The US dollar fell on Monday against the yen, and hit four-year lows against the euro amid market optimism about reaching US trade deals, which could prompt the Federal Reserve to cut interest rates.
The dollar continued to perform poorly against sterling, approaching four-year lows, while hitting a decade low against the Swiss franc as the White House approaches a deal with China.
Investors interpreted Fed Chair Jerome Powell’s last week Congressional testimony as leaning cautious, after saying that rate cuts are likely if inflation doesn’t rise this summer in response to tariffs.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in July stood at 20%.
The odds of such a cut in September stood at a much better 93%.
Currently, markets await a spate of important US data this week, including the crucial payrolls report on Friday, which would impact market’s expectations for upcoming Fed moves.
Trump’s Statements Pressure the Dollar
The dollar was pressured once more by renewed attacks by President Donald Trump against Powell, urging him to resign before the end of his term in May.
Trump also said he wants main interest rates down to 1% from the current 4.25-4.5%, adding he plans to replace Powell with someone much more interested in monetary easing.
Investors are also analyzing Trump’s new massive tax cut and spending bill, currently in the Senate, which is estimated to add $3.3 trillion to government debt in 10 years.
Otherwise, the dollar index is heading for its biggest 6-month decline since the early seventies.
It has settled near 97.193, close to over three-year lows.
Performance of Major Rivals
The dollar fell 0.4% against yen to 144.11
The euro settled at 1.1723, near September 2021 highs
Sterling inched down 0.1% to $1.3701, still near October 2021 highs
The Swiss franc settled near January 2015 highs at 0.7978.
The US Treasury Secretary Scott Bessent said Friday that Washington and Beijing solved their dispute about rare-earth minerals shipments to the US.
He expects the US to finish multiple trade deals by early September, expressing flexibility about the final deadline on tariffs set by Trump on July 9.
As for other currencies: the yuan rose 0.1% against the dollar to 7.163 on trade deal news, while the Canadian dollar relinquished earlier gains and steadied by the end of the session.
