The U.S. dollar ticked up on Monday, while the euro weakened slightly, after President Donald Trump announced a fresh round of tariffs on imports from the European Union. Despite the headline-grabbing move, currency markets reacted with relative calm.
As of 05:30 ET (09:30 GMT), the Dollar Index—tracking the greenback against six major global currencies—rose 0.1% to 97.577. The index had already surged nearly 2% last week, its strongest weekly performance since early December.
Greenback Strengthens Amid Trade Turbulence
Trump’s latest tariff announcement included a 30% duty on goods from both Mexico and the EU, effective August 1. The declaration adds urgency to ongoing trade negotiations, with less than three weeks left before the tariffs go into effect. The U.S. had previously pushed back a July 9 deadline to allow more time for talks.
While the news supported the dollar, the market’s reaction was far less dramatic than during previous episodes of tariff anxiety, such as April’s “Liberation Day” shock.
“The moves have not been larger since investors see these threats as a Washington negotiating tactic to push the other side over the line into a deal,” said analysts at ING, in a note.
“Our baseline assumes that better deals than this get agreed by the 1 August deadline and that we are not going to see a repeat of the early April market shock in response to Liberation Day tariffs.”
Traders also turned their attention to other events that could impact the dollar this week, including Tuesday’s release of the U.S. Consumer Price Index (CPI) and possible new sanctions targeting buyers of Russian oil.
“Look out for the announcement of any secondary sanctions on those countries buying Russian oil,” ING added. “A jump in energy is good news for the energy-independent U.S. (and the dollar) and negative for the big energy importers in Europe and Asia.”
Euro Drops to 3-Week Low on Trade Tensions
The euro came under pressure following Trump’s tariff threat, with EUR/USD slipping 0.1% to 1.1683—its lowest level in three weeks.
European Commission President Ursula von der Leyen criticized the proposed tariffs, calling them “unfair and disruptive.” Nevertheless, she confirmed that the EU would continue to suspend its retaliatory tariffs through early August and would seek a negotiated solution.
“Those waiting for better levels to buy EUR/USD could be rewarded for their patience,” said ING. “U.S.-EU trade negotiations look set to get noisier over the coming weeks, and baseline expectations that the EU secures a 10% tariff rate on most goods could be challenged.”
Pound Extends Losses on Weak UK Growth
Sterling also declined, with GBP/USD falling 0.2% to 1.3476, its lowest in two weeks. The drop follows last week’s disappointing data showing that the British economy shrank for a second consecutive month in May.
“Investors seem to be taking a dimmer view of sterling, presumably on the back of the fiscal straitjacket currently trapping U.K. Chancellor Rachel Reeves,” said ING.
Muted Action in Asia Despite China’s Trade Surprise
Asian currencies showed little movement, with USD/JPY up 0.1% at 147.21 and USD/CNY largely unchanged at 7.1682. Market participants appeared cautious amid a barrage of trade-related developments and encouraging data out of China.
In June, China recorded a stronger-than-expected trade surplus, helped by a pickup in exports following mutual tariff reductions agreed with the U.S. Rare earth shipments also increased amid a relaxation of export controls tied to U.S. chip restrictions.
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