The US dollar extended its losses as investors digested the latest developments in global trade tensions. Expectations of negotiations between US President Donald Trump and Chinese President Xi Jinping could help improve market sentiment. In addition, the suspension of tariffs on Mexico and Canada could prompt a more risk-on approach and exert selling pressure on the greenback.

However, the US currency could find renewed support if trade tensions with Europe escalate. Recent tariff threats on the EU by President Donald Trump have prompted the European Commission to prepare potential countermeasures. While no immediate action has been taken, the possibility of heightened tensions may bolster demand for the US dollar as a safe-haven asset.

Meanwhile, US treasury yields remained relatively stable across long-term maturities. Uncertainties about further trade developments could leave investors cautious while new decisions from China and the US could fuel volatility. Should trade tensions ease, risk appetite could improve, leading to a rebound in yields if traders move out of treasury bonds.

Looking ahead, key US economic data, including ISM Services PMI, Nonfarm Payrolls, and ADP Employment Change, will be closely monitored. These reports could influence market expectations regarding the Federal Reserve’s next move, influencing the trajectory of the dollar.