Dollar dithers as investors await more tariff clarity
With little over a week to go before August 1, U.S. Treasury Secretary Scott Bessent said on Monday the administration is more concerned with the quality of trade agreements than their timing. Asked whether the deadline could be extended for countries engaged in productive talks with Washington, Bessent said President Donald Trump would make that decision. Uncertainty over the eventual state of tariffs globally has been a huge overhang for the foreign exchange market, leaving currencies trading in a tight range for the most part, even as stocks on Wall Street have scaled fresh highs.
"Nothing that happens on August 1 is necessarily permanent, so long as the U.S. administration remains willing to talk, as was indicated in Trump's letters from two weeks ago," said Thierry Wizman, global FX and rates strategist at Macquarie Group. The euro held steady at $1.1702. The European Central Bank is also in the mix this week, although it is not expected to adjust euro zone interest rates. A deal between the European Union, which could face 30% tariffs from August 1, and the U.S. remains elusive. EU diplomats said on Monday they were exploring a broader set of possible counter-measures given fading prospects for an agreement.
"The Trump administration has shown little tolerance for retaliatory measures, and there is a risk this could spiral (even if temporarily) into a tit-for-tat tariff escalation. The euro's ability to maintain preference over the dollar amid tariff tensions will depend on the extent of any escalation and whether the EU emerges as a relative loser while other countries secure significant deals with the U.S.," ING strategist Francesco Pesole said. Separately, the ECB said in a survey on Tuesday that loan demand from euro zone companies improved last quarter and is expected to pick up in the current quarter, in spite of the threat of tariffs and higher geopolitical tensions.
Against a basket of currencies, the dollar was broadly unchanged at 97.829, having fallen 0.6% on Monday. Also weighing on investors' minds were worries about Federal Reserve independence, given Trump has repeatedly railed against Chair Jerome Powell and urged him to resign because of the central bank's reluctance to cut interest rates.
"Our base case remains that solid U.S. data and a tariff-driven rebound in inflation will keep the FOMC on hold into 2026, and that the resulting shift in interest rate differentials will drive a continued rebound in the dollar in the next few months," said Jonas Goltermann, deputy chief markets economist at Capital Economics.
"But that view is clearly at the mercy of the White House's whims." The yen remained in focus on Tuesday, trading a touch weaker on the day at 147.485, having gained 1% on Monday following the weekend election and a public holiday.
"The initial relief for the yen that the ruling coalition did not lose even more seats and that Prime Minister Ishiba plans to hang on to power is likely to prove short-lived," said MUFG senior currency analyst Lee Hardman.
"The pick-up in political uncertainty in Japan could complicate reaching a timely trade deal with the U.S., posing downside risks for Japan's economy and the yen." (Additional reporting by Rae Wee and Ankur Banerjee in Singapore; Editing by Rachna Uppal, Sharon Singleton and Chizu Nomiyama )
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Dubai Eye
42 minutes ago
- Dubai Eye
Trump to raise tariffs on goods from India over Russian oil purchases
US President Donald Trump said on Monday he will substantially raise tariffs on goods from India over its purchases of Russian oil. "India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits. They don't care how many people in Ukraine are being killed by the Russian War Machine," Trump said in a post on Truth Social. "Because of this, I will be substantially raising the Tariff paid by India to the USA." He did not elaborate on what the tariff would be. Trump last week said he would impose a 25 per cent tariff on goods imported from India and added that the world's fifth-largest economy would also face an unspecified penalty but gave no details. Meanwhile, India said on Monday that US and EU "targeting" of the nation for importing oil from Russia after the commencement of the Ukraine conflict is "unjustified and unreasonable." "Like any major economy, India will take all necessary measures to safeguard its national interests and economic security," the Foreign Ministry's spokesperson Randhir Jaiswal said in a statement.
