Image: Official U.S. Government image.
Pound to dollar @ 1.3437, up 0.26%
Euro to dollar @ 1.1625, up 0.15%
The dollar fell against the euro, pound sterling and other major currencies.
This after U.S. Treasury Secretary Scott Bessent injected a dose of optimism into financial markets after confirming a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping was "a go".
The meeting is expected to see the two sides agree a trade settlement that potentially unlocks global growth and a stock market rally into year-end, creating a market backdrop that would naturally weigh on the dollar.
Bessent gave a press conference in Washington overnight in which he confirmed the meeting between Xi and Trump was still scheduled for the APEC meeting to be held in South Korea at the end of the month.
Bessent was confident he would lay the groundwork for the deal on the "very good chance" he travels to Asia and meets with his Chinese counterpart, Vice Premier He Lifeng.
"Is it possible that we could go to a longer roll in return? Perhaps. But all that’s going to be negotiated in the coming weeks," said Bessent, referencing the rollover of the tariff deadline, currently set for November 01.
Unless a new accord is reached, the U.S. will impose an additional 100% tariff on Chinese imports.
The move is in retaliation for new rules announced by China that will require all overseas firms to obtain Chinese government approval before exporting any products containing even trace amounts of certain rare earths that originated in China.
Above: GBP/USD rises up to important resistance at the 21-day moving average.
This is an unusual restriction from China in that it is not aimed solely at the U.S. and is global in nature and is why the dollar rose in response to the escalation (whereas it falls when the escalation is exclusively between the U.S. and China).
"The scope and the scale is just unimaginable, and it cannot be implemented," said U.S. trade representative Jamieson Greer.
A meeting of the finance ministers of the world's biggest economies is underway in Washington today, and it is believed they will present a united pushback against these new rules imposed by China.
This confirms tensions and negative headlines will be a major risk over the coming two weeks, which should limit market enthusiasm and underpin the dollar.
Given this, GBP/USD upside might prove limited.
Initially, we are watching the exchange rate's rally to the 21-day exponential moving average at 1.3428. A break, and subsequent consecutive daily holds above this level would open the door to a move to 1.3550.