USD steady as markets cheer planned US/China trade talks this weekend - Scotiabank

The US Dollar (USD) is steady, attempting stabilization against most of the G10 currencies and clawing back some of its recent weakness against JPY, SEK, AUD, and NZD as we head into Wednesday's NA session. Broader markets are celebrating the announcement of Treasury Secretary Bessent's trade talks with China Vice Premier He Lifeng in Switzerland later this week, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD steady, stronger vs. JPY, SEK, AUD & JPY into Wednesday's Fed

"The talks are scheduled for Saturday and Sunday and are said to be aimed at de-escalation rather than a trade deal. Negotiations between the US and UK are also said to have intensified, as British officials have arrived in Washington for talks. President Trump had announced over the weekend the possibility of a trade deal being signed this week and the FT is confirming this possibility--specifically as it relates to the UK. The market tone is constructive and US equity futures are climbing back toward last week's post-Liberation Day (April 2) highs."

"The US 10Y yield continues to consolidate in a tight range just above 4.30% with the 2Y just above 3.80% as both await today's 2pm ET Fed policy decision and 2:30pm ET press conference. A hold is widely anticipated and there will be no fresh set of economic projections, putting the risk squarely on Chair Powell's press conference and the tone that he strikes as it relates to the outlook for growth and inflation within the context of trade tensions and the constructive developments that have taken place over the past month or so. Markets are still pricing several cuts into year-end and could be vulnerable to adjustment if Chair Powell leaned toward a brighter outlook."

"Looking beyond the rates market, oil prices appear to remain well supported as the tentatively extend their recent recovery from the weekend's OPEC-driven gap lower. Copper prices had initially cheered the US/China trade talk announcement but have since weakened considerably and appear to be delivering a bearish outside reversal from a local high. Finally, gold is moderately weaker following a spectacular two-day rally that delivered a fresh record closing high above $3400/oz. Wednesday's US data release calendar is dominated by the Fed. We'll receive third-tier consumer credit data for March at 3pm ET."