Dollar Gains Weekly Edge Amid Trade Talks and Waning Fed Rate Cut Bets

The U.S. dollar is poised for a weekly gain against major currencies as optimism over a limited U.S.-UK trade agreement and potential progress in upcoming U.S.-China trade negotiations lifted sentiment. Expectations for near-term Federal Reserve rate cuts also diminished after Chair Jerome Powell signaled no urgency for monetary easing.

The euro was steady on Friday morning in Asia but fell 0.6% for the week to $1.1217. The Japanese yen dropped 0.7%, briefly touching a one-month low of 146.18 per dollar. Sterling initially rose on reports of a U.S.-UK trade deal but later slipped to a three-week low of $1.3220 after the deal's modest terms were revealed. The agreement slightly boosts agricultural trade and eases U.S. auto tariffs on British cars but retains a 10% baseline tariff.

Analysts say the dollar’s strength reflects market optimism over reduced trade tensions. Steve Englander of Standard Chartered noted that prospects of a broader trade détente—especially with China—may be calming market fears. President Trump announced the UK deal and hinted at possible tariff reductions on China, with negotiations set to begin in Switzerland this weekend. Reports suggest the U.S. may halve tariffs on Chinese imports, though the White House called the claims speculative.

Risk sentiment improved, as seen in Bitcoin’s rally above $100,000. Meanwhile, the Australian and New Zealand dollars weakened, falling 0.7% and trading at $0.6391 and $0.5892 respectively. Central banks mostly held rates steady, though the Bank of England implemented a cut. Market odds of a Fed rate cut in June dropped from 55% to 17% following Powell’s remarks.

Despite the greenback's G10 strength, it slipped against some Asian currencies, including the Taiwan and Singapore dollars, amid regional currency surges and central bank interventions.