short-term demand—they’re also adjusting for relocation risk, in case tariff policies swing again. More volatility is being priced into longer tenors, as hedging continues to favour rapid exposure rather than extended carry.

Those reacting quietly will be better positioned. Inaction now looks like a position, rather than a lack of one. The choice isn’t whether to re-enter, but where to place time versus volume—the faster lanes are crowded, the slower ones risk irrelevance should policy shift again. What we are seeing is a short fuse with a wide charge, especially within manufacturing-linked prices.

Notably, Liu’s remarks point to a broader confidence issue. Traders remain unconvinced about the long-term direction. As a result, risk has not evaporated—it has just shifted. For positioning strategies, it’s not about riding the rally. It’s managing the spread without assuming the trend will hold beyond the short agreement window.

Factories are restarting, shipments resuming, but that’s only half the story. What matters more is who prices in the shape of this reset and whether protective mechanisms are kept in place longer than needed. For now, we’re staying close to short-term contracts and parsing data for lags. The move in tariffs may solve part of the paperwork, but it hasn’t put containers on vessels just yet.

Create your live VT Markets account and start trading now.

USD/JPY is expected to fluctuate within a 146.50 to 148.60 range. In the longer term, USD is likely to strengthen, although it might remain range-bound temporarily.

The pair’s recent surge saw a 2.14% increase, marking the largest one-day gain since March 2020. Overbought conditions indicate USD might stabilize within the outlined range instead of continuing its climb.

Short Term Market Movement

In the 1-3 week outlook, USD has gained momentum, with strong resistance identified at 149.30. Conversely, robust support has increased from 143.90 to 146.00.

These statements involve potential risks and should not guide trading decisions. Before making investment choices, conduct thorough research as there are risks, including potential total financial loss.

That sharp spike in USD/JPY—up over 2% in a single session—wasn’t just a reaction, it was a meaningful burst, triggered largely by a change in expectations around interest rate differentials. More precisely, it appeared to be driven by shifts in yield spreads and the resilience of economic data out of the US. The magnitude of the move, the strongest since March 2020, suggests market participants were either caught off-guard or rushing to re-align their positions at the same time. Either way, it sets a baseline for what could develop if bullish conviction holds.

However, it’s not all open skies from here. One-day rallies of that size can often lead to stretched short-term technical indicators—we’re not just talking about Relative Strength Index (RSI) but a broader sense of positioning froth. That’s why the range between 146.50 and 148.60 has become more relevant now than it has been over the past few weeks. It sets outer limits for near-term movement while market participants decide what comes next. Current behavior suggests the pair wants to consolidate those gains rather than extend higher immediately.

Technical Indicators And Trading Strategy

In the medium-term view, though, the upward trend remains intact, and levels are being reset. We’ve observed that support has quietly risen from 143.90 to 146.00, which isn’t just a number; it’s a shift in where dollar-buying interest is willing to step in. On the other end, resistance near 149.30 has acted like a ceiling traders are hesitant to test right now, especially following an overbought impulse move.

What this tells us, tactically? Well, exaggerated moves like this usually require exhaling, which often translates into sideways action that stays within recently defined bands. For those operating in this space, that makes timing—for now—more important than direction. Volatility could drop, so pressing aggressive directional trades might leave you fighting the tape unless there’s a fresh catalyst, like a data release or a sudden shift in policy tone.

From our perspective, we will focus on building around areas where risk can be clearly defined and managed tightly—namely near those support and resistance thresholds. Getting caught in the middle of this range often results in low-reward setups with an uneven payoff profile. Patience here isn’t just a virtue. It’s part of the playbook.

Lastly, there’s plenty of commentary warning about risk—and rightly so. But rather than letting risk become an abstract concept, translate that into concrete adjustments. This isn’t the time to be over-leveraged or to chase expanded moves after the fact. Tighten the focus, reassess stops, and ensure trade structure is built with volatility normalization in mind. That’s how to stay exposed while limiting downside.

