Global markets reversed course following US President Donald Trump’s shift in tone on both China and Federal Reserve Chair Jerome Powell. Stocks rebounded, the US dollar strengthened, and gold prices retreated as investor sentiment improved.

Speaking at the White House on Tuesday, President Trump stated that tariffs on China would be reduced “substantially,” though “they won’t be zero”. His comments echoed earlier remarks by Treasury Secretary Scott Bessent, who said that high tariffs were not sustainable and that a de-escalation in the US–China trade war was expected.

In a separate Oval Office meeting, Trump told reporters that he had “no intention” of firing Fed Chair Jerome Powell. “I would like to see him be a little more active in terms of his idea to lower interest rates,” Trump said. “This is a perfect time to lower interest rates.” These comments marked a significant softening from his previous post on Truth Social, where he labelled Powell “Mr Too Late, a major loser”.

Trump’s remarks followed Monday’s sharp sell-off on Wall Street, a tumbling US dollar, and declines in US Treasuries as investors continued to flee American assets. Despite Tuesday’s rebound, analysts remained sceptical over whether the rally could be sustained.

“Nevertheless, participants understandably remain jittery, not only as the haven value of both Treasuries and the USD continues to be called into question, but also as a huge degree of trade uncertainty continues to linger,” wrote Michael Brown, senior research strategist at Pepperstone, in a note.

Stocks rally

US stock futures jumped following Trump’s comments, with the Dow up 1.13%, the S&P 500 rising 1.51%, and the Nasdaq Composite climbing 1.76%.

Equities across Asia also joined the broader rally on hopes of a de-escalation in the US–China trade war. As of 5:38 am CEST, Hong Kong’s Hang Seng Index was up 2.4%, Japan’s Nikkei 225 rose 1.91%, South Korea’s Kospi climbed 1.54%, and Australia’s ASX 200 rallied 1.41%.

US Dollar and government bonds rebound

In currency markets, the US dollar index surged by more than 1% to 99.25, recovering from a three-year low just above 98. Haven currencies such as the euro, Swiss franc, and Japanese yen weakened against the dollar. Notably, the EUR/USD pair fell below 1.14 during Wednesday’s Asian session, retreating from above 1.15 the previous day when the euro hit its highest level since November 2021.

US government bonds also staged a relief rally, particularly among long-dated Treasuries. Yields on the 10-year and 30-year Treasuries rose by 5 and 8 basis points, reaching 4.35% and 4.8%, respectively. Bond prices move inversely with yields. The interest rate-sensitive two-year Treasury yield increased by 6 basis points to 3.8%, as markets priced in a slower pace of rate cuts.