The Dollar edged higher against its European counterparts on Wednesday, particularly versus the Pound, supported by indications that the US and China are moving toward a trade war truce, as investors also awaited the Federal Reserve’s meeting later in the day.
Speaking in South Korea ahead of his Thursday meeting with Chinese President Xi Jinping, US President Donald Trump expressed optimism about reaching a “great deal” for both nations.
Trump indicated that he plans to lower US tariffs on Chinese goods in return for China’s pledge to restrict exports of chemicals used to produce fentanyl.
The Dollar’s recent strength could provide some relief amid the uncertainty caused by Trump’s tariff policies, Reuters reports.
The greenback has been under significant selling pressure for an extended period, so market forces may eventually drive a rebound.
The Euro fell 0.2% to $1.1628, poised to end a five-day winning streak, while the Dollar climbed 0.4% against the Swiss Franc to 0.7969, moving further away from last month’s multi-year lows.
In addition, investors are also focused on the US Federal Reserve’s meeting later in the day, where a rate cut is widely anticipated. Policymakers are navigating an economy with limited data, which has nonetheless heightened concerns about a slowing labour market.
Market expectations suggest another rate cut in December, followed by two more by next July, making investors keen to see whether Fed Chair Jerome Powell’s press conference will alter that outlook amid limited economic data.
Meanwhile, both the European Central Bank and the Bank of Japan are widely expected to keep interest rates unchanged on Thursday
The Yen edged slightly lower to 152.31 per Dollar but briefly strengthened after US Treasury Secretary Scott Bessent said on X that Japan’s “willingness to allow the Bank of Japan policy space will be key to anchoring inflation expectations and avoiding excess exchange rate volatility.”
Bessent, who accompanied Trump to Japan for discussions with Prime Minister Sanae Takaichi’s newly formed government, has frequently criticised the Bank of Japan for its gradual approach to raising interest rates.