The US dollar is trading steady, holding on to its gains from last week over a stronger than expected US NFP report which released on Friday. At the time of writing, the US dollar index DXY is trading around 97.71.

However, gains in the US dollar were capped over concerns of escalating US-China trade tensions as the next round of tariff hikes on Chinese imports are due to be implemented on December 15. Although both nations continue to maintain that talks are progressing well, the markets have not yet received any concrete updates regarding when the phase one trade deal could be signed.

On Friday, the NFP report revealed that 266k jobs were added in the US economy during November – the highest increase in jobs since the past 10 months. Meanwhile, US unemployment rate declined to 3.5%, the lowest levels seen in nearly 50 years, lending an additional boost to the US dollar.

Markets were reassured that the US economy remained in a healthy place despite the ongoing trade war with China and despite the manufacturing sector in the US going through a recession. However, the US dollar remains under strain as markets remain cautious that any further escalation of the trade tensions with China could bring about bad times for the US economy. Any positive signal towards reaching a trade deal could hint at the US putting off the latest tariff hikes on around $156 billion worth of Chinese imports during the peak holiday season.