Create your live VT Markets account and start trading now.

Following the recent US-China agreement, Goldman Sachs has adjusted its forecast for a US recession over the next 12 months to 35%, down from 45%. This change also affects their prediction regarding the Federal Reserve, now anticipating just one rate cut this year instead of three.

Additionally, the firm has revised its year-end target for the S&P 500, raising it to 6,100 from an earlier estimate of 5,900.

Economic Momentum And Financial Conditions

The downward revision in recession probability to 35% reflects a growing confidence in the economic momentum, likely supported by firmer diplomatic ties and the easing of global tensions. These improved trade and policy signals appear to be fostering better financial conditions, which in turn shape expectations for monetary policy. That said, the reassessment of rate cuts — now expected to be just a single move by the Federal Reserve rather than three — points to somewhat stronger underlying demand, potentially sustaining inflationary pressures above the central bank’s comfort zone.

By lifting their year-end S&P 500 target to 6,100, the firm signals a stronger earnings outlook, underpinned by wider margins and corporate resilience. This should not be misread as unqualified optimism, though — it suggests a measured view that the broader index can rise on the back of stable macro assumptions and fewer rate-related headwinds. For us, that recalibration forces a rethink in the short-term cost of capital and forward equity multiples.

Now, in practical terms, shorter-dated options premiums may not unwind as quickly as one might expect. Forward volatility implies that risk pricing has not entirely aligned with these fresher projections. Short gamma positions, for example, could become more sensitive to even mild earnings surprises or shifts in Treasury yields. Maintaining delta neutrality will require more active adjustment, particularly near upcoming rate decisions and inflation prints.

Blanket bias toward rate-sensitive sectors needs a rethink. The reduction in anticipated cuts implies that credit spreads may tighten, but duration trades are not about to get a free pass. In fact, for those of us focused on skew and tail protection, this one-cut view expands the likelihood of policy staying restrictive longer — and those knock-on effects for growth markers like payrolls and core inflation are far from settled.

Risk Premia And Derivatives Pricing

We’ve also noticed that the steepening of the front end is not being priced in in a balanced way across instruments. That asymmetry opens up some tactical relative value which, if sized properly, can absorb the shocks from a stickier disinflation process. This isn’t the time to strip risks down to a simple bear or bull case — it’s about recognising where risk-premia has misaligned with fundamentals.

Derivatives pricing, particularly on the index level, suggests traders have not completely internalised the implications of just one rate cut. Some compression in implied volatility has occurred, but not to the degree that would suggest a stable rate environment. There’s still an embedded premium for policy error or geopolitical re-ignition, which markets are not ready to let go of.

So while the sentiment shift suggests a more constructive environment for risk assets, we are approaching this from a place of caution rather than euphoria. Risk positioning should be built around the revised forward curve. In these coming weeks, we’re focusing on convexity rather than direction, and that means being more selective — not just in which instruments are employed, but when positions are initiated.

Create your live VT Markets account and start trading now.

The New Zealand Dollar (NZD) faces potential downside risks against the US Dollar (USD), likely ranging between 0.5835 and 0.5900. The probability of NZD reaching the 0.5835 mark has risen, with the next level eyed at 0.5800.

In a 24-hour view, even after a sharp dip to 0.5847, the downward momentum is not markedly stronger. A further decline is expected to remain within the 0.5835/0.5900 range, with no clear break below 0.5835 anticipated.

Weekly Outlook for NZD

Over the course of one to three weeks, the bias leans downwards towards 0.5870, possibly reaching 0.5835, unless the resistance level at 0.5960 is breached. On Monday, NZD dropped to 0.5847, increasing the likelihood of it reaching 0.5835, with an eye on 0.5800. Overcoming 0.5940 would indicate stalling further decline.

