Strong Dollar and Fed Expectations Pressure Markets

The US Dollar Index climbed to its highest level in two months, driven by strong domestic economic data and increasing market expectations for a Federal Reserve interest rate hike. This dollar strength was reflected across currency markets, with the Euro, Japanese Yen, Canadian Dollar, and British Pound all weakening against the greenback. The rising US Treasury yields also contributed to a risk-off sentiment in Asian equity markets and put downward pressure on silver prices, which saw continued selling.

Markets Monitor US-China Leadership Talks

Attention remained on the high-level meetings between US President Donald Trump and Chinese President Xi Jinping in Beijing, with President Trump expressing optimism for the bilateral relationship. Discussions reportedly included China agreeing to purchase US oil and a US push for greater market access, although sensitive topics like chip export controls were said to be off the table. Ahead of the talks, currency markets showed some caution, and the People’s Bank of China set the yuan's reference rate slightly weaker against the dollar.

Geopolitical Focus on Iran and Strait of Hormuz

Geopolitical tensions surrounding Iran were highlighted, with President Trump commenting that he would not remain patient on the issue indefinitely. US officials underscored the strategic importance of keeping the Strait of Hormuz open for maritime commerce, noting that it was particularly crucial for China. In this context, President Trump also suggested that Chinese President Xi Jinping could potentially have the influence to sway Iran.