June 11 (Reuters) - The dollar steadied on Wednesday as teams from the U.S. and China concluded trade talks in London, hinting at a thaw in a damaging trade war but offering scant detail, while sterling was firm ahead of a British government spending review.
U.S. and Chinese officials approved a framework based on a trade truce reached last month in Geneva that would resolve China's export restrictions on rare earth minerals and magnets, and remove some U.S. export restrictions recently put in place.
Chinese Vice Commerce Minister Li Chenggang said that the next step would be to take the agreed framework back to their respective heads of state.
"On traditional metrics this would be a 'sell the dollar' moment: good for risk, good for global trade," said James Kniveton, senior corporate FX dealer at Convera.
However, since the dollar has not been behaving like a safe-haven asset lately, people might instead continue buying dollars and invest in Wall Street, Kniveton said.
Much of the year has been dominated by investor unease over U.S. President Donald Trump's erratic policies. Despite a bounceback in U.S. stocks, the erosion of investor confidence clearly shows in a dollar that is down by over 8% this year.
On Wednesday the dollar was 0.1% weaker versus the euro at $1.1438, and rose 0.1% against the yen to 144.93 .
China's onshore yuan was little changed at 7.1849 per dollar.
An index that measures the greenback against six other currencies was flat at 98.993.
Still, analysts noted that any newly agreed tariffs would be higher than they were late last year, while the blow that trade uncertainty has had on both economies is yet to be fully reflected in economic data.
Commerzbank analysts said no new improvements were achieved in the U.S.-China talks, rather only the tensions that have arisen since the last agreement had been defused.
Markets are also awaiting a closely-watched UK spending review, with British finance minister Rachel Reeves set to divvy up more than 2 trillion pounds ($2.7 trillion) of public spending for government departments from 2026 to 2029 and investment plans out to 2030.
Sterling was flat at $1.349, while gilt yields, which are among the highest in the developed world, underperformed on Wednesday, adding 7 bps to 4.598%, compared with a 1 bp rise in 10-year Treasuries, which yielded 4.49%.
"This week's spending review will highlight the tight fiscal headroom, leaving a bearish taste in rates markets. Until the government moves towards tax increases ..., the room for longer-dated sterling rates to move lower will be limited," analysts at ING said.
Later in the day, investors will parse a U.S. consumer inflation report that could potentially determine the trajectory of the Federal Reserve's monetary policy for the rest of 2025.
The Fed is expected to hold rates steady next week and a Reuters poll showed that analysts expect the central bank to maintain that stance until September.
Analysts at ANZ Bank said consumers are likely to face the impact of tariffs through higher goods prices, which would also keep the Fed cautious as they look for more clarity on how U.S. trade policy is impacting inflation over the coming months.
Attention will also be on a $39 billion, 10-year Treasury bond auction that could be a reflection of investor appetite for U.S. debt, as concerns mount regarding an expensive tax and spending bill that is making its rounds in Congress.
The yield on 10-year Treasuries was 2 bps higher at 4.4898%.
Reporting by Johann M Cherian in Bengaluru and Lucy Raitano in London; editing by Shri Navaratnam, Kim Coghill and Mark Heinrich
