US Dollar Forecast: Bullish Outlook After 90-Day U.S.-China Tariff Pause

Stocks

China–U.S. Trade War

Summary:

The U.S. dollar rallied after a 90-day U.S.-China tariff truce boosted global sentiment, driving Treasury yields higher and strengthening the dollar index, with markets now eyeing key inflation data.

U.S. Dollar Index Rallies as U.S.-China Tariff Deal Boosts Risk Appetite

The U.S. Dollar Index (DXY) climbed sharply Monday, extending its recent rebound as markets digested a significant breakthrough in U.S.-China trade negotiations. A 90-day truce to slash reciprocal tariffs has revived confidence in the global growth outlook, fueling demand for the dollar and sending Treasury yields higher.

Dollar Breaks Key Resistance as Trade Deal Spurs Buying

Daily US Dollar Index (DXY)

The dollar index surged above its short-term pivot of 101.302, signaling bullish momentum and setting the stage for a potential test of the 50-day moving average near 102.10. A sustained push through that level could open the path toward the 200-day moving average at 104.297. The greenback strengthened broadly, gaining 1.7% against the yen to 147.835 and 1.5% versus the Swiss franc at 0.84405, as traders rotated out of safe-haven assets.

Tariff Reduction Agreement Shifts Market Sentiment

Monday’s rally followed the announcement that the U.S. and China had agreed to reduce tariffs significantly for a 90-day period. U.S. duties on Chinese imports will fall from 145% to 30%, while Chinese tariffs on U.S. goods will decline from 125% to 10%. The agreement, brokered in Geneva, alleviated fears of a prolonged economic standoff. U.S. Treasury Secretary Scott Bessent said the deal avoids “the equivalent of an embargo” and reflects both nations’ interest in continued trade engagement.

Treasury Yields Surge as Risk Premium Recedes

Bond markets responded sharply, with the U.S. 2-year Treasury yield jumping 10 basis points to 3.996%, and the 10-year rising nearly 6 basis points to 4.433%. The easing of geopolitical tensions—including a ceasefire between India and Pakistan and scheduled talks between Ukrainian and Russian leaders—added to the global risk-on tone, further pressuring bond prices and lifting yields.

Market Eyes Key U.S. Economic Data for Confirmation

Attention now turns to upcoming U.S. macroeconomic releases, including Tuesday’s consumer price index and Thursday’s retail sales and producer price index data. These indicators will be closely watched for signs of inflation pressure and consumer resilience, which could influence the Fed’s rate outlook.

Market Forecast: Dollar Bulls Eye 200-Day Average

With trade risks easing and Treasury yields rising, the backdrop favors further upside in the DXY. A successful breach of the 50-day moving average at 102.10 would strengthen bullish conviction, potentially targeting the 200-day moving average at 104.297. Near-term momentum hinges on the CPI print and whether it aligns with stronger demand fundamentals following the tariff reprieve.

Source: fxempire

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Glendon

Economic

Forex

A breakthrough in U.S.-China trade talks has propelled world stocks and the dollar higher, but investors fear further negotiations could prove a long slog, tempering optimism, as risks of a global economic slowdown persist.

Speaking after two days of talks with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent said on Monday the two sides had agreed a 90-day pause on measures and that tariffs would fall by over 100 percentage points.

That leaves U.S. tariffs on Chinese goods at 30% from May 14 to August 12 and Chinese duties on U.S. imports at 10%, beating investors' best-case scenarios going into the talks.

The dollar jumped by the most in almost a month against a basket of major currencies , as the yen and Swiss franc fell along with other safe-haven assets like gold and government bonds.

S&P 500 stock futures leapt almost 3%, suggesting a hefty rally at the opening bell, while U.S. Treasury prices sagged, sending yields to one-month highs above 4.4% .

But relief that the worst of a global trade war could be avoided was tempered by caution, given a more permanent deal needs to be struck and that higher tariffs overall are still likely to weigh on the global economy.

"It's long-term positive plus 90 days of uncertainty," said Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management Co.

Michael Metcalfe, head of macro strategy at State Street Global Markets in London, estimated that Monday's U.S.-China trade deal implied an average effective tariff rate of around 15%.

"Given where expectations were, it's a net positive," he said. "You basically reverse the reciprocal tariff announcement, and if you reverse the reciprocal tariff announcement you are back to square one."

