US dollar (USD) Market Update
The US dollar (USD) has recently faced significant pressure and has tumbled to a three-year low, reflecting growing concerns surrounding US policy. Analysts indicate that uncertainty over tariffs and the independence of the Federal Reserve are eroding confidence in the dollar. Reports of President Trump's candidacy to the Supreme Court seeking the ability to dismiss Fed Chair Jerome Powell have heightened these concerns.
As the week begins, experts warn that the USD may continue to decline if President Trump persists in undermining the credibility of US economic policies. The recent announcement of a minimum 10% tariff on all exports to the US—with higher rates impacting major trading partners—has further destabilized the dollar. Some analysts speculate that this strategy might be a deliberate attempt by Trump to weaken the dollar as part of broader efforts to reshape global trade dynamics, a concept some are dubbing the "Mar-a-Lago Accord."
In terms of recent USD performance, the currency has lost all gains made since Trump's election, with the USD to EUR trading at 0.8812, 6.3% below its three-month average of 0.9406. This pair has demonstrated notable volatility, trading within an 11.2% range from 0.8804 to 0.9788. Similarly, the USD to GBP is at a seven-day low near 0.7638, representing a 3.2% decline relative to its three-month average of 0.7893 within a stable range from 0.7633 to 0.8217. Meanwhile, the USD to JPY is also struggling, currently at 143.5, which is 4.9% below its three-month average of 150.9, and has traded within a volatile range of 10.1% from 143.5 to 158.0.
Additionally, the relationship between oil prices and the USD is noteworthy. Current prices of oil (OIL to USD at 64.76) are 11.9% lower than the three-month average of 73.47, with a highly volatile range of 33.4% from 61.58 to 82.16. Given that the euro is influenced by oil price movements, this decline in oil prices may also have repercussions for the euro and its exchange relationship with the dollar.
Looking forward, the direction of the USD will heavily depend on Federal Reserve policy, economic data, and geopolitical factors. Continued scrutiny of US fiscal policy and trade relations will likely provoke further volatility in the dollar. Investors and businesses engaged in international transactions should remain vigilant regarding ongoing developments and consider strategies to mitigate risks associated with these fluctuations.
