The US dollar fell in European trade on Friday against a basket of major rivals away from four-week highs scaled earlier in the Asian session, amid active profit-taking, while traders shun new positions before US-China trade talks. 

Despite the decline, the dollar is still heading for the third weekly profit in a row after the announcement of a US-UK trade deal, and after a more bullish than expected Federal Reserve meeting, which hurt the odds of a Fed rate cut soon.

The Index

The dollar index fell 0.3% today to 100.32, with a session-high at 100.86.

On Thursday, the index rose 0.75%, the second profit in a row, after the US-UK trade deal.

Weekly Trades

The index is up 0.5% so far this week, on track for the third weekly profit in a row.

US-China Trade Talks

US Treasury Secretary Scott Bessent is scheduled to meet Chinese trade officials on Sunday in Switzerland to conduct negotiations.

The US administration might reduce tariffs on Chinese imports by over a half according to the New York Post’s sources.

Trade Developments 

The US and the UK announced a new trade agreement, the first of its kind with the new US administration.

According to the deal, the 10% base reciprocal tariffs on UK goods will continue, but 25% tariffs on British cars will be reduced to 10%, while 25% tariffs on UK steel and aluminum will be scrapped

The UK will reduce tariffs on a range of US goods from 51% to 1.8%, while raising beef and ethanol imports from the US by $5 billion a year.

The Fed

In a step that wasn’t surprising, the Fed decided to maintain interest  rates unchanged at below 4.5%, due to ongoing economic uncertainty.

The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.

The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.

Trump described Powell as a “fool” and insisted that energy and oil prices alongside most other products have fallen with inflation barely there, and once again demanded a rate cut.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in June fell from 32% to 20%.

The odds of such a cut in July fell as well from 71% to 66%.

Now investors await important remarks by Fed officials on inflation and the future of interest rates.

Gold prices fell on Friday in European trade on track for the third loss in a row, and under pressure from the stronger dollar against a basket of major rivals, while haven demand slows down following a US-UK trade deal.

Now markets are focusing on the US-China trade talks expected this weekend in Switzerland and could potentially lead to de-escalation in the trade war.

The Price

Gold prices fell 0.95% today to $3274 an ounce, with a session-high at $3323.

On Thursday, gold lost 1.75%, the second loss in a row on profit-taking away from a two-week high at $3435.

US Dollar

The dollar index rose 0.2% on Friday, expanding gains for the third straight session and scaling a four-week high at 100.86 against a basket of major rivals.

A stronger dollar makes the greenback-denominated gold futures less attractive to holders of other currencies.

The dollar’s gains come as concerns about a US recession diminished following positive developments in trade negotiations.

Trade Developments 

The US and the UK announced a new trade agreement, the first of its kind with the new US administration.

According to the deal, the 10% base reciprocal tariffs on UK goods will continue, but 25% tariffs on British cars will be reduced to 10%, while 25% tariffs on UK steel and aluminum will be scrapped.

The UK will reduce tariffs on a range of US goods from 51% to 1.8%, while raising beef and ethanol imports from the US by $5 billion a year.

Following the announcement of the deal with the UK, Trump said he expects negotiations with China by the end of this week, which could lead to a reduction in the 145% China tariffs.

US Treasury Secretary Scott Bessent is scheduled to meet Chinese trade officials on Sunday in Switzerland to conduct negotiations.

The US administration might reduce tariffs on Chinese imports by over a half according to the New York Post’s sources.

The Fed

In a step that wasn’t surprising, the Fed decided to maintain interest  rates unchanged at below 4.5%, due to ongoing economic uncertainty.

The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.

The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.

Trump described Powell as a “fool” and insisted that energy and oil prices alongside most other products have fallen with inflation barely there, and once again demanded a rate cut.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in June fell from 32% to 20%.

The odds of such a cut in July fell as well from 71% to 66%.

Now investors await important remarks by Fed officials on inflation and the future of interest rates.

The SPDR

Gold holdings at the SPDR Gold Trust rose 2.01 tons yesterday to a total of 939.68 tons, away from April 9 lows at 937.67 tons.

