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Donald Trump’s recent trade threats have caused the dollar to drop to its lowest level in three years on Thursday, as concerns over trade and geopolitics continue to mount.
The US president’s announcement that he will be sending letters to trading partners outlining new tariff rates in the coming weeks has pushed the dollar down by 0.8% against a basket of currencies, including the pound and the euro. This decline marks the currency’s lowest point since March 2022.
Market analysts, such as Derek Halpenny from MUFG, believe that Trump’s comments indicate a potential escalation in trade tensions as the deadline for new tariffs approaches.
Aside from trade concerns, investors are also monitoring the trade truce between the US and China, as well as the escalating tensions between the US, Israel, and Iran.
While the dollar is facing downward pressure, stock markets have been recovering from their April losses, with the S&P 500 nearing an all-time high. Futures markets are predicting a 0.6% decline for the Wall Street benchmark.
Additionally, lower-than-expected US inflation figures have raised expectations of faster interest-rate cuts from the Federal Reserve, further impacting the dollar’s performance.
On the other hand, the euro has strengthened against the dollar following signals from the European Central Bank hinting at a potential end to its rate cutting cycle.
Overall, the dollar has experienced a significant decline this year due to economic concerns related to the trade war, rising deficit, and uncertainties surrounding US investments.
Market experts like Trevor Greetham from Royal London Asset Management and Vasileios Gkionakis from Aviva Investors believe that the dollar’s downward trend may continue as global economic dynamics shift.