US Dollar Dips Amid Tariff Negotiations and Awaited Economic Data
Tokyo – The U.S. dollar experienced a slight decline against most major currencies on Wednesday as investors closely monitored developments in President Donald Trump’s tariff negotiations, particularly with China, ahead of a series of upcoming economic data releases.
The Trump administration set a Wednesday deadline for countries to submit their best trade offers, coinciding with the day duties on imported steel and aluminum were officially doubled. Adding to the trade tension, the White House indicated that Trump is expected to have a call with Chinese President Xi Jinping this week. This comes after both sides recently accused each other of violating an agreement made last month to roll back some existing tariffs.
“What happened was that the market was quite relaxed about U.S. and China until we heard the sort of ramping up of rhetoric from Trump at the end of last week,” noted Fiona Cincotta, City Index’s senior markets analyst. She added that this renewed focus on the upcoming call has markets looking for “a sense that the two leaders are at least getting towards the same page.” Trump himself posted on his social media platform on Wednesday that Xi was “tough” and “hard to make a deal with.”
Economic Data Influencing Dollar Volatility
While trade frictions remain central, economic indicators have also played a role in the U.S. currency’s movements this week. The dollar fell 0.8% against major peers on Monday following a contraction in manufacturing activity. However, it rebounded by almost the same amount the next day after a surprising increase in U.S. job openings.
As of 0735 GMT, the dollar remained steady against the Japanese yen at 143.95, while it edged 0.16% lower against the Swiss franc to 0.8228. The euro gained 0.21% to $1.1395 ahead of the European Central Bank’s interest rate decision expected on Thursday. Sterling inched up 0.14% to $1.3539, benefiting from the UK’s exemption from the increased U.S. metal duties due to an existing trade deal. The dollar index, measuring the currency against six others, was flat at 99.12, hovering near its late April low.
Global Economic Focus
Overall market sentiment has been bolstered by economic data that analysts suggest may not yet fully reflect the impact of trade uncertainty. Traders are closely watching May business activity data from the UK and euro zone economies, alongside a key ISM services sector report from the U.S. The ADP employment report later today could also offer insights into the health of the U.S. private sector before the crucial monthly payrolls figures are released on Friday.
Elsewhere, the Australian dollar edged up 0.12% to $0.647 following GDP figures that showed the economy barely grew in the first quarter, underscoring the need for additional stimulus. The Canadian dollar remained flat against its U.S. counterpart at C$1.3714, with the Bank of Canada expected to hold interest rates steady later today. Both Canada and Mexico are exposed to the higher U.S. tariffs on industrial metals, though Mexico’s peso remained steady. China’s yuan was stable at 7.1886 per dollar in offshore trading. In South Korea, the won strengthened approximately 0.9% to 1,365.4 per dollar following the victory of liberal candidate Lee Jae-myung in the country’s presidential election.
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