The dollar index erased early losses to hover around 107.8 on Thursday as traders assessed President Trump's trade policies and shifting Federal Reserve rate expectations.
Dollar index erases early losses
Trump stated that new reciprocal tariffs would be announced later in the day, following his recent imposition of a 25% levy on aluminum and steel imports and a 10% tariff on Chinese goods. Tariffs on Mexico, Colombia, and Canada were temporarily suspended for 30 days, leaving uncertainty about potential future trade actions.
US inflation tops estimates
Meanwhile, stronger-than-expected US CPI and PPI data reinforced concerns about persistent inflation, leading investors to scale back expectations for Federal Reserve rate cuts this year. Markets are now pricing in just one quarter-point cut, likely in December, as Fed Chair Jerome Powell reiterated a cautious approach to monetary easing during his congressional testimony. Higher US yields continued to support the dollar, keeping it near multi-month highs.
USD against main currencies
The greenback pared losses primarily against the euro, which gained traction amid optimism over potential peace negotiations between Ukraine and Russia. Reports suggested that diplomatic talks brokered by Saudi Arabia could lead to de-escalation efforts, providing some relief to European markets. However, concerns over trade tensions and global growth risks kept traders cautious, with the dollar maintaining strength as a safe-haven currency. Investors are closely watching further developments on US trade policy and upcoming economic data for additional direction.
