The U.S. dollar made modest gains on Monday, kicking off the week with cautious trading as investors prepare for potential market fluctuations tied to looming trade developments. With the July 9 deadline for the Trump administration’s tariff pause rapidly approaching, traders remain alert for signs of volatility.
By 04:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against six major currencies, inched up 0.1% to 96.932, hovering just above last week’s three-year low.
Steady Before Possible Trade Shifts
Currency markets showed relative stability early Monday as participants awaited Wednesday’s end to the 90-day suspension of the so-called “Liberation Day” tariffs. President Trump said he would disclose on Monday which countries will receive formal letters outlining upcoming tariff increases set to take effect August 1.
Most U.S. trade partners are expected to face notable tariff hikes once the moratorium concludes. Yet, Trump also highlighted progress on several trade deals anticipated soon. So far, agreements with the UK, China, and Vietnam have been secured.
Analysts at ING commented, “While threats of reinstating tariffs as high as 50% could unsettle the current low-risk sentiment, the greenback’s downside may be limited due to already cautious dollar positioning.”
Euro Retreats from Recent Highs
The euro eased 0.3% against the dollar to 1.1747, pulling back from last week’s peak of 1.1829—the highest since September 2021. German industrial output rose 1.2% in May, driven by automotive and energy sectors, surpassing expectations of no growth.
Following its eighth rate cut in a year last month, the European Central Bank is anticipated to hold rates steady until September, with ongoing trade uncertainties and euro strength tempering further easing, according to Capital Economics.
EU trade officials recently met with U.S. counterparts in Washington, though a broad trade deal remains out of reach. The EU aims for an “in principle” agreement offering immediate tariff relief on key products. Capital Economics expects negotiations to drag on or result in a preliminary, non-binding deal.
Pound Holds Close to Recent Highs Despite Slight Dip
GBP/USD slipped 0.3% to 1.3607 but remained near last week’s peak of 1.3787, the highest level since October 2021. UK house prices were flat in June, per Halifax data, with a minor upward revision to May’s figures.
The housing market still feels the impact of April’s hike in property transaction taxes, which has kept activity subdued.
Australian Dollar Softens Ahead of RBA Rate Decision
In Asia, USD/JPY climbed 0.4% to 145.18 as traders awaited clarity on complex U.S.-Japan trade talks. The Chinese yuan edged up 0.1% to 7.1726, while AUD/USD slipped 0.8% to 0.6504, pulling back from a near eight-month high of 0.6590 reached last week.
Markets expect the Reserve Bank of Australia to cut its cash rate by 25 basis points on Tuesday, responding to easing inflation and uncertain economic growth prospects.