USD: Demand for EM could weigh on the USD – ING

Risk assets start the week in a positive mood. Weekend reports suggest the US and China have found common ground on topics like the sale of TikTok, soybean purchases and tariffs. The view here would be that the meeting between US President Donald Trump and Chinese President Xi Jinping on Thursday might see a formal agreement on these areas and enact a further delay of those severe 125/145% mutual tariff levels threatened in April. Probably most important will be what China does with its planned export controls on rare earths. A prolonged delay here of, say, one year would very much be welcomed by the markets. Global equity markets are rallying on what they see as a likely extension of the US-China trade truce, and the risk-sensitive currencies of the Australian and New Zealand dollars lead today's gains in G10 FX, ING's FX analyst Chris Turner notes.

US data releases remain scarce this week

"Assuming the Trump-Xi meeting delivers on these bullish expectations, the dollar might face a slightly negative backdrop. But there are also rate meetings this week in the US, the eurozone, Japan and Canada. Another 25bp rate cut is expected. Unlike in September, dollar positioning is now better balanced, and the currency does not have to rally too far should Federal Reserve Chair Jerome Powell express any latent fear over inflation. This, however, looks unlikely after last week's release of softer September CPI data."

"Given the ongoing government shutdown, US data releases remain scarce this week. The betting market attaches a 49% probability that the shutdown lasts beyond 16 November. And it could be that 15 November becomes a key date, with Scott Bessent stating that the US military does not get paid after this point should the shutdown remain in place. The ongoing shutdown means we probably do not see the US third-quarter GDP this week, where consensus was for a reasonably strong 3.0% quarter-on-quarter annualised figure."

"DXY is staying quite bid near 99 – largely because USD/JPY is bid on local politics and EUR/USD remains a little soggy. But the German Ifo could give EUR/USD a lift today and send DXT back to 98.50."