Australia's iron ore (62% Fe, CFR China) soared by US$1.25 to US$98 on May 5. After turning higher yesterday, iron ore has risen by a modest US$0.15 so far this month, up by 0.15%. Optimism over potential US-China trade negotiations lifted market sentiment, pushing the offshore yuan sharply higher for two straight days, and it reached its strongest performance since last November. The stronger yuan reduced China's import costs, while robust US non-farm payroll data for April further fueled a rally in iron ore prices.

However, the yuan's strength may prove short-lived amid continued uncertainty around trade talks. At the same time, China is expected to ramp up steel production cuts in the second half of the year, further increasing the iron ore supply.