USD soft, fading portion of post-Fed gains into US/China trade talks – Scotiabank

G10 FX performance is varied heading into Friday’s NA session as most currencies claw back a portion of this week’s post-Fed losses against the US Dollar (USD). JPY, SEK, and NOK are outperforming, with GBP, EUR, and MXN eking out modest gains as the CAD trades flat while the AUD and CHF show modest losses. NZD is the sole underperformer, down 0.3% vs. the USD. The focus remains on trade, as market participants look to this weekend’s US/China trade talks and the scheduled meeting between US Treasury Secretary Bessent and China Vice Premier He Lifeng, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD mixed vs. G10 as markets eye US/ China trade talks this weekend

"Initial reports are hinting to the possibility of a tariff reduction, below 60%, as a first step. Overnight releases included China’s trade figures for March, revealing a larger than expected trade balance (USD terms) driven by much stronger than expected export growth. The broader market’s tone is tentative into the end of the week as US equity futures consolidate just below their recent highs, at levels roughly corresponding to those observed in early April when US tariffs were initially announced."

"Global equity indices are buoyant with broad gains across Asian and European indices, and market participants are cheering a fresh record high in the German DAX as it clears its prior high from March. US Treasury yields have climbed somewhat from their prior congestion levels with the 10Y pushing toward 4.40% and the 2Y reaching its 50 day MA (~3.87%) for the first time since February. Oil prices are providing further confirmation to the market’s more constructive tone with WTI extending its recovery from this week’s OPEC-driven decline and pushing back above $60/bbl."

"Meanwhile, copper is steady and attempting to stabilize at the lower end of its three week range while gold also looks to be consolidating this week’s post-Fed pullback. Friday’s US data calendar is empty, leaving the focus squarely centered on Fedspeak as well as any headline risk out of the US administration. Friday’s Fed speakers include BoG member Barr (voting), whose hawkish comments have already hit the newswires, as well as Kugler (BoG/voting), Williams (NY/voting), Barkin (Richmond/non-voting), and Goolsbee (Chicago/voting)."