After taking office in January, U.S. President Donald Trump had imposed tariffs of 145% on imports of Chinese goods, with China in turn raising tariffs on U.S. goods to 125% and limiting exports on some vital rare earth minerals.

Those measures had brought nearly $600 billion in two-way trade to a standstill, disrupting supply chains and sparking fears of an immediate cratering of the global economy.

Trump's April 2 "Liberation Day" announcement of sweeping tariffs on China and others sparked a sharp exit from U.S. assets, including the dollar and Treasuries - the mainstays of the global financial system - before being paused.

Heightened uncertainty caused by U.S. trade policy has hurt business and consumer confidence. The dollar index, while up over 1% on Monday, remains down some 7% so far this year.

A line chart showing the relative performance of US, European and Chinese stocks, as well as the dollar, crude oil and gold since April 2

SOFTENING STANCE

Reassuring for markets are signs that Trump may be rethinking his trade strategy, given the damage caused already, as economic indicators have turned south and central bankers warn of the risk of slowing growth and rising inflation.

A deal last week with Britain, plus positive noises from Japan, Vietnam and South Korea, have helped restore some confidence, along with a cooling in geopolitical tensions.

U.S. stocks are already roughly where they were prior to April 2, while beneficiaries of the "sell America" trade, such as European and Chinese stocks have given up a big chunk of those gains (.STOXX), opens new tab, (.CSI300), opens new tab.

"This is only a three-month temporary reduction of tariffs. So this is the beginning of a long process," Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong, said.

"The two sides will spend months probably, to come up with a resolution, or reach a final trade deal, but this is a very good starting point."

Rabobank's head of FX strategy Jane Foley said there was more optimism that the tariffs will not have the devastating impact many had feared, but this did not mean a return to the pre-Trump status quo.

"The overall scenario is not as bad as it could have been, but we still have a fair amount of uncertainty about where these tariffs will settle, their impact on world growth and central bank policy," she said.

State Street's Metcalfe said as uncertainty over trade lifts, the focus could also turn to other hot spots - such as Trump's plans for tax cuts and what that means for U.S. debt levels, especially as revenues from tariffs drop.

"It (the U.S./China deal) doesn't mean the policy uncertainty has gone away, it's moved on to a new area," he said.

Reporting by Alun John, Amanda Cooper and Dhara Ranasinghe in London, Samuel Shen in Shanghai and Summer Zhen in Hong Kong; Graphic by Amanda Cooper; Editing by Dhara Ranasinghe and Catherine Evans

Source: Reuters

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Gerik

Economic

US Tariffs Deal a Direct Blow to Canada’s Labor Market

Canada’s jobless rate rose to a new post-pandemic high in April, reaching 6.9%. This increase occurred despite the creation of 7,400 jobs—most of which were temporary roles in the public sector for the federal election. Behind the headline figure lies a deeper issue: growing fragility in Canada’s private sector, particularly industries tied to international trade.

The tariff hike implemented by the United States in early April disrupted Canada's exports, especially in key manufacturing sectors like automotive and machinery. The impact has rippled across the country, forcing factories to scale down production and shed jobs.

Sharp Declines in Manufacturing and Retail Employment

While finance and real estate recorded modest gains, the manufacturing sector shed 31,000 jobs, and wholesale and retail lost 27,000. These sectors are heavily exposed to trade uncertainty and global supply chains. Without the temporary hiring tied to the election, Canada’s economy would have lost over 30,000 jobs in April alone.

Ontario, Canada’s manufacturing heartland, suffered the most. The province lost 33,000 factory jobs, and Windsor—the auto industry hub—saw unemployment surge to 10.7%, driven by US tariffs on car imports. The manufacturing contraction in Ontario alone significantly dragged down national figures.

Rising Joblessness Signals Growing Economic Vulnerability

According to Statistics Canada, the April jobless rate matches that of November 2024, which had been the highest since the pre-COVID era. Most worryingly, newly unemployed workers are struggling more than before to find new jobs. Layoffs are rising, with 0.7% of March hires losing their jobs by April due to termination—highlighting a troubling labor market trend.

Senior economist Brendon Bernard warned that these data are the first official signs of the trade war's direct hit to Canada’s job market. Meanwhile, wage-sensitive sectors remain under pressure as businesses brace for potential economic slowdown.

