Dollar slides towards one-week low amid tariff speculation
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The U.S. dollar edged lower on Tuesday, approaching a one-week low as markets weighed the likelihood of President-elect Donald Trump’s proposed tariffs being less aggressive than initially anticipated. Mixed signals surrounding trade policies and economic data contributed to cautious trading sentiment.
Dollar Performance
DXY, the U.S. dollar index measuring the currency against a basket of six major peers, dropped 0.25% to 108.03 by 0730 GMT, after touching an overnight low of 107.74, its weakest since December 30
On January 2, the index hit a high of 109.58, driven by expectations of Trump’s fiscal stimulus, regulatory easing, and higher tariffs
Market Drivers
The dollar’s decline followed a Washington Post report suggesting Trump’s team may target specific sectors with tariffs deemed critical to U.S. security rather than imposing sweeping tariffs. While Trump dismissed the report, uncertainty over future trade policies continued to weigh on the greenback
Key Performances Against Major Currencies
Euro rose 0.16% to $1.0407, nearing its one-week high of $1.0437
Sterling climbed 0.14% to $1.25395, extending gains from the previous session
The dollar gained against the yen, rising 0.09% to 157.46, with U.S. Treasury yields providing support
Risk-Sensitive Currencies and Cryptocurrencies
Australian dollar climbed 0.46% to $0.6275
New Zealand dollar rose 0.66% to $0.5681
Bitcoin traded steady at $101,781, holding its highest levels since December 19
Focus on Economic Data
Markets are awaiting U.S. JOLTS job openings and ISM Services Index for December later in the session, key indicators for assessing the U.S. economic outlook Eurozone inflation data is also in focus, with expectations of a rise to 2.5% year-on-year from 2.2%, potentially influencing European Central Bank policy
Analyst Perspectives
Chris Weston of Pepperstone emphasized the uncertainty surrounding Trump’s tariff strategy, noting that while the president’s denial of scaled-back tariffs may be tactical, the market remains skeptical of their full implementation
Chris Turner of ING highlighted that doubts about Trump’s tariffs could pressure the overbought dollar, while the ECB’s rate cut trajectory may keep the euro/dollar pair on a "gentle grind towards 1.02" this year
Conclusion
The U.S. dollar faces continued pressure amid trade policy uncertainty and shifting economic data. While higher Treasury yields and positioning adjustments lend support in some cases, risk-sensitive currencies and cryptocurrencies are taking advantage of the greenback’s retreat. Traders will look to key economic reports for clarity on market direction in the coming days.
Dollar Performance
DXY, the U.S. dollar index measuring the currency against a basket of six major peers, dropped 0.25% to 108.03 by 0730 GMT, after touching an overnight low of 107.74, its weakest since December 30
On January 2, the index hit a high of 109.58, driven by expectations of Trump’s fiscal stimulus, regulatory easing, and higher tariffs
Market Drivers
The dollar’s decline followed a Washington Post report suggesting Trump’s team may target specific sectors with tariffs deemed critical to U.S. security rather than imposing sweeping tariffs. While Trump dismissed the report, uncertainty over future trade policies continued to weigh on the greenback
Key Performances Against Major Currencies
Euro rose 0.16% to $1.0407, nearing its one-week high of $1.0437
Sterling climbed 0.14% to $1.25395, extending gains from the previous session
The dollar gained against the yen, rising 0.09% to 157.46, with U.S. Treasury yields providing support
Risk-Sensitive Currencies and Cryptocurrencies
Australian dollar climbed 0.46% to $0.6275
New Zealand dollar rose 0.66% to $0.5681
Bitcoin traded steady at $101,781, holding its highest levels since December 19
Focus on Economic Data
Markets are awaiting U.S. JOLTS job openings and ISM Services Index for December later in the session, key indicators for assessing the U.S. economic outlook Eurozone inflation data is also in focus, with expectations of a rise to 2.5% year-on-year from 2.2%, potentially influencing European Central Bank policy
Analyst Perspectives
Chris Weston of Pepperstone emphasized the uncertainty surrounding Trump’s tariff strategy, noting that while the president’s denial of scaled-back tariffs may be tactical, the market remains skeptical of their full implementation
Chris Turner of ING highlighted that doubts about Trump’s tariffs could pressure the overbought dollar, while the ECB’s rate cut trajectory may keep the euro/dollar pair on a "gentle grind towards 1.02" this year
Conclusion
The U.S. dollar faces continued pressure amid trade policy uncertainty and shifting economic data. While higher Treasury yields and positioning adjustments lend support in some cases, risk-sensitive currencies and cryptocurrencies are taking advantage of the greenback’s retreat. Traders will look to key economic reports for clarity on market direction in the coming days.