Trade Talks in London: Dollar Firms as Markets Anticipate Easing of US-China Tensions

The U.S. dollar strengthened on Tuesday as trade talks between Beijing and Washington resumed in London for a second day, sparking optimism among investors for potential relief in trade tensions. This development comes at a crucial juncture as both economies navigate the pressures from ongoing tariff disputes that have now extended to rare earths.

Meanwhile, sterling saw a decline following the release of UK's labor market data, which pointed to a weaker outlook and raised questions about the Bank of England's monetary policy stance. In contrast, market speculation suggests the BoE will keep rates unchanged in their upcoming meeting, with money market traders anticipating cuts by year's end.

The global market's attention is now directed towards the upcoming U.S. consumer price index report, expected to shed light on the tariff impact and potentially influence the Federal Reserve's policy decisions. Additionally, interest rate decisions by the Bank of Japan will be closely watched, as Governor Kazuo Ueda hints at a delay in rate hikes owing to export concerns from U.S. tariff actions.

(With inputs from agencies.)