US Dollar Nears Five-Month Low Amid Trade Policy Uncertainty

US Dollar Nears Five-Month Low Amid Trade Policy Uncertainty

Dollar Weakens as Trade Policies Raise Concerns

The U.S. dollar remained close to a five-month low on Monday, weighed down by uncertainty surrounding trade policies and a series of weak economic data releases.

Euro Holds Near Five-Month Peak

The euro maintained its strength, trading near a five-month high. This comes after German political parties reached a fiscal agreement that could increase defense spending and support economic growth in Europe’s largest economy.

Key Shifts in Global Markets

Goldman Sachs analysts highlighted two major shifts in macroeconomic trends:

1. A sharp downgrade of U.S. assets due to tariff volatility and policy uncertainty.
2. A significant increase in Germany’s fiscal spending, boosting its economic outlook.

These shifts challenge the idea of U.S. economic dominance that has driven markets in recent years.

Germany’s Fiscal Expansion

German Chancellor-in-waiting Friedrich Merz announced a deal backed by the Greens to expand state borrowing. The agreement includes a €500 billion fund for infrastructure and major changes to borrowing rules, expected to be approved by parliament this week.

Chinese Yuan Strengthens

The Chinese yuan edged closer to a four-month high in offshore trading. The currency recently strengthened to 7.2158 per dollar, marking its strongest level since November.

China’s State Council introduced a “special action plan” aimed at boosting domestic consumption. Measures include increasing household income and implementing a childcare subsidy. Recent economic data suggests the Chinese economy started the year on a solid footing, with retail sales showing improvement.

U.S. Dollar Index Performance

The U.S. dollar index, which tracks the currency against six major counterparts, was at 103.71 early Monday. This is close to a five-month low of 103.21 reached last week. The index has fallen nearly 6% from a two-year high of 110.17 recorded in mid-January.

Concerns about a potential recession have replaced earlier optimism that trade policies would drive growth.

Market Focus on U.S. Retail Sales Data

On Friday, U.S. consumer sentiment fell to its lowest level in nearly two and a half years, with inflation expectations rising due to ongoing trade tensions. Analysts expect upcoming retail sales data to be a critical test for the dollar, given the decline in consumer confidence.

Steady Yen as Markets Eye Central Bank Decisions

The U.S. dollar remained stable at 148.70 yen, staying near last Tuesday’s low of 146.545, its weakest point since early October. The Federal Reserve is expected to keep interest rates unchanged on Wednesday.

Similarly, the Bank of Japan is likely to hold rates steady, though rising wages in Japan could support a case for future rate hikes. BOJ Governor Kazuo Ueda noted that wage increases could boost consumption but expressed concerns about global economic uncertainties.

Sterling Holds Steady

The British pound traded at $1.2927, with markets anticipating that the Bank of England will also maintain its current interest rate policy on Thursday.

“US Dollar Nears Five-Month Low Amid Trade Policy Uncertainty” “US Dollar Nears Five-Month Low Amid Trade Policy Uncertainty” “US Dollar Nears Five-Month Low Amid Trade Policy Uncertainty” “US Dollar Nears Five-Month Low Amid Trade Policy Uncertainty”