• The greenback stabilized on Monday after Friday’s payroll-driven rally, with attention turning to pivotal trade discussions between Washington and Beijing.
• Senior officials from both sides are expected to meet in London amid growing concerns over global trade headwinds and domestic economic slowdowns.
• Market expectations are tempered, with analysts noting that without a meaningful resolution, optimism could fade quickly.
• Recent strength in the dollar followed encouraging labor market data, but the overall trend for 2025 remains negative, with the DXY down over 8%.
• Yen and euro moved little, while the Aussie and Kiwi dollars edged up in thin trading due to regional holidays.
• An upcoming US inflation release is in focus this week, as traders seek clarity on how Trump’s import tariffs are influencing prices.
• With the Fed in its pre-meeting quiet period, markets now expect the central bank to hold rates steady for a while longer, possibly cutting in Q4 if inflation eases.
• Some Fed officials remain cautious on inflation risks, especially from import costs, while others suggest any tariff impact may be short-lived.

What’s Next?
• This week could be a turning point. If U.S.-China negotiations disappoint and inflation holds firm, the dollar might face renewed pressure. Investors should watch not just headlines, but how the Fed interprets trade-driven inflation over the coming months.