Insights 
VT 
Beijing confirmed an ongoing phone call between Xi Jinping and Donald Trump, though Trump has not yet commented. Updates are expected through Truth Social, following the call’s conclusion.
The Australian and New Zealand dollars have both increased by around 50 pips, performing well today. The Australian dollar is nearing its highest levels since May and could reach levels unseen since November if it surpasses that benchmark.
Market Concerns
There is a concern of a ‘sell-the-fact’ reaction once the call’s details are released. The market rallied ahead of the Trump-Xi conversation, especially after Tuesday’s confirmation of diplomatic talks.
If both countries ease trade tensions and initiate steps toward an actual agreement, it could lead to an upward trend for risk assets.
What we’re seeing here is a response driven by optimism tied to diplomatic efforts. The news of the discussion between the two heads of state has come at a time when traders have already been bidding up assets – particularly risk-oriented currencies like the Aussie and Kiwi. So far, the Australian dollar has climbed meaningfully, approaching price levels that haven’t been seen since mid-May, with a possibility to test highs last recorded in November. In currency markets, that’s not trivial.
Though nothing specific has been formalised post-call, the mere expectation of reduced tensions between the two nations has provided a lift. Prior to hard outcomes, markets often price in hoped-for changes. This early rally, before any actual trade resolutions or economic shifts have materialised, poses a potential for a reversal when the reality sets in. That’s what the mention of a ‘sell-the-fact’ warning points toward: sentiment that’s ahead of fundamentals.
Trading Implications
When moves like these occur as a result of diplomatic events, particularly ones that haven’t delivered tangible policy outcomes yet, it prompts a set of challenges. If market participants have positioned themselves aggressively for good news, and the actual follow-through is flat or ambiguous, prices may correct swiftly. That’s the backdrop to watch.
For traders operating in leveraged conditions, the movement in the AUD and NZD is not just a side note—it triggers broader implications across currency pairs that are often used as proxies for global appetite for yield and exposure. When these two strengthen simultaneously, it’s a sign that sentiment is shifting in favour of perceived stability or confidence that external risk factors might ease.
With that in mind, we would typically anticipate fading that kind of momentum unless there is clear and structured progress. High beta currencies tend to reverse quickly if the underlying support weakens. Momentum traders were rewarded earlier this week following the diplomatic headlines. However, continuing along that same path will now require more than verbal updates. Data and confirmation will matter from here.
Looking ahead, the approach should adjust toward verifying whether earlier expectations play out in reality. Any follow-up measure that confirms a pathway to reduced tariffs or fresh agreements will naturally help risk appetites. But until that occurs, chatter alone will serve as a fragile footing for further strength.
Volatility now hinges on the content and the tone of how both parties reflect on the call. If either provides mixed messaging or uses combative phrasing, we would likely see backtracking of current gains. On the other hand, any concrete agreements around future meetings, trade frameworks, or easing restrictions may extend this rally another leg.
Short-term positioning remains exposed. In environments like this, short-volatility trades might look appealing on the surface, but spike risk—particularly sharp, news-driven price moves—remains real and should be respected. Those with derivative exposure should adjust to reflect a period of delicate balance, where sentiment is pushed by headlines rather than hard data.