Implications for Monetary Policy and Future Outlook

Doug Porter, chief economist at the Bank of Montreal, said the job data strengthen the case for the Bank of Canada to lower interest rates by 25 basis points in June. The policy shift would aim to ease financial pressure on businesses and consumers amid growing uncertainty.

With consumer confidence wavering and inflation remaining sticky, the combination of weaker trade and higher unemployment could pull the economy closer to a technical recession by mid-year if conditions do not improve.

April’s labor market report makes one thing clear: the US tariff escalation is not just a geopolitical maneuver—it is triggering real economic consequences for Canada. Without targeted fiscal and monetary interventions, Canada could see the current wave of unemployment spill over into broader economic malaise.

Source: AOL

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Adam

Economic

China–U.S. Trade War

What happened last week

Trade negotiations advance:US established its first country-level trade framework US with UK, reducing US duties on British automotive, steel and aluminium sectors, while British tariffs on US goods will decrease from 5.1% to 1.8%. Markets responded positively on anticipation of additional trade agreements, with US-China discussions commencing in Switzerland on 10 May.

Central bank policy decisions:Fed funds rates remained unchanged at 4.25-4.5% despite political pressure from President Trump. Chair Powell indicated the US economy remains robust but cautioned that sustained tariffs could accelerate inflation and increase unemployment. The Bank of England implemented a 25 basis point (bp) rate reduction, though the non-unanimous decision prompted traders to recalibrate expectations for a potential June cut.

Asian currency fluctuations:The Taiwan dollar appreciated 8% against USD across two sessions, reaching a three-year high amid speculation that currency appreciation is necessary to secure a US trade agreement. The Hong Kong Monetary Authority intervened by selling over HK$100 billion to maintain its USD peg ahead of CATL's IPO. The People's Bank of China (PBOC) also intervened as USD/CNH declined to a six-month low. Most gains subsequently reversed on trade optimism.

China's monetary easing:The PBOC reduced policy rates from 1.5% to 1.4% and decreased the reserve requirement ratio (RRR) by 50 bp, introducing 1 trillion yuan of liquidity. Additional measures include reductions in mortgage rates and targeted lending facilities to technology enterprises.

Markets in focus

US markets navigate trade policy shifts and tech sector developments

Major US equity indices concluded last week with minimal variation following several mixed trading sessions. Regarding trade policies, negative headlines concerning potential tariffs on non-US produced films and pharmaceutical products were counterbalanced by positive developments in negotiations with the UK and China. The Trump administration is also considering revising the framework for artificial intelligence technology restrictions, potentially allowing numerous countries beyond China to negotiate access to advanced semiconductor components.

Company-specific developments also contributed to divergent stock performance last week. Share prices of Apple and Alphabet declined 3% and 7% respectively after Apple revealed plans to transform the Safari browser to incorporate an AI-powered search engine, potentially terminating a longstanding partnership with Google. Conversely, Tesla's share price appreciated 4%, bolstered by easing trade tension headlines. Other Magnificent Seven stocks traded within a narrow range.

The US Tech 100 Index has reached a critical technical juncture as it approaches the 200-day simple moving average (SMA) at 20,478 following breakthroughs of both the 20-day and 50-day SMA. Price action exhibits characteristics consistent with Elliott Wave structures, with the current advance potentially representing a corrective Wave B formation, which may subsequently yield to a bearish move towards 16,000. Should the index maintain levels above its 200-day SMA, the corrective phase would likely be completed, potentially enabling the index to challenge its February peak at 22,223.

Figure 1: US Tech 100 index (daily) price chart

as of 11 May 2025. Past performance is not a reliable indicator of future performance.

Hang Seng gains amid Chinese monetary stimulus

The Hang Seng Index (HSI) continued its upward trajectory, extending its winning streak to seven consecutive trading sessions since 29 April; month-to-date, the benchmark has appreciated 3%.

This positive market momentum is primarily attributable to two key catalysts. Firstly, the PBOC has announced a series of accommodative monetary measures. Beyond the RRR and reverse repo rate reductions, the central bank has introduced specialised lending facilities to support technology firms, elderly care initiatives, agricultural enterprises and the residential property market. Secondly, US and Chinese officials are convening in Switzerland over the weekend for trade negotiations, marking the first formal discussions since the Trump administration elevated tariffs to as high as 145% on Chinese imports.

