Global markets ended the week on a mixed note as traders digested the aftermath of the high stakes U.S. – China summit. Gold fell 0.7%, marking its fourth decline in five sessions, as investors unwound safe haven positions following signs of easing trade tensions. Treasury yields and the dollar index steadied after volatile swings earlier in the week, with market participants pausing ahead of fresh macro data and central bank commentary. The retreat in bullion highlights a shift toward cautious optimism, though the broader sentiment remains fragile given lingering geopolitical uncertainties.
Yen Gains as Tokyo Inflation Rises and Japan Vows Vigilance
The Japanese yen strengthened after Tokyo’s inflation reading came in hotter than expected, reinforcing expectations that price pressures remain stubbornly elevated. Japan’s government reiterated that it is monitoring the currency “with a strong sense of urgency,” underscoring growing discomfort over recent yen volatility. The move added fresh focus on whether the Bank of Japan could soon face renewed pressure to adjust policy settings if inflation proves more persistent than anticipated.
U.S. -China Trade Truce Buoys Sentiment, But Long-Term Frictions Remain
On the trade front, Treasury Secretary Scott Bessent signaled that Washington expects to return to formal negotiations with Beijing within a year, following the landmark meeting between President Donald Trump and President Xi Jinping. The two leaders agreed to extend the current tariff truce, roll back certain export controls, and lower other trade barrier a development viewed as a step toward stabilizing the world’s largest trading relationship.
In his first public remarks after the summit, Xi cautioned against “breaking supply chains,” a subtle warning aimed at preserving China’s strategic manufacturing role amid ongoing global fragmentation. In a further sign of thawing relations, China resumed purchases of at least four U.S. soybean cargoes, a symbolic gesture signaling goodwill and economic cooperation.
Traders Stay Alert as Structural Rivalry Persists
Despite the positive headlines, analysts warn the one year truce should be seen as a temporary reprieve rather than a resolution. “The much anticipated U.S. – China trade agreement showed both sides willing to step away from recent escalations but not to step back from a longer term competition,” For traders, that means volatility in risk assets could resurface quickly if diplomatic progress stalls or political rhetoric intensifies.
Market Outlook: Temporary Calm, Not a Turning Point
The week closes with a sense of guarded relief across global markets but not complacency. As gold retreats and the yen firms, investors are recalibrating their portfolios for what could be another turbulent quarter. The message is clear: while diplomacy offers short-term stability, the structural rivalry between Washington and Beijing will continue to define global market direction heading into 2026.
Disclaimer: This report is for informational purposes only. It does not constitute investment advice or represent the official views of any central bank or regulatory body.