The greenback is cashing in on reduced bets that the Fed will aggressively cut rates in the coming months
The dollar is crushing it on the new week after Trump and Xi reached a trade truce over the weekend, helping to give markets some sense of optimism and relief after talks broke down back in May.
That is putting some doubts over how aggressive the Fed will cut rates and July will increasingly be seen as an "insurance cut" more than anything else unless future trade headlines start to turn for the worse again.
With markets in a more risk-on mood, the yen and swissie are the biggest losers as equities jump while Treasury yields are also marked higher to start the new week. 10-year yields are up by 3 bps to 2.035% currently.
I would expect the positive mood to carry on throughout the morning and into US trading but give it some time before markets start to realise that we're not on the cusp of a trade deal just yet and that'll temper with the optimism to start the week.