The probability of reaching a comprehensive agreement during the initial round of discussions remains low. Consequently, investors should maintain a cautious approach and prepare for potential market volatility in the coming week. Market participants will also closely monitor upcoming earnings reports from Tencent and Alibaba, which have historically served as key indicators of Chinese economic health.

Technical analysis continues to indicate a medium-term bullish trend for the HSI. However, after successfully breaching the 50-day SMA, momentum has moderated and the index has entered a consolidation phase as markets await greater clarity from US-China trade negotiations. Constructive progress could propel the index towards the psychologically significant 24,000 threshold. Conversely, should the weekend discussions yield limited substantive outcomes, the index may conform to Wave C trajectory within the Elliott Wave framework and potentially retrace towards 19,000.

Figure 2: Hang Seng index (daily) price chart

as of 9 May 2025. Past performance is not a reliable indicator of future performance.

Bitcoin surpasses $100,000 threshold

Bitcoin has demonstrated remarkable recovery, rebounding nearly 40% from April lows, and exceeding $100,000 for the first time since February. The cryptocurrency surpassed this psychologically significant milestone following the US-UK trade framework announcement last Thursday. Risk appetite has noticeably strengthened over the past fortnight as optimism regarding trade agreements has emerged. Any positive developments from the US-China discussions in Switzerland this weekend could further catalyse price appreciation.

Robust month-to-date net inflows of US$2 billion through exchange-traded funds (ETF), alongside accumulation by Bitcoin whales, have contributed significantly to the price advancement. Market observers have also noted substantial short-covering pressure at the $98,000 level.

Technical analysis suggests that the corrective phase has likely concluded, with a new bullish trend commencing. In the near term, Bitcoin may experience a technical correction with support anticipated around $91,400, given elevated valuations and excessively bullish market sentiment. The relative strength index (RSI) has surpassed the 70 threshold, while the Crypto Fear and Greed Index approaches "extreme greed" territory, indicating overbought conditions. A 100% Fibonacci extension of the uptrend between September and December 2024 suggests the cryptocurrency could potentially advance towards $130,000 over the medium term if it breaks through the historical high and resistance level at $109,576.

Figure 3: Bitcoin (daily) price chart

as of 9 May 2025. Past performance is not a reliable indicator of future performance.

The week ahead

The upcoming week features crucial US economic data with metrics - Consumer Price Index (CPI) and Producer Price Index (PPI) - likely to provide valuable insights into the Federal Reserve's next policy moves. Consumer sentiment readings will whether household spending intentions have improved as trade tensions moderate. On the corporate earnings front, major Chinese technology enterprises including Alibaba, Tencent, and JD.com are scheduled to report results, potentially offering important signals regarding China's digital economy and consumer trends amid persistent deflationary pressures.

US consumer sentiment has declined for four consecutive months, reaching 52.2. One-year inflation expectations have surged to 6.5%, the highest level since 1981, fuelled by recession concerns and anticipated price increases resulting from the Trump's tariff policies. As the government advances trade negotiations, market participants will monitor upcoming data releases closely for indications of recovering consumer confidence, which could potentially propel risk assets back towards pre-'Liberation Day' peak levels.

Figure 4: University of Michigan survey results

as of 9 May 2025

Source:ig

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Warren Takunda

Economic

China–U.S. Trade War

Donald Trump will inevitably claim Monday’s temporary truce in the US-China trade war as a victory, but financial markets seem to have read it for what it is – a capitulation.

Stocks were up and bond yields were higher after the US treasury secretary Scott Bessent’s early morning press conference in Geneva, where he has been holding talks with China.

As with the UK “trade deal” last week, the US is not reverting to the status quo before Trump arrived in the White House.

Instead, tariffs on Chinese goods will be cut from 145% to 30% – initially for a 90-day period. In return, China has cut its own tariffs on US imports to 10%, from the 125% it had imposed in retaliation against the White House.

That still marks a big shift in the terms of trade between the two countries since before Trump came to power, but falls far short of what was in effect a trade embargo.

The two sides have pledged to keep talking, but there was no reference in the statement put out by the White House to other gripes it has previously raised about China, including the weakness of the yuan.

