Market Update: Dollar Nears Six-Week Low
TOKYO/LONDON – The dollar hovered near a six-week low on Tuesday, reflecting the growing economic concerns stemming from the trade war emphasized by President Trump’s administration.
Despite a significant recovery in global stock markets following the persistent narrative surrounding Trump’s tariff threats, the dollar struggled to maintain its footing. The forthcoming factory and employment data could further illustrate the impacts of trade uncertainty on the U.S. economy.
Recently, U.S. tariffs on imported steel and aluminum have been raised to 50%, doubling since the previous Wednesday.
Rodrigo Cathrill, a senior FX strategist at the National Bank of Australia, commented, “This situation suggests that trade tensions haven’t really improved, and as a result, we’ve seen the dollar take quite a hit.” Interestingly, he noted that the Australian and New Zealand dollars performed well recently.
The dollar index, which evaluates the U.S. currency against six others, dipped to 98.58, the lowest point since late April, before recovering slightly by 0.25%.
Against the yen, the dollar increased by 0.1% to 142.81, while the euro fell by 0.15% to $1.1426, nearing its six-week high of $1.1454. Attention later in the week will shift toward the European Central Bank’s decisions on interest rates and future outlook.
Additionally, preliminary inflation data from the Eurozone for May is on the agenda, with economists anticipating that core rates—excluding food, energy, alcohol, and tobacco—may start from 2.7% in April.
The dollar experienced a notable decline on Monday after reports indicated a contraction in the manufacturing sector for May, with supply chain delays causing longer delivery times. As we look to Tuesday, U.S. factory order numbers are on the horizon, followed by employment data later in the week.
Last week, the dollar gained 0.3% following renewed trade talks with the European Union, although a U.S. trade court initially blocked most of Trump’s tariffs. However, the appeals court reinstated those duties soon after, indicating that Trump’s administration could pursue alternative measures if it loses in court.
According to Treasury Secretary Scott Bescent, a conversation between President Trump and Chinese President Xi Jinping is anticipated soon to address trade discrepancies. However, he noted that the U.S. Commerce Department received an angry rejection from Beijing over allegations of violating the trade deal.
Potential Developments
Strategist Francesco Pesole mentioned that “trade development remains critical,” suggesting that China might be leveraging influence over the U.S. through the chip supply chain and rare earth management. He added, “Trump and Xi Jinping are scheduled to have discussions this week, and previous in-person meetings have occasionally alleviated tensions, potentially leading to positive developments for the dollar.”
Financial uncertainties have spurred a variety of “SelAmerica” themes, with stock assets experiencing a decline due to recent financial obligations. This week’s spotlight will be on the implications of the administration’s tax cuts and spending proposals, which are projected to contribute an additional $3.8 trillion to the federal debt of $36.2 trillion over the next decade.
