The U.S. dollar edged higher on Monday, recovering from a four-month low, though it remained under pressure amid concerns that the Trump administration’s trade policies could weigh on economic activity in the world’s largest economy.
As of 04:10 ET (09:10 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.1% to 103.959, slightly above last week’s four-month low.
Dollar Stabilizes After Recent Decline
The U.S. dollar managed to halt its recent slide, gaining some ground after a month-long decline driven by uncertainty surrounding President Donald Trump’s trade policies and their potential economic impact.
In an interview with Fox News on Sunday, Trump refrained from predicting whether the U.S. economy could enter a recession following his tariff measures on Mexico, Canada, and China.
Last week, the dollar suffered a sharp 3% drop against major rivals, marking its weakest weekly performance since November 2022.
Market focus now shifts to Wednesday’s February Consumer Price Index (CPI) report, which could offer insight into the Federal Reserve’s future monetary policy stance.
“The core rate is expected to remain sticky at 0.3% month-on-month,” analysts at ING noted, reinforcing Fed Chair Jerome Powell’s recent comments that the central bank is in no rush to cut interest rates.
Euro Pulls Back After Strong Rally
In Europe, EUR/USD dipped 0.2% to 1.0816, retracing slightly after notching its strongest weekly performance since 2009, fueled by Germany’s groundbreaking fiscal reforms.
Germany’s election winner, Friedrich Merz’s conservatives, and the Social Democrats concluded initial coalition talks on Saturday, aiming to finalize an agreement before next week. Their central theme is the relaxation of Germany’s borrowing limits to keep the economy growing. On Tuesday, investors will also pay close attention to a high-level meeting in Saudi Arabia, where U.S. and Ukrainian officials will work on peace negotiations in the ongoing Ukraine-Russia war.
“We anticipate EUR/USD consolidating within the 1.0770–1.0850 range at the start of the week,” ING analysts added. “A further leg higher will likely require hawkish signals from ECB officials or meaningful progress in Saudi Arabia, rather than U.S. macroeconomic developments.”
Meanwhile, GBP/USD declined 0.3% to 1.2880, giving up some recent gains after sterling touched a four-month high of 1.2946 earlier in the session.
Yen Strengthens on Safe-Haven Demand
In Asia, USD/JPY fell 0.6% to 147.17, nearing its lowest level since early October.
The yen has appreciated owing to increased safe-haven demand given fragile economic prospects, along with ongoing speculation that the Bank of Japan may continue hiking interest rates, even though wage data for January came slightly weaker than the market had been expecting. The Chinese yuan, on the other hand, slid, which saw USD/CNY climb 0.4% to 7.2655, because of dismal inflation data.
Consumer and producer inflation fell short of expectations in China in February and continued to suggest lingering but not accelerated fazes of deflation due to the assistive stimulus packages introduced by Beijing, including subsidies on discretionary goods designed to boost domestic consumption.
