Investing.com -- The dollar was higher against the yuan and a touch lower against the euro early Monday in Europe after reports playing down the chance of a major breakthrough in the trade talks between the U.S. and China, which are due resume on Thursday.
Bloomberg reported that China had dug in its heels and is refusing to make concessions on its industrial policy, such as the extensive subsidies for state-owned enterprises. However, it's unclear that there was ever much will in Beijing to comply with that U.S. demand. It's also unclear whether any hardening of the Chinese stance is connected to the domestic political problems of President Donald Trump. Some analysts have argued that the risk of impeachment should logically deter Beijing from making any long-term agreements in the short-term.
The yuan snapped a week of gains against the dollar on the news and by 3:30 AM ET (0730 GMT) the offshore rate was at 7.1317, down around 0.3%. Liquidity is still thinned by the ongoing public holiday in China.
The dollar index, which measures the greenback against a basket of developed-market currencies, was at 98.597, a rise of around 0.1% from late Friday's levels.
The euro strengthened a touch in early trading after German factory orders for August fell again, but without the shock impact seen in previous releases. Incoming orders fell 0.6% on the month, more than expected, but that was offset by an upward revision to July's figures, which turned a Monthly decline of 2.7% into a more gentle 2.1% drop.
Analysts at Nordea argue that the EUR/USD may come under more pressure this week however, on confirmation of the widening divergence in inflation trends when the U.S. releases core CPI numbers on Thursday. The annual U.S. number is expected to come out at 2.4%, compared to a sickly 1.0% for the euro zone.
"As inflation outcomes will impact a central bank’s stance in a dovish or hawkish direction, the euro area/U.S. core inflation spread is not only often helpful in predicting the direction of transatlantic spreads (Germany vs US 10-year yields), but also the general direction of the EUR/USD," analysts Martin Enlund and Andreas Steno Larsen wrote. "As long as the core inflation spread moves to the advantage of the USD as it has done in recent months, it adds downward pressure to the pair."
Despite that, it's still the Federal Reserve that is expected to move next in the global cycle of monetary easing. According to Investing.com's Fed Rate Monitor Tool, the chance of a 25 basis point rate cut at the Fed's next policy meeting on Oct. 30 is up to 84%, almost double what it was a week ago, after a labor market that showed a slowing trend in hiring and a softening of average wage growth.
Elsewhere Monday, the dollar rose by 0.7% against the Turkish lira on reports that Ankara is about to send troops into Syria to assert control over local Kurds, whom it suspects of helping rebel Kurds in Turkey.