USD: Waiting on Bessent's update – ING

US President Donald Trump described this weekend's US-China meetings in Switzerland as 'very good' and said a 'total reset' is being negotiated. Treasury Secretary Scott Bessent led the negotiations and said 'substantial progress' has been made, and will share details today. Asset markets are again leaning on the optimistic side, and we think the baseline expectation is for an initial reduction in tariffs on China to 60%. Investors will weigh the new level of duties against the breadth of exemptions that are being discussed, ING's FX analyst Chris Turner notes.

Trump hails 'Very Good' US-China trade talks in Switzerland

"We have argued in recent weeks that the dollar likely requires a constant flow of positive news on trade de-escalation to keep recovering. The Trump administration has so far provided it, and while the dollar’s recovery hasn’t been nearly as spectacular as in equities, there is a strong sense that Trump’s pragmatic shift on trade has trimmed the tail risks for the greenback. The dollar’s solid momentum may be tested today as Bessent might fail to sell the progress in China negotiations to markets, and this week’s economic calendar presents a few more obstacles for further USD gains."

"The key one is inflation, released tomorrow. This April CPI print may start showing some signs of price hikes, but our economist notes this is likely too early for the tariff effect to show, given the lag between implementation, shipping the product, and arriving in a warehouse before appearing in stores and online. We expect core CPI at 0.3% month-on-month, in line with consensus. A similar figure should show for April’s core PPI later this week, ultimately pointing to some lingering pressure on the Federal Reserve's preferred core PCE measure, but unlikely enough to trigger alarm bells for the central bank."

"The dollar should continue to be pulled by these conflicting forces, and risks are starting to look finely balanced in both directions, looking a few weeks ahead. At the start of this week, scrutiny on the actual progress in US-China negotiations may lead to a softening of dollar momentum, but some decent support may start to form around 100.0 in DXY."