Dollar Slips as Trade Talks Loom Large

The dollar weakened against major currencies on Monday, influenced by optimism turning cautious ahead of crucial U.S.-China trade discussions set for London. These talks are pivotal for both nations, with China dealing with deflation and trade uncertainties impacting U.S. market sentiment, challenging the dollar's traditional safe-haven status.

U.S. representatives including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer will engage with China's Vice Premier He Lifeng. 'The trade talks' outcome will be vital for overall sentiment,' remarked Kit Juckes, chief FX strategist at Societe Generale.

Expectations of these talks have already affected market behavior, with notable currency movements evident. Investors continue to digest economic data, like Japan's slower-than-expected economic contraction and the European Central Bank's recent policy outlook, adjusting market positions based on these developments.

(With inputs from agencies.)