The U.S. dollar saw a slight rise during Tuesday’s trading session, continuing its recovery from last week’s losses driven by pressures on the banking sector. The recent improvement was supported by a gradual return of market confidence, improved investor sentiment, and easing concerns over the stability of U.S. banks.
Optimism surrounding the upcoming trade talks between the United States and China played a key role in supporting the dollar, as investors believe the anticipated meeting between Presidents Donald Trump and Xi Jinping could pave the way for easing trade tensions and reviving global economic momentum. Additionally, the weakness of the Japanese yen contributed to the dollar’s gains against a basket of major currencies.
In the short term, the dollar’s performance is expected to remain influenced by confidence in the U.S. banking system, developments in trade relations with China, and upcoming economic data. Moreover, the potential end of the U.S. government shutdown, as mentioned by economic advisor Kevin Hassett, could provide additional support for the currency’s stability in the coming weeks.
This week, attention turns to the Consumer Price Index (CPI) data for September, scheduled for release on Friday, with forecasts pointing to a 0.3% increase in the core reading. These figures are likely to be a key factor in strengthening expectations of a 25 basis point rate cut by the Federal Reserve at its next meeting, which may directly impact short-term dollar movements.
Despite the relative rebound in Wall Street, concerns persist over questionable loan exposures at Zions Bank and Western Alliance, which continue to unsettle investors. Although analysts at ING believe these issues may be contained, market confidence has yet to fully recover, as doubts linger over the overall credit quality within the U.S. banking system.
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