- The DXY collapses below 99.50, lowering 1.8% in the week in the midst of a wide feeling of risk aversion.
- Trump threatens 50% tariffs at EU products, 25% to Apple products manufactured abroad.
- The markets are attentive to the next LCOM minutes, GDP and underlying PCE data for policy signals.
The American dollar index (DXY), which follows the value of the US dollar (USD) compared to a basket of six main currencies, collapses sharply on Friday, lowering more than 1.8% in the week after registering a modest profit on Thursday, quoting around 99.10 about a minimum of two weeks, before the weekend.
Although the US dollar was already facing winds against persistent commercial tensions and growing concerns about the fiscal perspective of the United States, the new weakness of Friday is produced in response to the aggressive commercial rhetoric of US President Donald Trump, who threatened to impose 50% tariffs on all goods sent to the United States from the European Union (EU) 25% ‘at least’ Apple products manufactured abroad. The threats revived the fears of a commercial war in climbing and added to the feeling of risk aversion in global markets.
Threats in the form of publications on social networks arrived only a few hours before high -level commercial conversations between Washington and Brussels were scheduled. Trump had initially imposed a 20% tariff to most EU products last month, but temporarily reduced the tax at 10% until July 8 to give space to negotiations.
“Our discussions with them are not going anywhere!” Trump wrote in a publication in social networks on Friday. He said the new tariffs would take effect on June 1.
This aggressive position is expected to decrease 20% of EU exports to the US, according to estimates from the Kiel Institute.
Looking forward, market participants will focus on the comments of officials of the Fed, as well as in the minutes of the FOMC meeting, the preliminary GDP of the first quarter, the underlying PCE price index, the personal income and expenses, the requests for durable goods and the trade balance of goods, all scheduled for next week, in search of new clues about the economic perspectives of the US and the direction of the monetary policy.
American dollar today
The lower table shows the percentage of US dollar change (USD) compared to the main coins today. US dollar was the strongest currency in front of the euro.
| USD | EUR | GBP | JPY | CAD | Aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.70% | -0.84% | -1.04% | -0.98% | -1.32% | -1.48% | -0.98% | |
| EUR | 0.70% | -0.14% | -0.36% | -0.28% | -0.61% | -0.77% | -0.26% | |
| GBP | 0.84% | 0.14% | -0.19% | -0.13% | -0.44% | -0.63% | -0.12% | |
| JPY | 1.04% | 0.36% | 0.19% | 0.08% | -0.28% | -0.44% | 0.08% | |
| CAD | 0.98% | 0.28% | 0.13% | -0.08% | -0.36% | -0.49% | 0.01% | |
| Aud | 1.32% | 0.61% | 0.44% | 0.28% | 0.36% | -0.15% | 0.36% | |
| NZD | 1.48% | 0.77% | 0.63% | 0.44% | 0.49% | 0.15% | 0.51% | |
| CHF | 0.98% | 0.26% | 0.12% | -0.08% | -0.01% | -0.36% | -0.51% |
The heat map shows the percentage changes of the main currencies. The base currency is selected from the left column, while the contribution currency is selected in the upper row. For example, if you choose the US dollar of the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box will represent the USD (base)/JPY (quotation).
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
