Dollar Holds Steady as U.S.-China Trade Talks Continue, CPI Data in Focus

The U.S. dollar remained stable in early Tuesday trading as markets treaded cautiously amid ongoing U.S.-China trade negotiations and anticipation of key inflation data. Traders were hesitant to make bold moves, awaiting the May U.S. consumer price index (CPI) report due Wednesday, a critical indicator ahead of the Federal Reserve’s June policy meeting.

High-level trade talks between Washington and Beijing extended into a second day in London, covering contentious issues beyond tariffs, including rare earths, semiconductor export controls, and student visa restrictions. The talks follow last week's phone call between Presidents Biden and Xi, but lack of concrete outcomes has kept currency markets in a tight range.

The dollar was flat against the yen at 144.57, while the euro traded at $1.1425. The British pound edged up 0.1% to $1.3563. The Australian dollar held steady at $0.652, and the New Zealand dollar remained near a seven-month high at $0.6058.

“The extension of talks and optimistic signals from some U.S. officials may offer short-term relief, but markets want structural progress,” said Charu Chanana, chief strategist at Saxo. She noted the London talks face more complex issues compared to previous discussions in Geneva, reducing the chances of quick resolutions.

The U.S. dollar index hovered at 98.986, close to a six-week low, and is down 8.7% year-to-date due to investor concerns over tariffs’ long-term impact on U.S. growth.

With the Fed expected to hold interest rates steady next week, signs of inflation resilience could solidify that stance. However, markets are still pricing in up to two 25-basis-point rate cuts by year-end.