The U.S. dollar surged sharply against most major currencies after President Donald Trump stated that he plans to be very "courteous" with China in any trade talks and that tariffs would be reduced if the two countries can reach an agreement. This suggests that Trump may be stepping back from his hardline stance toward Beijing amid ongoing market volatility.

"Tariffs will be significantly reduced, but they certainly won't be zero," Trump said. "We will be very courteous, and they will be very courteous, and we'll see what happens."

Trump also noted that he sees no need to say he will take a tough line with Chinese leader Xi Jinping and that he would not bring up the topic of Covid-19 during the talks—a subject that is extremely politically sensitive in Beijing.

It's worth noting that Trump's remarks came against the backdrop of a collapse in U.S. stocks, Treasury bonds, and the dollar since he imposed broad tariffs on April 2, followed by a 90-day grace period for most countries. The 145% tariffs Trump imposed on Chinese goods earlier this year remain in place, though exceptions have been made for computers and popular consumer electronics. Yesterday, it was also reported that certain exemptions would be extended to the automotive industry.

Clearly, Trump is panicking over the market selloff and dollar weakness, but he urgently needs a deal. So far, China has not officially responded to Trump's promises to behave courteously, but news agency Cailian described it as a sign that Trump is already softening his position on his signature tariff policy.

Earlier this month, Beijing indicated that it wants to see a series of concrete steps from the Trump administration before agreeing to any talks—particularly the restraint of disparaging remarks from members of his cabinet. Chinese authorities have also expressed dissatisfaction with comments made by Vice President J.D. Vance about Chinese farmers, which one diplomat labeled as ignorant and disrespectful.

In a speech yesterday, U.S. Treasury Secretary Bessent said that the world's two largest economies will need to find ways to de-escalate, and that this is likely to happen in the near future. Bessent also said that decoupling from China is not the U.S.'s objective. However, the Treasury Secretary believes that a comprehensive deal could take two to three years. He reiterated his view that China has suppressed its consumer economy in favor of manufacturing at the expense of the U.S., adding that any agreement would need to rebalance trade in a way that allows the U.S. to boost domestic production.

As mentioned above, the U.S. dollar reacted to all of this with strength—something many market participants had been anticipating, as the overbought euro and British pound clearly lost appeal as a result.

EUR/USD Technical Outlook: At present, EUR/USD buyers need to focus on regaining the 1.1360 level. Only a breakout here would allow targeting a test of 1.1430. From there, a move toward 1.1500 is possible, though accomplishing this without support from large market players may be quite difficult. The ultimate upside target remains the high at 1.1570.

In case of a decline, I expect significant buyer activity only around 1.1280. If no support is found there, it may be worth waiting for a retest of the 1.1210 low or considering long positions from the 1.1150 level.

GBP/USD Technical Outlook: For GBP/USD, buyers must break above the immediate resistance at 1.3300. Only then can they target 1.3350, which remains a difficult level to break. The most extended bullish target is the 1.3416 zone.

If the pair falls, bears will attempt to regain control at 1.3240. A successful break of this range would deliver a serious blow to bullish positions and drive GBP/USD toward the 1.3205 low, with a potential move down to 1.3165.