US Dollar Index (DXY) remains depressed below 97.00 on trade talks, US debt woes

• The Dollar trims previous losses but remains close to three-year lows..

• Hopes of trade deals between the US and partners are weighing on the safe-haven USD.

• Concerns of a debt crisis in the US are back on the table as Trump's Tax bill advances in the US Senate.

The US Dollar has bounced up from three-year lows on Monday, but remains depressed below the 97.00 level. Optimism about the latest advances on trade deals is weighing on the safe-haven USD with concerns about the impact of Trump’s sweeping tax bill return.

Investors opened the week in a risk-on mood, although optimism faded somewhat during the European session, after the US and China announced an agreement on rare earths trade that would complete the agreement announced two weeks ago.

Late Sunday, Canada´s Prime Minister. Mark Carney confirmed that the tariff talks with the US will resume this week after the country agreed to withdraw the digital tak that prompted the US side to end the conversations.

This news, coupled with rumours that negotiations with other trade partners, like the EU or Japan, are going on behind the scenes, is feeding hopes that some normalisation in global trade is possible, which is supporting riskier-perceived assets to the detriment of the safe-haven US Dollar.

In the US, Trump’s “big, beautiful bill”, that is expected to slash taxes and add between 3 and 4 trillion to the US debt pile, is making progress through the Senate. Concerns about a debt crisis in the US have returned to the forefront and are likely to act as a headwind to US Dollar’s recovery in the near term.