Inflation Impact Spreads as Treasury Yields, Gold, Silver and Stocks Face Volatility
Trump-Xi Meeting Brings Warm Words but Few Confirmed Deals
The meeting between President Trump and President Xi boosted the short term sentiment in the market. President Trump left Beijing after two day summit and described the talks as highly successful. Chinese President Xi Jinping also marked these talks as successful and called the visit historic.
This positive message supported markets as investors want stability between two largest economies. A cooling in relationship between the US and China may reduce the risk of tariffs, support trade flows and improve confidence across global markets.
But the meeting produced more symbolism than confirmed results. Trump said China had agreed to buy 200 Boeing jets with a possible commitment for 750 more planes. He also said China would buy billions of dollars of U.S. soybeans. But China did not confirm these purchases.
This lack of confirmation is important for global markets. This suggests that the summit remains sentiment boost rather than hard economic catalyst.
The tariff issue is also not clear. Trump said tariffs were not discussed while the White House said both leaders agreed to create a “Board of Trade” to manage the relationship.
The presence of Nvidia CEO Jensen Huang and Tesla CEO Elon Musk suggests that the AI chips, electric vehicles and advanced manufacturing remain central to the relationship between US and China.
Impact on the U.S. Dollar and Treasury Yields
U.S. Dollar Index – Higher Inflation Supports DXY
The strong inflation data support the US dollar. A huge increase in the CPI and PPI makes the chances of the Federal Reserve cutting rates lower. This also indicates that the Fed may keep the interest rates higher for longer.
The high interest rates also help to maintain the strong dollar since they attract capital flow from around the world. As a result, it is likely that the Fed will keep the interest rates higher in 2026, which will help to maintain a strong US dollar.
The daily chart of the U.S. Dollar Index shows that it is trading within the range of 96.50 and 100.50 after the U.S.-Iran war. However, the consolidation above 97.80 has formed a double bottom pattern.
If the index breaks above 99.30 on Monday, it will likely move towards 100.50. A break above 100.50 will trigger strong move towards 102.
On the other hand, a break below 97.80 will likely take the index towards 96.50, which is the key level for the downside movement towards 90. The RSI has moved above the midline, which indicates further upside in the short term.