This information is forward-looking, and involves inherent risks and uncertainties. It is for informational purposes only, not as a recommendation to buy or sell assets. Doing thorough research before making investment decisions is advised. The article contains potential inaccuracies and does not replace professional investment advice.

The New Zealand Dollar has clearly struggled to mount any sort of upward pressure lately. Its fall to 0.5847 indicates that directional appetite remains tilted downwards, albeit in a somewhat measured fashion — that is, not in an uncontained or aggressive manner. Even though the fall wasn’t violent, the levels now being approached are ones that haven’t held particularly well under past scrutiny. A move towards 0.5835 seems increasingly probable, with 0.5800 not far behind on many participants’ radars.

We are watching that 0.5900 ceiling rather closely. Should prices rotate back upwards and test this area but fail to gain traction, it would merely serve to reinforce the tentative downside structure now in place. On shorter time frames, this reaffirms a low-volatility drift lower with no real conviction to reverse course. Nobody’s calling for a cascading sell-off — but the lack of fresh buyers near resistance does diminish the odds that upward momentum would carry any substance without a change in conditions.

Longer Term Pressure for NZD

From a broader angle spanning over two to three weeks, the pressure leans south so long as 0.5960 holds. That line in the sand stands as the invalidation point for now. Should we see it breached with conviction, it would imply the prior sell pressure is likely exhausted, which might shift tactical exposure near-term. Until then, 0.5870 appears exposed, followed potentially by that deeper low towards 0.5835. Some might already be eyeing 0.5800 as a tail risk on a deeper channel extension.

We’ve seen tops near the 0.5940–0.5960 band cap progress before — this zone effectively filters out short bursts of upside, and unless that changes, it creates an attractive anchoring point above for establishing controlled risk. That being said, there’s no strong reason presently to be leaning into long entries unless 0.5960 gives way meaningfully and is held on follow-through pricing.

What’s key here is how participants position around pivot levels, particularly with demand proving lukewarm below 0.5900. Most reactions to recent downside attempts have been reactionary and shallow — scarcity of sustained buying interest further supports staying tactically cautious on the upside.

As it stands, being nimble and not overstaying short-term strategic views seems to be the more prudent approach. Movements within tight ranges still provide directional clues. For those active in this space, observing price behaviour as it approaches 0.5835 will likely be more telling than headline commentary. The way we see it, the path of least friction leans to the downside — but without momentum acceleration, one must manage expectations carefully and avoid assumptions that continuation will occur without confirmation.

Create your live VT Markets account and start trading now.

UBS projects improved growth prospects for China as the effects of tariffs diminish. Analysts now suggest that the peak of the trade war impact has passed.

UBS forecasts China’s economy to expand between 3.7% to 4.0% in 2025. This marks an increase from their earlier prediction of 3.4% made last month.

Impact Of Revised Growth Forecast

What this means is fairly straightforward. UBS has lifted its expectations for China’s output next year, pointing to clearer skies ahead now that the worst of the trade-related disruption appears to be behind us. It signals that businesses operating in and around export-led sectors may begin to regain some footing, especially as the drag previously exerted by tariffs loses momentum. The modest upward revision from 3.4% to a range of 3.7% to 4.0% suggests they are not expecting a spectacular recovery, but they are confident enough to adjust their previous outlook.

Zhang and his team likely based the revision on easing international tensions, along with an uptick in domestic policy response aimed at supporting producers and consumption. Their improved forecast implies that demand from abroad may be recovering in tandem with renewed confidence among Chinese manufacturers. In this context, we can infer that liquidity conditions could continue improving under relatively stable monetary settings.

For those of us observing shorter-term market flows, there’s something to be read between the lines. An improved growth trajectory often comes with firmer policy goals and quieter fiscal concerns, which tends to support steady yield expectations across sovereign notes. If someone is holding exposure to Chinese equity futures or interest rate swaps, the broader macro shift relayed here could justify either maintaining positions or beginning to rotate into more cyclical exposure—though this depends on the extent of pricing already reflected in those instruments.

