After signs of a truce surfaced Tuesday, the trade threats between the U.S. and China are back in the headlines, strengthening the dollar. Treasuries and the dollar slid and then gained Wednesday morning ahead of the Federal Reserve decision and amid better-than-expected nonfarm payrolls.

Trade ups and downs

The markets were able to take a break from the tensions of the trade war Tuesday as reports of U.S. and Chinese officials rekindling negotiations came to light. However, it didn’t last long.

The Trump administration is also considering doubling the tariffs on $200 billion in Chinese goods from 10% to 25%. Chinese officials responded by warning the U.S. against “blackmailing and pressuring” to get them back to the table.

The dollar gained on the news against its major peers, but has since given back its gains as investors look ahead to the Federal Reserve’s monetary policy statement later today.

Fed meeting to hold rates

The Federal Reserve will likely hold interest rates steady at the end of its FOMC meeting today, but the monetary policy statement and what the discuss will be more of interest.

There is no press conference today, but at 2 p.m. EST the Fed’s monetary policy statement will be released and investors can get a sense of the group’s outlook.

This is the first meeting since President Trump spoke out lamenting the Fed’s recent rate hikes this year. While they probably won’t mention it in their statement, we could hear about it in the meeting minutes due in a few weeks.

The Fed meeting will be followed up by the Bank of England meeting on Thursday when the BoE is expected to raise rates.

Dollar gains on upbeat data, rising yields

The dollar is gaining against the euro and pound this morning, off of better-than-expected ADP employment numbers. The 10-year U.S. Treasury yield hit 3% for the first time since June.

The ADP employment change saw an additional 219,000 jobs in the month of July, compared to 185,000 estimated. This number is not as closely watched as the nonfarm payrolls due Friday, but the fact that it beat expectations so much had the dollar spiking a little.

EUR/USD dropped slightly from 1.169 to 1.167 and GBP/USD fell from 1.314 to 1.311. the USD/JPY pair is hovering around 111.9.