The National
7 hours ago
- The National
US states and cities boycotting Israel won't receive disaster funds, Trump administration says
US President Donald Trump 's administration has said states and cities will not receive funding to prepare for natural disasters if they choose to boycott Israeli companies. States must certify that they will not cut commercial relations with Israeli companies to receive the money from the Federal Emergency Management Agency, Reuters reported, quoting grant notices posted last week. The condition applies to at least $1.9 billion on which states rely for search and rescue equipment, emergency manager salaries and back-up power systems, among other expenses. 'DHS [Department of Homeland Security] will enforce all anti-discrimination laws and policies, including as it relates to the BDS [Boycott, Divestment and Sanctions] movement, which is expressly grounded in anti-Semitism," a DHS representative said in a statement to The National. They were referring to a campaign designed to put economic pressure on Israel to end the occupation of the Palestinian territories. "Those who engage in racial discrimination should not receive a single dollar of federal funding.' More than 30 states already have anti-BDS laws or policies, according to Newsweek. Fema will require major cities to agree to the Israel policy to receive a cut of $553.5 million set aside to prevent terrorism in dense areas. New York City is due to receive $92.2 million from the programme, more than all other recipients. It is the latest example of the Trump administration making use of routine federal funding to advance its political message at the state level. Fema said in July that states will be required to spend part of their federal terrorism prevention funds on helping the government to arrest migrants, which is an administration priority. Mr Trump has said that Fema should be eliminated, and that states should take on more responsibility for responding to and preparing for disasters including extreme weather.
Al Etihad
7 hours ago
- Al Etihad
Early wins for US, but dynamics of EU alliance is changing
4 Aug 2025 23:55 SULTAN KHALIFA AL RUBAEI*Tariffs have once again taken centre stage in US and international trade, following the August deadline set by United States President Donald Trump for countries to present trade agreement proposals or face steep tariffs. The US administration secured deals with several of its trading partners, most notably the European Union (EU) and the United Kingdom. However, the global trade landscape now appears to be bracing for profound changes in trade rules that go beyond the post-World War II US agreement with the EU included a 15% tariff on European goods (significantly lower than the 30% previously threatened by the US president), an exemption for pharmaceutical products, and limited exceptions for aircraft and medical equipment. In return, the EU committed to purchasing $750 billion worth of US energy products and investing approximately $600 billion in the US. This agreement secured substantial additional revenue for the American 'America First' policy pursued by the United States in its dealings with both partners and non-partners pushes it toward manoeuvring economic policies. But beyond the deals and manoeuvres lies US-European relations, particularly with the EU, the foundation of which is no longer only partnership, but also competition, or rather, the partnership is taking a backseat in the face of competition. This shift may be attributed to internal divisions among the EU's 27 member states, the multiple challenges facing the ageing continent, and the heavy reliance on the United States when it comes to defence forces. At this time, none of the EU countries can afford the economic strain of a trade the American side, the current administration has shown little regard for the mutual trust in the transatlantic free trade relations, nor for the existing rules of international trade. As a result, there is a possibility that other global actors may adopt similar protectionist policies, posing a threat to the stability of international markets, particularly in light of the tensions that the current environment may create at the level of international trade the changes and uncertainty, the EU chose to stay aligned with America, albeit at a high cost. The newly imposed tariffs place a heavy financial burden on EU-based companies, forcing them to bear additional billions in expenses. While EU member states acknowledge the agreement's potential harm to their economies, they have viewed it as the best possible option under the current circumstances. It may mark the beginning of a longer negotiation process rather than the end, given the limited options available. Without formal trade agreements with Washington, the EU risks being subjected to US terms, leading to imbalanced deals or potential trade United States emerged as the winner in the agreement with the EU. However, the outcome also places a burden on American consumers, who are likely to face higher prices for imported goods as companies pass on the additional costs. This is particularly significant given that Germany is one of the largest exporters to the US, with exports exceeding €161 billion in 2024. Ireland's exports to the US reached €72 billion and Italy's €64 billion in the same year, according to Eurostat, the EU's statistical office. In total, 20% of the EU's goods exports are directed to the United States. This makes the agreement the least damaging option for Europe to avoid a trade confrontation between two allies who together account for nearly one-third of global trade. The effects of this deal may become visible in the US market in the coming this agreement, the US aims to achieve economic balance and address its trade deficit with the EU, which reached $235.6 billion in 2024. Although the deal helps avoid a trade war, it shows that the dynamics of old alliances are shifting, international trade is being reshaped amid global economic uncertainty, and competition for each country to achieve huge gains has become a defining feature of today's international economic and trade relations. *The columnist is a researcher with the think-tank firm, TRENDS Research & Advisory
