The US Dollar (USD) struggled to maintain strength against other major currencies on Thursday after experiencing volatility driven by the latest tariff developments. Investors are now focused on the release of the April Personal Consumption Expenditures (PCE) Price Index, a key inflation metric favored by the Federal Reserve, which is set to be released on Friday.
USD Performance This Week
The US Dollar showed mixed results this week, with the USD posting its strongest performance against the Australian Dollar (AUD). However, it faced headwinds against most other major currencies as a result of shifting market sentiment and geopolitical developments.
Dollar’s Volatility Amid Tariff News
On Thursday morning, the US Dollar initially gained ground following a decision by the US International Trade Court to block President Trump’s proposed “Day of Liberation” tariffs. However, the USD lost momentum later in the day as the Federal Circuit Court ruled to reinstate the tariffs. The currency further weakened after Treasury Secretary Scott Bassett noted that US-China trade talks had “slightly stalled” and that any potential deal would likely require direct involvement from President Trump and Chinese President Xi Jinping.
In addition to the tariff news, the Wall Street Journal reported that the Trump administration is considering implementing new tariffs of up to 15% on Chinese imports within the next 150 days. These developments contributed to the pressure on the USD, which saw a decline of approximately 0.5% on Thursday, before making a modest recovery to around 99.50 in early European trading on Friday.
Economic Data and Market Movements
Earlier in the day, data from Germany showed that retail sales fell by 1.1% in April, worse than the expected 0.2% growth. This was a key indicator for the Eurozone, and the data weighed on market sentiment. In the afternoon, Germany’s Federal Statistical Office is expected to release preliminary Consumer Price Index (CPI) data for May, which could provide further insight into inflation trends within the region.
The EUR/USD pair ended the day in positive territory on Thursday, but trading was relatively flat on Friday, with the currency pair holding steady around the 1.1350 level as market participants awaited further developments.
Gold prices also saw fluctuations during Thursday’s session. After a significant drop in Asian trading, gold prices reversed their losses and closed higher. However, in early European trading on Friday, the precious metal saw a pullback, retreating back towards the $3,300 range.
GBP/USD & UK Economic Outlook
GBP/USD saw slight gains on Thursday but remained below the 1.3500 level. In a statement late Thursday, Bank of England (BoE) Governor Andrew Bailey indicated that the BoE’s key interest rate decisions are primarily driven by domestic economic conditions in the UK, rather than by external factors such as US tariffs or trade policies.
USD/JPY & Market Sentiment
The USD/JPY pair reached a two-week high above 146.00 on Thursday before reversing course and ending the day down by about 0.5%. The pair faces mild bearish pressure, and by Friday morning in Europe, it was trading below the 144.00 level.
Conclusion
The US Dollar’s performance remains highly sensitive to developments in US-China trade talks and key economic data, including inflation figures due to be released on Friday. With uncertainty surrounding tariff policies and mixed signals from global economic indicators, the USD is expected to face continued challenges as traders await further clarity on the US economic outlook and potential changes to trade relations.
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