The U.S. dollar edged lower on Tuesday, giving back overnight gains as markets weighed the latest developments in President Donald Trump’s trade negotiations.
As of 04:10 ET (08:10 GMT), the U.S. Dollar Index—tracking the greenback against a basket of six major currencies—fell 0.2% to 96.910, after reaching a high of 97.280 overnight.
Greenback Gives Up Gains Amid Tariff Uncertainty
The retreat followed Trump’s announcement late Monday that he had sent letters to 14 countries, including Japan and South Korea, outlining sharply increased tariffs on imports to the U.S. The president also extended his July 9 deadline for new trade agreements to August 1, though he noted the timeline was flexible and open to revisions.
Analysts at ING suggested the market is treating the letters as part of an ongoing negotiation process rather than final policy: “The market seems to be taking the view that nothing is final… The DXY is consolidating above 96.50, with a broader 96.50–98.00 range likely ahead of the June CPI release.”
Euro Rises on Trade Optimism
The euro climbed on the back of trade deal optimism, with EUR/USD up 0.5% to 1.1761.
The European Union, not included in the new tariff round, is continuing trade talks with the U.S. A spokesperson said European Commission President Ursula von der Leyen had a “good exchange” with Trump and hopes to finalize a deal by Wednesday.
ING analysts noted that the EU’s strong consumer base gives it leverage: “Reports suggest the U.S. may maintain the baseline 10% tariff on EU imports, while certain sectors like aircraft or beverages could receive exemptions.”
However, German trade data weighed slightly on sentiment. Exports fell by 1.4% in May—below the expected 0.2% drop—largely due to a 7.7% decline in shipments to the U.S., which had surged in prior months amid tariff concerns.
Pound Holds Near Highs on Trade Certainty and BoE Outlook
GBP/USD rose 0.3% to 1.3642, remaining close to last week’s peak of 1.3787, its highest since October 2021. The U.K. is one of the few countries with a finalized trade agreement, and persistent inflation supports the view that the Bank of England may stay hawkish.
Aussie Jumps After RBA Surprise Hold
In Asia, AUD/USD jumped 0.7% to 0.6543 after the Reserve Bank of Australia held interest rates steady, defying expectations for a cut. The RBA cited uncertainty around global risks and trade policy, opting to wait for clearer signals that inflation is easing. Despite significant disinflation since 2022, recent CPI data was stronger than anticipated.
Meanwhile, USD/JPY rose 0.1% to 146.10, with the yen stabilizing after a nearly 1% overnight drop following Tokyo’s receipt of Trump’s tariff notice. USD/CNY dipped 0.1% to 7.1715 as markets remained cautious over China-U.S. trade dynamics.
