Dollar on Back Foot as Markets Cheer Prospects of US–China Tariff Truce – Action Forex

Optimism dominated Asian markets on Monday, with Japan’s Nikkei 225 surging to a fresh record high above the 50,000 mark. The risk-on tone carried through to U.S. futures, which pointed to another higher open as Wall Street looks set to continue its record-breaking run. In contrast, European markets lagged behind, trading mostly flat as regional investors adopted a more cautious stance.

The upbeat sentiment in Asia and the US was driven by renewed confidence that the U.S.–China trade conflict will avoid a fresh escalation. Reports suggested that the threatened 100% tariffs on Chinese goods, previously due to take effect on November 1, are now effectively off the table. This follows a weekend of constructive talks between top U.S. and Chinese trade officials that laid the groundwork for a broader framework agreement.

Investors are now looking ahead to Thursday’s highly anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the APEC summit. The two leaders are expected to endorse the new framework, which reportedly includes a delay to China’s rare-earth export restrictions and the resumption of Chinese soybean purchases from the U.S. While the fate of the TikTok dispute remains uncertain, markets appear reassured that both sides are prioritizing de-escalation.

The tone from the weekend meetings was viewed as better than expected, reinforcing hopes that the trade truce will hold into next year. For now, traders are taking the view that a formal agreement between Trump and Xi would further cement global risk appetite and underpin equities, commodities, and pro-growth currencies.

In currency markets, Aussie remains the day’s top performer, followed by Kiwi and then Sterling. The Dollar is the weakest, trailed by Swiss franc and Yen, while Euro and Loonie sit mid-pack.

In Europe, at the time of writing, FTSE is up 0.12%. DAX is down -0.01%. CAC is down -0.12%. UK 10-year yield is down -0.01 at 4.425. Germany 10-year yield is up 0.007 at 2.635. Earlier in Asia, Nikkei rose 2.46%. Hong Kong HSI rose 1.05%. China Shanghai SSE rose 1.18%. Singapore Strait Times rose 0.41%. Japan 10-year JGB yield rose 0.015 to 1.674.

German Ifo rises to 88.4 as business expectations improve

Germany’s Ifo Business Climate Index rose to 88.4 in October from 87.7, topping expectations of 87.8. The uptick was driven mainly by stronger optimism about the outlook, even as assessments of current conditions softened. Expectations Index climbed to 91.6 from 89.8, while Current Assessment slipped to 85.3 from 85.7, highlighting that the recovery remains more hopeful than tangible.

By sector, the data painted a mixed but improving picture. Manufacturing sentiment strengthened from –13.2 to –11.7, with Ifo noting that “expectations in particular brightened” and the decline in new orders has “come to a halt.” The service sector saw a sharp rebound, rising from –3.0 to –0.1, as providers turned less skeptical about the coming months. Trade confidence also improved from –23.9 to –21.5, while construction slipped slightly from –14.8 to –15.0.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1603; (P) 1.1626; (R1) 1.1650; More…

EUR/USD recovers mildly today but remains bounded in range of 1.1540/1727. Intraday bias stays neutral and further decline is in favor. On the downside, below 1.1540 will resume the fall from 1.1917 and target 1.1390 support, or even further to 38.2% retracement of 1.0176 to 1.1917 at 1.1252. On the upside, though, break of 1.1727 resistance will turn bias back to the upside for 1.1778, and then retest of 1.1917 high instead.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top is likely in place at 1.1917, just ahead of 1.2 key psychological level. As long as 55 W EMA (now at 1.1301) holds, the up trend from 0.9534 (2022 low) is still expected to continue. Decisive break of 1.2000 will carry larger bullish implications. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep outlook bearish.