Instead, the statement hailed “the importance of a sustainable, long-term and mutually beneficial economic and trade relationship”. The language was rather different to Trump’s Liberation Day speech, about the US being “looted, pillaged, raped and plundered by nations near and far”.

In other words, the president has caved. He may have been swayed by market wobbles but it seems more plausible that dire warnings from retailers about empty shelves – backed up by data showing shipments into US ports collapsing – may have strengthened the hands of trade moderates in the administration.

Confronted with warnings of a shortage of toys, Trump told reporters that children should be happy with “two dolls instead of 30 dolls”, and they might “cost a couple bucks more” than usual. But it is difficult to imagine even this most bullish of presidents withstanding the attacks that would come his way if he began to be seen as responsible for Covid-style shortages of key goods in the world’s largest economy.

Instead, the White House seems to have opted for tactical retreat. The China-US conflict was always the hottest theatre of confrontation in Trump’s trade war, with a longer history and deeper public support than his quixotic attacks on Mexico and Canada.

If Trump is indeed ready to give in even with Beijing, it sends a signal that some of the other aggressive aspects of his trade policy may be negotiable.

What Bessent and his Chinese counterparts have not erased, however, is the corrosive uncertainty that has gripped investors across the global economy since Trump’s “Liberation Day” tariff announcement.

China tariffs have only been slashed temporarily, for now and many other countries are still awaiting negotiations on where their tariff levels will end up, after that other 90-day pause, on Trump’s “reciprocal” levies, due to end in July.

Meanwhile, companies throughout the global trading system are left wondering which particular iteration of the policy is likely to stick, and may well be tempted to continue working around the US, where possible.

And with 30% tariffs remaining on Chinese exports to the US, the bigger picture remains of two great economic powers pulling apart.

Source: Theguardian

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Adam

Stocks

U.S. stock futures surged Monday after the White House announced a trade deal with China had been reached, with both sides agreeing to lower their respective levies.

At 06:30 ET (10:30 GMT), Dow futures gained 975 points, or 2.4%, S&P 500 futures climbed 170 points, or 3%, and Nasdaq 100 futures rose 785 points, or 3.9%.

Gains in futures come after a positive week on Wall Street, as the prospect of a Sino-U.S. trade deal lifted spirits and spurred buying into risk-driven assets.

U.S.-China tariffs to be cut

U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said on Sunday afternoon that a trade deal had been struck with China after negotiations over the weekend in Geneva, and more substance surrounding the agreement was subsequently announced on Monday.

The two sides have agreed to a 90-day pause to soaring tariffs placed on each other, Washington has moved to slash tariffs on China to 30% and Beijing’s duties on U.S. imports are being cut to 10%, the nations said in a rare joint statement following high-stakes trade talks over the weekend.

Heading into the talks, U.S. President Donald Trump had raised tariffs on China to at least 145%, leading China to respond with retaliatory levies on American imports of 125%.

"The consensus from both delegations is that neither side wanted a decoupling," U.S. Treasury Secretary Scott Bessent said in a news conference.

More trade negotiations are planned between the two, while both sides may conduct working-level consultations on relevant economic and trade issues.

Investors, who have been worried that the trade spat could spiral into a global crisis that threatened economic activity and increased uncertainty for businesses, have welcomed the changes.

“The tone of stock markets has been downward over the last two months, weighed down by fear of the effects of a possible tariff war and other tough-line measures by Donald Trump, but the situation shows signs of some stabilization and even moderate upturns have been seen in the most recent sessions," said Alberto Matellan, managing director at La Financiere Responsable.

“All of this is explained by the loss of confidence caused by the White House, something that has not been reversed; however, if progress is made toward a clearer scenario, the market’s performance will be positive.

“What has happened over the past two months, even before ‘Liberation Day,’ is that Trump has broken trust—the market doesn’t trust Trump or the economy. And once trust is broken, it’s difficult to rebuild it, but also harder to destroy it further. Only by making things clearer can there be a positive development for the stock markets in general.”

India and Pakistan ceasefire

In another potential market-moving development, India and Pakistan agreed to a ceasefire after increased tensions in recent days. U.S. President Donald Trump said U.S.-led mediation allowed cooler heads to prevail.

