Insights 
VT 
Xi Jinping announced that the US and China will begin a new round of trade discussions. He stressed the need to enhance cooperation and trade, as well as decreasing misunderstandings between the nations.
Xi confirmed China’s commitment to the Geneva agreement and invited Trump to revisit China. Emphasis was placed on preventing disturbances in China-US relations, as both sides have reached a consensus that they should adhere to.
Engagement in Trade Consultations
Xi urged both countries to effectively engage in established economic and trade consultations. He cautioned the US to prevent ‘Taiwan independence separatists’ from leading China-US relations into peril.
Recent developments have been perceived positively, influencing stock market movements. However, Xi’s invitation for Trump may indicate that Xi is not considering a visit to the US. This is despite prior talks about a potential visit coinciding with their birthdays in mid-June.
This recent announcement from Xi lays out a clear and deliberate message. The Chinese side is prioritising stability in commercial relations and appears unwilling to allow external or domestic provocations to derail the current course. The signal to return to structured trade talks provides ample clarity: we are likely to see a more predictable and rules-based exchange in the near term.
Strategic Implications and Market Reactions
The reaffirmation of the Geneva agreement and the open invitation also suggest a one-sided willingness to re-engage, but only to the extent that it doesn’t appear politically weak domestically. There’s intent there, but it’s carefully couched. When interpreted through a timing lens, especially with mid-June milestones already passed without a reciprocal visit, it becomes evident that there may be no interest in making travel a negotiating tool. This nuance, though subtle, shapes how one should view scheduling optics through a broader macro lens.
Zhongnanhai’s insistence on pushing back against any support for Taiwan self-determination is not a change in rhetoric, but its appearance in this trade context underlines how interlinked the diplomatic track is with economic dialogue. There is no ambiguity: if the US allows Taiwan issues to escalate further, any agreements—provisional or potential—could be frozen or reversed.
Markets enjoyed a brief bump on the back of this announcement, mostly due to hopes of renewed dialogue. The bounce, however, should not be misread. Underneath that upward motion is an atmosphere still charged with uncertainty. For us, reading beyond the headlines means watching not just communications, but travel logs, second-tier official meetings and follow-up ministerial conversations.
Li’s team has previously acted as the key channel for trade technicals. If they resume publicly documented meetings again within the next fortnight, then that’s the first real indicator that actual progress is returning. On the American side, the silence from mid-level officers remains deafening. Without those names reappearing in formal releases, the optimism remains priced in—but tenuous.
On the hedging side, activity remains tilted toward protective strategies on Q3 volatility. Implied vols, while not surging, are not deflating in tandem with the equity rise, and that separation in movement suggests traders expect churn even if index levels climb. This continuation of purchasing out-of-the-money puts in Chinese and US industrials, largely via cross-border ETFs, reflects a sentiment mismatch with media headlines.
In the coming sessions, our focus remains on trade-weighted currency baskets, particularly movements in the yuan fix and its offshore spread. A narrowing gap there would indicate Beijing is aligning with a more neutral policy ahead of further talks. If that materialises quickly, risk proxy pairs—such as AUD/USD—could enjoy short-lived strength. But if the People’s Bank resumes large indirect market interventions, the call changes—that would demonstrate reluctance to let openness dictate capital movement settings.
Beyond FX, T-bill futures are nudging only marginally, suggesting the bond market is treating this as a communications moment, not a policy paradigm shift. The swap curve still flattens toward year-end, implying traders are hedging against shallow collaboration that quickly resurfaces with tariff posturing.
From where we sit, actions—not announcements—will determine whether this is another pause or an actual reset. For now, the trade desk should remain light on exposure from headline reaction and steer toward capturing technical dislocations in commodities and interest rate spreads that always lag behind political statements.
