Futures rebound as US-China talks offer pre-Fed respite

Currency markets remain relatively quiet, though subtle shifts reflect the slight improvement in overall risk sentiment. Both the yen and the Swiss franc — typically sought during risk-off periods — are on the back foot in early trading. Their pullback suggests traders are at least temporarily easing into more optimistic positioning following the overnight US-China meeting headlines.

Still, conviction is lacking as attention turns squarely to the Federal Reserve. With Powell’s press conference on deck, few appear willing to take meaningful positions in FX until more clarity emerges on the central bank’s outlook. This is clear when focusing on the US Dollar Index, which continues to consolidate.

Gold prices pulled back this morning after surging 5% over the past two sessions. It dropped below $3,400 overnight, having rallied up to $3,435 yesterday. Some kind of pullback, or consolidation, seemed reasonable given the size of the gains over the first two sessions this week. And the catalyst was provided by news that the US and China were preparing for trade talks later this week.

For now, gold appears to have met some resistance around $3,430, while the first significant level of support comes in at $3,200.

Oil continues its rebound with another sharp overnight gain. Prices gapped lower on Monday following the OPEC+ decision over the weekend to increase output by just over 400,000 barrels per day, taking the total increase from April through June to 960,000. The news saw oil prices slump, as the market is already dealing with a supply glut, while demand growth continues to slow.

Front-month WTI fell back towards four-year lows on Monday morning, near $55 per barrel. But prices have reversed sharply since then, with WTI coming within a few cents of $60 earlier today.

Natural Gas prices are also trending higher, now hovering around the 3.5 btu level, enjoying a good run-up from recent lows.

Cryptocurrencies also got a lift in this morning’s early trade. Bitcoin was up 2.5% overnight, closing in on last week’s highs. Friday’s high represented Bitcoin’s best levels since February and puts it back within sight of the key $100,000 level. Ether was up close to 4% this morning but still well below $2,000.

The VIX remains relatively steady, trading just above 23. It continues to reflect a level of caution in the market as investors brace for potential volatility, which could follow this evening’s Federal Reserve press conference.

The lack of movement in the VIX may indicate that traders are positioned for a relatively benign outcome, or it may simply reflect the calm before the storm. Either way, volatility remains in focus — and the VIX could move quickly if Powell surprises in any way.

After the bell on Tuesday, both AMD and Rivian delivered mixed earnings results, which did little to move sentiment decisively in either direction. Today, attention is on Disney and Uber — two names that will help gauge consumer and service-sector health amid the ongoing tariff noise.

On the geopolitical front, Chinese President Xi’s visit to Moscow adds another layer of complexity to an already busy macro backdrop. The timing, coming just as the US and China announced a re-engagement in trade discussions, will be watched closely.

The overnight rally in US stock index futures offers a brief respite after the sell-off across Monday and Tuesday. However, with the Federal Reserve set to announce its decision this evening, the true test for markets is still to come. While no rate change is expected, Powell’s tone and guidance will be critical in shaping near-term sentiment.

Meanwhile, news of the US and China finally coming to the negotiating table was enough to trigger a knee-jerk risk-on reaction — but whether it has staying power is yet to be seen. For now, markets remain headline-driven, with traders cautious but ready to pivot quickly. The balance between data, earnings, Fed policy, and geopolitics continues to make for a fragile, fast-moving landscape.