USD/CNH holds steady around 7.1800 as US-China negotiations enter second day

• USD/CNH moves little ahead of the US-China trade talks entering the second day.
• US-China discussions are scheduled to resume on Tuesday, after five hours of negotiations were held in Stockholm on Monday.
• Traders expect the Fed to keep the benchmark interest rate unchanged in July.

USD/CNH inches lower after registering gains in the previous three sessions, trading around 7.1790 during the Asian hours on Tuesday. The offshore Chinese Yuan (CNH) holds ground against the US Dollar (USD) ahead of the United States (US)-China negotiations entering the second day.

On Monday, US Treasury Chief Scott Bessent met with China's Vice Premier He Lifeng at Sweden's Rosenbad government offices. The meeting aims to extend a fragile trade truce by three months ahead of an August 12 deadline.

China's 10-year government bond yield declines slightly to near 1.73% on Tuesday as traders cautiously monitor ongoing US-China trade talks. A positive outcome could pave the way for a meeting between US President Donald Trump and Chinese President Xi Jinping later this year, potentially easing tensions in critical sectors like semiconductors and rare earths.

The USD/CNH pair gains ground as the US Dollar (USD) receives support from trade optimism, driven by the United States (US)-European Union (EU) trade agreement finalized on Sunday, setting 15% tariffs on most European goods, taking effect on August 1.

Traders keep their eyes on the US Federal Reserve's (Fed) interest rate decision due on Wednesday. The US central bank is widely expected to keep the benchmark interest rate steady between 4.25% and 4.50% on Wednesday. The FOMC press conference will be observed for any signs that rate cuts may start in September.

Market participants are also awaiting key economic data this week, including the Q2 Personal Consumption Expenditures (PCE) inflation report and July's Nonfarm Payrolls, for further insight into the health of the US economy.