The dollar index extended its decline for a sixth consecutive session, slipping to 103.6 on Monday, its lowest level in four months. The greenback’s weakness was driven by mounting concerns over the US economic outlook, with both domestic and global factors weighing heavily on investor sentiment.
Dollar falls for sixth session
Last week, the dollar tumbled approximately 3.5%, marking its worst weekly performance since November 2022. The decline in the dollar came amid growing uncertainty, as traders braced for more signs of economic slowdown. In a Fox News interview, President Trump declined to rule out a potential recession, pointing to his administration's tariff policy changes and describing the current economic phase as a "period of transition." These comments added to the prevailing sense of caution in the markets.
Macro effects on the USD
Meanwhile, Federal Reserve Chairman Jerome Powell acknowledged the increasing economic uncertainty, underscoring concerns that inflationary pressures may not subside as quickly as anticipated. Powell’s statements, coupled with the release of softer jobs data, have sparked speculation about the Fed’s next steps, leaving investors on edge as they await the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports. These reports will be closely watched for fresh insights into inflation, providing crucial clues ahead of next week's Federal Open Market Committee (FOMC) meeting, where the Fed is expected to unveil updated economic projections.
Sharpest decline against Japanes yen
The dollar’s broad weakness continued on Monday, with the sharpest declines seen against the Japanese yen and Swiss franc. Both currencies, viewed as safe-haven assets, attracted demand as heightened risk aversion swept through the global markets. This surge in demand for the yen and the franc reflected investor fears of rising economic instability, prompting a flight to safety. With inflation data on the horizon and the Fed's stance remaining a key point of focus, the dollar's direction in the coming days will depend heavily on the economic signals that emerge from these reports.
