With a quiet day on in market fundamentals, the US dollar has retraced its gains late yesterday after recently hitting some multi-month highs. The U.S dollar index which measures the greenback's strength against a trade-weighted basket of currencies rose to a fresh five-month high of 93.94 before hitting resistance and paring back most of its gains.
Investors have been sitting on the sidelines eagerly awaiting developments between the US and China. US Treasury Secretary Steven Mnuchin said that the two countries have set up a framework for addressing future trade imbalances, and have also agreed to suspend the tariff threats that led to high volatility on global markets earlier this spring. China has said to agree to buy more US goods to help narrow the trade deficit the two countries have but didn’t agree to the specific target of $200 billion.
The dollars bull-run has slowed over the past 24 hours as traders take stock with possibly one eye on Wednesday night's FOMC Meeting Minutes from May 2nd's get-together. As 10 year Treasury yields continue to rise in line with expectations of four 2018 hikes from the Fed the dollar has rallied over recent weeks and we may get extra momentum should the minutes from the meeting show both September and December are seen as live meetings. Current expectations are for three hikes this year with one in June fully priced in, however, chances of four this year are rising towards 50/50. EUR/USD has just retaken 1.18 and USD/JPY is around 111 ahead of a relatively quiet day data-wise. Its likely Trump, North Korea, and trade will be the main influence over the greenback today.