Sterling fell in European trade on Friday against a basket of major rivals, expanding the gains for the third straight day against the dollar and plumbing three-week lows, on track for the second weekly loss in a row as a US-UK rate gap emerges.

As expected, the Bank of England cut interest rates to two-year lows, with Governor Andrew Bailey welcoming the US-UK trade deal, which reduces uncertainty.

The Price

The GBP/USD price fell 0.25% today to $1.3212, the lowest since April 17, with a session-high at $1.3253.

The pair lost 0.35% on Thursday, the second loss in a row as concerns about a UK recession diminished amid developments in trade negotiations.

Weekly Trades

The pound is down 0.45% so far on the dollar this week, on track for the second weekly loss in a row.

BOE

As expected, the Bank of England cut interest rates by 25 basis points to 4.25%, the lowest since March 2023, marking the fourth such UK rate cut since the current cycle of policy easing started in August 2024.

The rate cut was an attempt to protect the UK economy from any potential negative impact due to US tariffs.

The vote split was unexpected, with 5 members voting in favor of the cut and 2 voting in favor of a deeper 0.5% cut, while two voted in favor of holding rates unchanged.

Markets expected all nine members to vote in favor of cutting rates to 4.25%.

The BOE said it’ll continue to monitor the path of inflation locally and internationally to decide on the appropriate policy response.

Bailey

Bank of England Governor Andrew Bailey said the monetary policy isn’t on an auto pace, and will develop in response to economic changes.

He said the new US-UK trade deal could help reduce uncertainty but won’t change the current outlook radically.

UK Rates

The odds of a UK 0.25% interest rate cut in June stood at 30%.

Now investors await important UK inflation, unemployment, and wages data to gather more clues on the path ahead for policies.

Interest Rate Gap

Following the policy meetings this week, the interest rate gap between the US and UK grew from nothing to 25 basis points in favor of the US, undermining the pound.

Trade Developments 

The US and the UK announced a new trade agreement, the first of its kind with the new US administration.

According to the deal, the 10% base reciprocal tariffs on UK goods will continue, but 25% tariffs on British cars will be reduced to 10%, while 25% tariffs on UK steel and aluminum will be scrapped.

The UK will reduce tariffs on a range of US goods from 51% to 1.8%, while raising beef and ethanol imports from the US by $5 billion a year.

The Japanese yen rose in Asian trade on Friday against a basket of major rivals, while trying to recoup from four-week lows against the dollar on short-covering.

Despite the gains, the yen is still heading for the third weekly loss in a row as the odds of a BOJ interest rate hike in June receded, while global risk appetite improved alongside developments in trade talks with the US.

The Price

The USD/JPY price fell 0.3% today to 145.46, with an April 10 high at 146.18.

Weekly Trades

Across the week, the yen is down 0.5% so far on the dollar, on track for the third weekly loss in a row.

Japanese Rates

The Bank of Japan expects inflation to hit 2% by the second half of 2026, nearly a year after its previous estimates in January.

BOJ Governor Kazuo Ueda said the timing for achieving the 2% inflation target will be delayed somewhat.

Thus the odds of a BOJ 0.25% interest rate cut in June stood below 25%.

Trade Developments 

The US and the UK announced a new trade agreement, the first of its kind with the new US administration.

According to the deal, the 10% base reciprocal tariffs on UK goods will continue, but 25% tariffs on British cars will be reduced to 10%, while 25% tariffs on UK steel and aluminum will be scrapped.

The UK will reduce tariffs on a range of US goods from 51% to 1.8%, while raising beef and ethanol imports from the US by $5 billion a year.

Following the announcement of the deal with the UK, Trump said he expects negotiations with China by the end of this week, which could lead to a reduction in the 145% China tariffs.

US Treasury Secretary Scott Bessent is scheduled to meet Chinese trade officials on Sunday in Switzerland to conduct negotiations.

The US administration might reduce tariffs on Chinese imports by over a half according to the New York Post’s sources.