Strategic Investment Considerations

Taking a cue from Gao’s revision, it would be reasonable to reassess duration profiles and implied vols across Asia-facing products, particularly where previous assumptions were built on a lower GDP path. The improved forecast does not suggest runaway momentum, but it does imply more oxygen for risk sentiment than anticipated even four weeks ago.

The team’s forecast arrives with a level of detail that points to more confidence in domestic resilience, perhaps more than overseas investors have been expecting. It also acknowledges that the pain from earlier protectionist measures was real but has largely now bled out of forward-looking data.

For positioning in the weeks ahead, we see the logic in leaning slightly towards trades that benefit from medium-term policy traction rather than short bursts of stimulus. Those still pricing in aggressive downside to growth may want to revisit those views, especially while volatility across regional FX and commodities remains comparatively subdued.

The upgrade itself might seem modest, but given the source and timing, it carries weight for those who trade on nuanced shifts in macro direction.

Create your live VT Markets account and start trading now.

In currency markets, the Japanese yen and Swiss franc experienced declines following a policy reassessment in Washington. The US implemented a 90-day truce, suggesting a pragmatic rather than ideological approach to imports.

The April core CPI data is expected to show a steady 0.3% month-on-month increase, indicating the Federal Reserve may not hasten to cut rates. Additionally, the Fed’s terminal rate for the easing cycle has shifted to 3.50% from 3.00%.

US Small Business Optimism Outlook

US small business NFIB optimism index is anticipated to fall further, but the market may not react strongly due to the recent US-China agreement. The dollar index (DXY) surpassed resistance at 100.80 and could move towards 102.60, though this is seen as a bear market correction.

This correction may not mark the beginning of a major dollar rally, with adjustments in US allocations and dollar hedge ratios likely. Potential asset re-allocation away from the US may be temporarily halted to assess the impact of current uncertainties on economic data.

We’ve seen a reaction in safe-haven currencies after signals from Washington hinted at a less combative stance on trade measures. The temporary easing of import policy pressures has trimmed recent strength in both the yen and the franc. Rather than a broad-based risk-on shift, this reflects repricing of hedging structures and a pullback in volatility-weighted inflows.

Now, markets are squarely looking at US inflation data, specifically the April core CPI, which is forecast to maintain its pace with a 0.3% month-on-month rise. What’s consistent here is the ongoing robustness of underlying consumer prices. That persistent strength, while subtle, makes the case against rapid monetary easing. It supports the narrative that rate cuts are unlikely to come early in the cycle. Rates traders will have to recalibrate their views around the revised terminal point for the Fed — it has quietly moved higher, now expected to stop nearer to 3.50%. That’s a full half-point above prior consensus, and can’t be dismissed as noise.

Dollar Index and Market Positioning

Elsewhere, forward-looking indicators like the NFIB small business sentiment index are drifting lower. But, interestingly, the overall FX positioning doesn’t seem to reflect alarm. That’s likely a reaction to the recent geopolitical thaw rather than an indication of confidence in domestic activity. Realignments that had been in progress — namely, a slow shift of capital out of dollar-denominated assets and away from US risk — now appear paused, if not reversed briefly.

Technically, the dollar index has cleared a familiar level at 100.80, and upward movement towards 102.60 is plausible. However, rather than marking a return to dollar-strength trends, this seems more like a short-covering move within a broader retracement. From our perspective, it’s a bounce consistent with temporary shifts in positioning, not a conviction-led move.

The move higher in DXY doesn’t mean the FX market is refocusing on US dominance. What’s more likely is that funding costs and hedge ratios are being managed with more caution. Asset managers seem to be hedging against data surprises rather than re-entering on the long side in size. If economic releases continue to underline resilience without tipping into overheating, holding volatility-steered positions may be preferred over bold directional bets.

