US Dollar Index (DXY) dives below 96.00 following upbeat Eurozone data
- The Dollar reaches fresh 3,1/2- year lows below 96.00.
- Renewed tariff concerns and US fiscal woes are weighing heavily on the US Dollar.
- Upbeat Eurozone manufacturing and German unemployment figures have boosted the Euro, adding pressure on the USD.
The US Dollar remains on the back foot on Tuesday, weighed by renewed concerns about the US fiscal health, growing trade uncertainty and investors’ bets on Fed cuts, as President Trump continues attacking the Fed Chair, Jerome Powell.
In this context, the US Dollar Index (DXY) extended its decline for the seventh consecutive day, reaching fresh 3, ½-year lows below 96.00 as the Euro jumped following the release of upbeat manufacturing data and steady inflation figures.
US Dollar PRICE This month
The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.35% | -0.83% | -0.09% | -0.16% | -0.40% | -0.65% | |
| EUR | 0.25% | -0.09% | -0.68% | 0.16% | 0.18% | -0.17% | -0.39% | |
| GBP | 0.35% | 0.09% | -0.47% | 0.28% | 0.28% | -0.07% | -0.29% | |
| JPY | 0.83% | 0.68% | 0.47% | 0.78% | 0.66% | 0.41% | 0.18% | |
| CAD | 0.09% | -0.16% | -0.28% | -0.78% | -0.09% | -0.35% | -0.58% | |
| AUD | 0.16% | -0.18% | -0.28% | -0.66% | 0.09% | -0.34% | -0.58% | |
| NZD | 0.40% | 0.17% | 0.07% | -0.41% | 0.35% | 0.34% | -0.23% | |
| CHF | 0.65% | 0.39% | 0.29% | -0.18% | 0.58% | 0.58% | 0.23% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Trade uncertainty is back on investors’ minds
Earlier on Tuesday, Trump complained about the lack of progress in the trade talks with Japan and threatened to impose higher tariffs from July 9. These comments have crushed the moderate optimism about last week’s rare earths deal with China and have increased pressure on the US Dollar.
Beyond that, the uncertainty about Trump’s Tax bill, which is expected to add $3,3 trillion to the US debt pile and has triggered some divergence between republican senators, keeps weighing on the US Dollar. Growing concerns about a debt crisis in the US are keeping investors away from the US Dollar.
In this context, Trump’s continuous attacks on the Fed President Powell are casting doubts about the central bank’s independence and further undermining confidence in the US Dollar as the world’s reserve currency.
Later today, the Fed Chairman, Jerome Powell, will speak at the central bankers’ summit in Sintra, Portugal, and might give further insight into the bank’s monetary policy plans. This speech, together with the US Manufacturing PMI and JOLTS Job openings data, will drive the US Dollar later today.
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 found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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