Dollar Rallies Amid U.S.-China Trade Tariff Truce

The dollar made significant gains on Monday as a temporary truce between the United States and China was reached, leading to a reduction in reciprocal tariffs that had been unsettling global markets. The U.S. agreed to reduce tariffs on Chinese imports to 30% from 145%, while China lowered its tariffs on U.S. goods from 125% to 10%. This de-escalation, effective for 90 days, exceeded investor expectations, who anticipated a mere introductory round of negotiations without substantial agreements.

'It's 90 days and so this basically buys some more time, I sort of think the U.S. blinked,' stated Marc Chandler, chief market strategist at Bannockburn Global Forex. Despite his criticism of the initial tariffs, Chandler pointed out that the U.S.' retreat from its aggressive stance didn't yield tangible results, leaving the situation largely unchanged despite the temporary resolution.

This arrangement boosted the dollar's value against a basket of major currencies. The dollar index rose by 1.5%, and its performance positively impacted the stock market, with the S&P 500 climbing over 3%. Analysts now predict that the Federal Reserve will delay interest rate cuts, awaiting further economic data as the markets show a renewed sense of optimism amidst easing geopolitical tensions.

(With inputs from agencies.)