The dollar index slipped below 108 on Wednesday, extending losses from the previous session as the Trump administration’s tariff strategy and China’s retaliatory measures turned out to be less severe than initially feared.
Dollar weakens as tariff concerns ease
Late on Monday, Trump agreed to delay the planned 25% tariffs on Mexico and Canada following successful negotiations, easing some trade-related concerns. However, the 10% tariffs on Chinese imports took effect on Tuesday, prompting Beijing to impose its own levies on U.S. goods—though its response was measured, suggesting an effort to prevent an immediate escalation of tensions.
Attention turns to Trump-Xi call
Investors are now turning their attention to an upcoming phone call between Trump and Chinese President Xi Jinping, which has raised hopes that both sides may seek a resolution and possibly reverse some tariffs in the future. Despite this, uncertainty remains high as markets assess the long-term impact of ongoing trade disputes on global economic growth.
Eyes on Fed, too
Meanwhile, speculation surrounding the Federal Reserve’s next move remains uncertain. While some market participants expect the central bank to adopt a more cautious stance in light of trade risks, recent economic data has painted a mixed picture, keeping policymakers on edge. Inflation remains subdued, but labor market strength and resilient consumer spending could limit the case for aggressive rate cuts. As trade policies continue to evolve, investors remain cautious, closely monitoring any developments that could influence the Fed’s rate trajectory and broader market sentiment.
