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What’s happening: The US dollar recorded gains on Wednesday amid optimism around averting a trade war.
What happened: The Trump administration said it was considering reducing tariffs on goods imported from China.
Investor sentiment was also supported by US President Donald Trump stating that he has no intention of firing Federal Reserve Chairman Jerome Powell.
Why it matters: The US President signalled a shift in his tariff strategy for China, saying that the high tariff rates imposed may be significantly lowered if an agreement is reached.
Trump has announced 145% tariffs on goods imported from China and threatened to take the rate to a whopping 245%. In an unexpected change of stance, Trump said on Tuesday, “It won’t be anywhere near that high. It’ll come down substantially. But it won’t be zero.”
US Treasury Secretary Scott Bessent also indicated that there could be a substantial reduction in tariffs on China, which could ease trade tensions between the world’s two largest economies.
Investors gained confidence in the US dollar, which had recently hit a three-year low due to the Trump administration’s erratic moves and fears of high tariffs pushing the US economy into recession.
Investors had also been concerned about the Fed’s independence following verbal attacks by the US President on Powell for not lowering interest rates since January. Markets welcomed another change in Trump’s stance as he said, “I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates.”
Meanwhile, data released on Wednesday showed the S&P Global US manufacturing PMI climbed to 50.7 in April, from 50.2 in the previous month. The figure also topped market estimates of 49.1. Although US services PMI declined to 51.4 in April, from 54.4 in the previous month, services activity remained in the expansion zone.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.3% to 99.84 on Wednesday.
The USD/JPY forex pair jumped around 1.3% to 143.44. The EUR/USD lost more than 0.8% to reach 1.1315 on Wednesday, after hitting a 3.5-year high earlier this week.
What to watch: Investors await the release of economic data on Chicago Fed National Activity Index (1630 UAE Time), initial jobless claims (1630 UAE Time) and existing home sales (1800 UAE Time) from the US today. New orders for manufactured durable goods, which rose by 0.9% to $289.3 billion in February, are expected to grow by 2% in March. US initial jobless claims, which declined by 9,000 to 215,000 in the second week of April, are expected to rise to 221,000. Analysts expect existing home sales in the US to decline 3% in March, following a 4.2% rise in February.
Context: Equity markets in the UK closed higher on Wednesday amid easing US-China trade tensions.
Details: Global investors grew optimistic about a de-escalation in the US-China trade war, following recent comments by President Donald Trump indicating plans to cut tariffs on Chinese goods.
Investor sentiment was also supported by the latest earnings reports. Shares of Croda International jumped around 8% on Wednesday after the chemicals company reported strong sales for the first quarter.
Data released on Wednesday showed the S&P Global flash UK manufacturing PMI declined to 44 in April, from 44.9 in the previous month. The figure was in-line with market estimates. The UK services PMI also dipped to 48.9 in April, from March’s reading of 52.5.
Public sector borrowing, excluding public sector banks, rose to £16.4 billion in March, from £13.6 billion in the year-ago period.
London’s FTSE 100 index gained 0.90% to close at 8,403.18 on Wednesday, while the domestically focused FTSE 250 jumped 1.27% to settle at 19,483.05.
The GBP/USD forex pair added around 0.2% to reach 1.3279 this morning.
What to watch: Investors await the release of economic data on UK’s CBI business optimism index (1400 UAE Time) and CBI industrial trends orders (1400 UAE Time) today. Sentiment in the UK manufacturing sector, which fell significantly to -47 in January, is expected to improve to -40 in February.
Analysts expect the Confederation of British Industry’s monthly net balance of new orders to decline to -35 in April, from a reading of -29 in the previous month.
Other Markets: US trading indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.07%, 1.67% and 2.28%, respectively.
Russia declared a state of emergency in the Vladimir region, following an explosion at an ammunition storage site. The news sent the RUB/USD pair lower in forex trading this morning.
India’s economic growth outlook for FY25 was cut by the World Bank to 6.3%, from the earlier projection of 6.7%, exerting pressure on the INR/USD forex pair.
South Korea’s economy shrank by 0.2% in the first quarter, versus market estimates of 0.1% growth, sending the KRW/USD pair lower in forex trading this morning.
New Zealand’s ANZ-Roy Morgan consumer confidence index added 5 points to reach a reading of 98.3 in April. The region’s consumer sentiment surging to the highest level since December 2024 lent support to the NZD/USD forex pair.
Colombia’s trade deficit widened to $1.546 billion in February, from $1.01 billion in the year-ago period, which sent the COP/USD pair lower in forex trading this morning.
Germany’s Ifo business climate (1200 UAE Time), Ifo current conditions (1200 UAE Time) and Ifo expectations (1200 UAE Time), South Africa’s PPI (1330 UAE Time), Brazil’s FGV consumer confidence (1500 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Mexico’s mid-month inflation rate (1600 UAE Time), Canada’s average weekly earnings (1630 UAE Time), as well as US durable goods orders (1630 UAE Time), continuing jobless claims (1630 UAE Time), EIA natural gas stocks change (1830 UAE Time), Kansas Fed composite index (1900 UAE Time) and Kansas Fed manufacturing index (1900 UAE Time).
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