The US dollar stabilized on Tuesday as Beijing and Washington negotiate on trade for the second day in London, boosting hopes, while sterling fell after weak UK labor data.

High-level talks between US and Chinese officials commenced this week in London, with the hopes of reaching some sort of an initial agreement on tariffs and trade.

It comes after the Trump-Xi phone call which was described as very positive and paved the way for deeper communication.

Trump adviser Kevin Hassett said that reducing US chip exports restrictions could be discussed, and in return, China would accelerate shipments of rare-earth minerals.

Dollars Performance

The dollar index rose 0.1% against a basket of major rivals to 98.989, hovering near a six-week trough at 98.351.

The index fell 8.7% since the start of the year amid concerns among investors about the impact of tariffs on the US economy.

The euro stabilized at $1.1423, while sterling edged down 0.1% to $0.6513.

Sterling lost ground after weak UK jobs data, boosting the odds of future Bank of England rate cuts.

UK wages rose 5.2% in the three months ending April, below estimates, sending the pound down 0.4% against the dollar to $1.13488.

The BOE will convene next week and is still expected to maintain interest rates unchanged, with traders expecting 48 basis points of rate cuts overall by the end of the year.

Japan to Maintain Rates

The Bank of Japan is also widely expected to maintain interest rates unchanged at next weeks meeting, with the governor Kazuo Ueda noting that the timing of the next rate hike might be delayed.

Ueda said ahead of the Parliament that the bank remains committed to policy normalization and rate hikes as long as inflation remains near the 2% target.

Yen has settled at 144.50 after surging 8.5% against the US dollar this year, boosted by haven demand after Trumps tariffs.

Now investors await the crucial US consumer prices report for May, which will impact the future path of Feds interest rates this year.