Traders would benefit from monitoring the spacing between policy expectations and realised inflation — particularly through swap markets — as those gaps are where dislocations tend to form. In the coming sessions, reactions to Fed commentary and second-tier macro data might carry outsized influence, not because of the data’s standalone value, but because of their timing within this delicate repricing phase.

Create your live VT Markets account and start trading now.

Chinese President Xi Jinping asserted that tariff and trade wars yield no winners, stating that global peace, stability, and development depend on international cooperation. He noted that oppressive actions ultimately result in isolation.

China supports Latin America and the Caribbean in enhancing their participation in global multilateral institutions. Beijing is dedicated to mutual backing with Latin American countries on issues concerning their core interests and major priorities.

China’s Commitment to Regional Collaboration

China aims to extend its collaboration with the region in sectors such as infrastructure, agriculture, food security, energy, and mineral resources. Additionally, China plans to offer a 66 billion yuan credit line to support Latin American and Caribbean nations.

Xi Jinping delivered these remarks at the opening of the fourth ministerial meeting of the China-CELAC (Community of Latin American and Caribbean States) Forum in Beijing.

The core message here is unmistakable: China is repositioning itself as a steady economic and policy partner in regions traditionally influenced by Western nations. Xi’s direct choice of words – that trade wars end in failure for all involved – sends a pointed message not only about world affairs but also suggests a strategy founded on collusion rather than confrontation. The implications are factual, not rhetorical.

Global Economic Implications
We are now seeing a deliberate effort to deepen links with Latin America and the Caribbean, and beyond that, an expansion of China’s financial reach. A 66 billion yuan credit facility doesn’t simply appear or circulate without intent. It reflects a long-term strategy to weave these nations deeper into cross-border trade arrangements and financing structures that China can influence. Such monetary backing, particularly in vital infrastructure and resource-heavy industries, anchors relationships in more enduring ways than diplomacy alone.

Diplomatic signals aside, the substance lies in industry alignment. With clear focus on food production, minerals and energy collaboration, China is not just offering capital—it is laying the foundation for influence through supply chains and industrial dependency. For those of us studying market volatility or resource flow across borders, these moves are quantifiable and predictive.

Given these recent declarations, macroeconomic positioning may shift in areas linked directly to commodities, sovereign debt, and infrastructure materials—particularly those with footprints in both Latin America and Asian emerging markets. We’ve seen this type of regional entanglement lead to adjustments in futures pricing, especially where supply concerns intersect with foreign investment trends.

López Obrador’s endorsement of Chinese cooperation may not change policy overnight, but it streamlines bilateral sentiment, which is often a precursor to easing regulatory frameworks, lifting capital controls or accelerating port developments. When one considers the monetary injection alongside the rhetoric, it’s reasonable to expect wider trade flows, probable debt repricing, and a short-term bolstering of offshore project finance.

We should bear in mind that soft commitments are rarely made in Beijing without accompanying mechanisms. Prior rounds of financial engagement were tied to performance clauses or minimum purchase orders, particularly in state-linked infrastructure work. Should similar terms apply here, market participants need to assess not only the headline figures but also the contractual underpinnings.

In the weeks ahead, watch for valuation shifts in basket currencies and construction-related derivatives. Access to capital of this size can reroute regional credit dynamics, especially when project bidding periods coincide with announced bilateral support. That means we could see temporary dips in local yields even if CDS spreads remain mostly unaffected.

Furthermore, given Chinese state banks’ prior role in currency swaps, the yuan’s extension into Latin American settlements may create subtle disturbances in FX hedging frameworks. Unhedged exposures in commodity export portfolios may need revisiting, particularly where correlation functions are shifting due to altered trade expectations.

At present, the conversation is not solely about diplomacy—it’s about built-in levers spread across capital trends, industry focus, and rising dependency. Those voices suggesting otherwise are likely missing the underlying mechanisms.

Be ready. Structural signals like this require more than observation. They demand reaction.

Create your live VT Markets account and start trading now.