Meanwhile, the ongoing US government shutdown and lack of major economic updates are unlikely to stop the Federal Reserve from cutting interest rates later this month. Important inflation data expected this Friday may show a slight rise in the CPI to 3.1% year-on-year.
At this stage, both China and the U.S. have too much to lose to halt talks and rely solely on high tariffs and export controls. That is why Treasury Secretary Scott Bessent met with Chinese Vice Premier Lifeng, with discussions described as generally productive.
President Donald Trump also suggested that the November 1 deadline for the full 100% tariff may change, and negotiations will continue. Following these developments, the US dollar strengthened locally and may continue to do so if positive news from the Washington-Beijing talks persists.
The negotiations are expected to lead up to a Trump-Xi meeting in late October or early November in South Korea. However, given the complexity of global trade and the many points of potential disagreement, it is unlikely that a single meeting will produce comprehensive solutions, as past talks—like those between Trump and Putin—have shown.
Market expectations suggest another US interest rate cut next week. Fed officials, including Alberto Musalem and Stephen Miran, have indicated that at least moderate monetary easing is the right approach. However, this cut is already priced into the market, so unless there is a surprise, attention will likely shift to the December meeting, where another 25 basis point cut is expected with over 90% probability.
The recent decline in EUR/USD, which began late last week, has reached a key support area near 1.1630, where it aligns with the 50% Fibonacci retracement level.
If this support area breaks, EUR/USD could continue lower, with a target near 1.1550. If the support holds and buying interest appears, the 1.1720 level remains the main resistance.
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