The US dollar rallied in European trade on Monday to a five-week high against a basket of major rivals, resuming gains after a short hiatus on Friday as recession concerns receded.

The US and China reached a trade deal that includes tariff pauses for 90 days in a step aimed at calming tensions.

The Index

The dollar index rose 1.5% today to 101.94, the highest since April 10, with a session-low at 100.42.

On Friday, the index lost 0.2%, the first loss in three days on profit-taking away from multi-week highs.

The index rallied 0.4% last week, the third weekly profit in a row amid positive trade developments and after a bullish Fed meeting.

US-China Trade Deal

The US and China agreed on suspending most tariffs on each other for 90 days after negotiations in Switzerland, in a huge step towards relaxing trade tensions between the worlds top two countries.

According to the temporary agreement, the US will cut tariffs from 145% to 30%, including a 20% tariff related to fentanyl, while China will cut tariffs from 125% to 10%.

US Treasury Secretary Scott Bessent hailed the very productive talks with Chinese counterparts, and praised the place of negotiations besides the serene Geneva lake.

Bessent asserted the tariff pause will carry on for 90 days with both sides cutting tariffs by 115%.

Both sides vowed to carry on economic and trade negotiations in upcoming weeks.

US Rates

Cleveland Fed President Beth Hammock said the Fed needs more time to assess the impact of tariffs on the economy before deciding on the appropriate response.

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in June stood at 8%.

The odds of such a cut in July stood at 45%, with traders now awaiting important US inflation data this week to gather more clues.

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