Dollar pressured by trade uncertainty

The dollar index remained below 98 on Tuesday, extending its slide for a second consecutive session as investors exercised caution ahead of the critical August 1 deadline for countries to finalize trade agreements with the United States.

The softer tone in the dollar reflected growing uncertainty around whether meaningful progress can be achieved in the ongoing negotiations, which have seen a series of ups and downs in recent weeks. Market participants are keenly awaiting any concrete updates that could reduce trade-related risks and restore investor confidence.

On Monday, U.S. Treasury Secretary Scott Bessent emphasized that the administration is prioritizing the quality and durability of trade deals over strict adherence to the deadline. He indicated that President Donald Trump retains discretion to extend the August 1 cutoff if countries demonstrate genuine progress in talks, signaling a potential window for further negotiations.

However, Bessent’s remarks also underscored the administration’s firm stance on leveraging tariffs as a negotiating tool, suggesting that trade tensions could persist if satisfactory agreements are not reached.

The broader market environment remains sensitive to geopolitical and policy developments, with currency traders balancing concerns about protectionism against hopes for diplomatic breakthroughs. The dollar’s recent weakness has been supported in part by signs of slowing U.S. economic growth and diminishing expectations for aggressive Federal Reserve tightening.

In this context, all eyes are on Federal Reserve Chair Jerome Powell, who is scheduled to speak at a high-profile economic forum in Washington later today. Investors will scrutinize his comments for any hints on the central bank’s future interest rate trajectory.

While President Trump has repeatedly called for rate cuts to bolster economic growth and ease borrowing costs, markets have remained skeptical that the Fed will move this month, instead pricing in a steady policy stance for the near term.

Powell’s remarks could prove pivotal in shaping short-term market sentiment. A dovish tone signaling caution about inflation or growth could further weigh on the dollar and boost risk assets, while a more hawkish or neutral message might stabilize the currency and temper expectations for policy easing.

Looking ahead, the dollar index is likely to remain volatile as traders react to trade negotiations, central bank communications, and broader global economic data. With uncertainty mounting, safe-haven demand for the greenback could fluctuate, depending on risk appetite and geopolitical developments in the coming days.