Fed decision and US-China trade talks kept global markets in a holding pattern on Wednesday, as investors paused ahead of key economic and political developments. While oil prices rose, the dollar continued its decline for the fourth consecutive session, and European stocks dipped slightly amid cautious sentiment.
🤝 US-China Trade Talks Aim to Ease Tensions
Markets are closely watching this weekend’s US-China trade talks in Switzerland. U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet with China’s top economic official in what could be an early step toward resolving trade disputes that have weighed on global growth.
“This will likely be a step toward de-escalation,” Bessent commented. In contrast, Chinese officials were more reserved, referencing a proverb about actions speaking louder than words.
Despite the headlines, many analysts believe that expectations for a meaningful breakthrough remain low. “This is typical indecision before a Federal Reserve meeting,” noted Michael Brown, a senior strategist at Pepperstone.
🏦 Fed Decision and Market Impact: Expectations Hold Steady
The upcoming Fed decision is another major focus for investors. While the central bank is expected to keep interest rates unchanged, attention will be on the tone of the accompanying statement.
“The Fed’s messaging could shape expectations more than usual,” said Commerzbank strategist Erik Liem. Recent fears that President Trump could replace Fed Chair Jerome Powell also contributed to last month’s market volatility.
Analysts at Commonwealth Bank of Australia noted that a firm, hawkish stance from Powell might offer the dollar temporary support. Market forecasts for a rate cut in June have dropped to around 30%, down from 60% following strong labor market data.
💹 Global Assets React to Fed Decision and US-China Trade Talks
- U.S. stock futures rose, with S&P 500 contracts up 0.6%
- Europe’s STOXX 600 and the UK’s FTSE 100 both fell by approximately 0.3%
- The dollar index weakened by 0.1%, marking its fourth straight daily loss
- Global equities have largely recovered since the April 2 tariff shock
Even as equities bounce back, the U.S. dollar remains over 4% lower than it was at the end of March.
💱 Currencies and Commodities Eye Fed and Trade Talks Outcome
- The euro stayed strong above $1.136 after Friedrich Merz secured the German chancellorship in a second-round vote
- Brent crude oil gained 0.6% to $62.55 but remained 15% below late March levels
- Gold prices dropped 1.3%, now more than $100 off last month’s record highs
🌏 Asia Responds to Fed Decision and Trade Talks Prospects
Geopolitical tensions also impacted sentiment. Pakistan’s international bonds rose and equities recovered after India conducted airstrikes in response to recent unrest, triggering the region’s most intense conflict in decades.
In China, the central bank introduced a rate cut and added liquidity to the banking system. It also expanded access for insurance capital to enter equity markets. However, investors showed limited reaction, focusing instead on potential fiscal stimulus and the outcome of this weekend’s US-China trade talks.
Asian currency rallies slowed. South Korea’s won dropped sharply, while the Chinese yuan weakened slightly following the monetary policy move.
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