US Dollar Weakens After ECB Aggressive Rate Cuts
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of six major currencies, has seen a seismic shift in its trading regime this week compared to the past few years. The index is trading near 104.00 at the time of writing on Thursday (06/03). Several banks and traders reported that large clients are repatriating their US Dollar-denominated foreign investments back to their domestic currencies. This may mean that the volumes will not return anytime soon, the FT reported.
The repatriation comes after weak US economic data that has left markets worried about the potential impact of Trump’s tariffs on domestic inflation and has brought back strong recession fears this week. Clearly, US President Donald Trump’s approach is starting to take a toll.
Meanwhile, the focus will now shift to Europe where a high-stakes European meeting will take place this Thursday. EU leaders will discuss a defense spending bill after Trump asserted that the US will no longer play an active role in NATO. US support for Ukraine has also been reduced. The European Central Bank (ECB) has cut its policy interest rate by 25 basis points as expected, although it changed the language of its statement to be slightly more aggressive.(Newsmaker23)
Source: FXstreet