“After a long night of talks mediated by the United States, I am pleased to announce that India and Pakistan have agreed to a FULL AND IMMEDIATE CEASEFIRE,” Trump said on Saturday. Pakistan praised the U.S.’s role in the ceasefire, although India downplayed it.

The ceasefire appeared to be holding, although both India and Pakistan had accused each other of violations.

Trump to slash pharma prices

Elsewhere, the pharmaceutical sector is likely to be in focus Monday after Trump said on Sunday that he plans to sign an executive order lowering prescription drug and pharmaceutical prices by between 30% and 80%.

Trump said he will "be signing one of the most consequential executive orders in our Country’s history," in the White House on Monday morning.

Trump claimed that pharma prices will "rise throughout the world" in order to bring fairness to America.

In other pharma news, Eli Lilly and Company (NYSE:LLY) said that its Zepbound weight loss drug had outperformed rival Novo Nordisk’s (NYSE:NVO) Wegovy in a recent head-to-head trial.

There are more earnings to digest this week, in what has generally been a mostly positive first quarter, with prints from Home Depot (NYSE:HD), Palo Alto Networks (NASDAQ:PANW), Lowe’s (NYSE:LOW), Target (NYSE:TGT), and Snowflake (NYSE:SNOW) due in the coming days.

Crude soars on trade deal

Oil prices rose Monday, building on last week’s sharp gains as the announcement of a China-U.S. trade deal raised hope that the world’s two largest crude users may be moving toward a resolution of their dispute.

Source: investing

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Glendon

Commodity

Economic

Oil prices soared Monday, adding to last week’s sharp gains, after the U.S. and China announced a trade deal which would ease some of their tariff measures, raising hopes of an end to the trade war between the world’s two largest consumers of crude oil.

At 08:20 ET (12:20 GMT), Brent Oil Futures expiring in June rose 3.7% to $66.28 per barrel, while West Texas Intermediate (WTI) crude futures gained 4% to $63.43 per barrel.

Both contracts rose by more than 4% last week on optimism over a potential de-escalation in Trump’s tariff agenda.

U.S.-China deal eases tensions

Monday’s surge was driven by the news that the U.S. and China have agreed to a 90-day pause to soaring tariffs placed on each other and will temporarily lower their respective levies.

Washington has agreed to cut U.S. President Donald Trump’s so-called "reciprocal" tariffs on China to 10%, while a 20% tariff related to Beijing’s alleged role in the flow of the illegal drug fentanyl remains in force. Meanwhile, China’s duties on U.S. imports are being cut to 10%, the nations said in a rare joint statement following high-stakes trade talks over the weekend.

More negotiations are planned between the two sides, while both sides may conduct working-level consultations on relevant economic and trade issues, the countries said.

Crude prices have been hit hard over the last month or so on worries that the trade spat may spiral into a crisis that could threaten global economic activity and increase uncertainty for businesses.

As the world’s two largest economies move toward a more stable trade relationship, expectations of stronger industrial activity and consumer demand, especially in China, lifted sentiment around the demand outlook.

OPEC+ hike decision weighs heavily

Despite the positive outlook, oil price gains were tempered by plans from OPEC+ to increase oil output in May and June.

“These changes to its production schedule ultimately shorten the timeline for the full return of the 2.2 mm b/d tranche of its production cuts to 14 months from the 18 months initially announced in December 2024,” said analysts at BCA Research, in a note dated May 12.

The hike decision comes at a time when there is already plenty of demand uncertainty.

The timing of these production hikes suggests that geopolitical considerations are also at play, BCA added. Specifically, U.S.-Saudi relations.

President Trump has been explicit about his preference for low oil prices, and Saudi Arabia is hoping to secure greater military, defence, and civil nuclear cooperation.

By unwinding some support for oil prices ahead of Trump’s visit this week, Saudi Arabia may be hoping to demonstrate that it is willing to negotiate in good faith.

Elsewhere, U.S.-Iran nuclear talks concluded on Sunday, with further negotiations planned, leaving the potential for increased Iranian oil exports uncertain.

The fourth round of talks occurred in advance of Trump’s trip to the Middle East.

Investors also closely watched increased geopolitical tensions between India and Pakistan, as the nuclear-armed neighbors engaged in their worst fighting in decades.

The two countries reached a ceasefire agreement on Saturday, though reports of violations emerged shortly afterward.