The US dollar rose but markets remained cautious on Monday ahead of a deadline for a tariff deal between Washington and Beijing and key inflation data expected to influence the Federal Reserve's (Fed) monetary policy decision. The dollar index rose 0.32% to 98.31 after a 0.4% decline last week, while the euro and yen traded in a narrow range. Markets are focused on the July core Consumer Price Index (CPI) report, which is expected to rise 0.3% month-on-month, pushing the annual rate to 3%.
Money market traders are now pricing in a 90% chance of a September interest rate cut, with two more quarter-point cuts projected by the end of the year. However, concerns that President Donald Trump's tariffs will push up inflation could deter the Fed from acting aggressively. Trump, who is preparing a new line-up of rate-setting officials in line with his dovish outlook, is also focusing on trade talks with China ahead of an August 12 deadline, particularly in the semiconductor sector.
Sources said Nvidia and AMD have agreed to allocate 15% of sales in China to the US government as part of efforts to secure chip export licenses. The move is seen as raising the possibility of another 90-day tariff truce. The yuan was trading at 7.1913 against the US dollar after weekend data showed Chinese producer prices fell more than expected, while consumer prices remained unchanged.
Elsewhere, the Australian dollar fell 0.2% to $0.6514 ahead of a Reserve Bank of Australia meeting, which is expected to cut interest rates by 25 basis points to 3.60% on weak inflation and a 3½-year high for unemployment. Crypto markets surged, with Bitcoin nearing an all-time high of $123,153 after Trump's executive order allowed crypto holdings in US retirement accounts, while Ether hit its highest level since December 2021.
