US Dollar Hits the Brakes! Tariff Fears Unsettle Markets
The US dollar briefly strengthened after the release of better-than-expected jobs data on Thursday (3/7), but the strengthening did not last long. Why? Although the main report looked solid, analysts said the data was not as strong as it seemed. The bond market reacted positively with US Treasury yields rising 10-12 basis points, but the dollar remained in the lower range, reflecting market uncertainty.
According to ING FX analyst Chris Turner, rising yields usually support a stronger dollar. But now, the market focus has shifted to the risk of new tariffs from US President Donald Trump which are scheduled to be announced before the July 9 deadline. The foreign exchange (forex) market is showing signs of caution, as seen from the high volatility in the EUR/USD three-week options contract.
What's happening? The Trump administration has threatened to raise tariffs to 20-30% if countries have not signed a trade deal before July 9. Trump even said he would start sending tariff notification letters to trading partners in the next few days. This has the global currency market bracing for a volatile period.
In such situations, safe haven currencies such as the Swiss franc, euro and yen usually perform stronger. In April, when the market faced similar turmoil, these three currencies performed the best. In contrast, the dollar tends to be dumped by investors when it rallies, indicating that confidence in the greenback is still fragile amid trade policy uncertainty.
With the US national holiday on July 4, the dollar's movement is likely to be limited for the time being. However, analysts expect the dollar to remain in a narrow range of 96.35 to 97.45 throughout this week. All eyes are on the White House and its next move on tariffs that could shake the market in the near term.
Source: (ayu-newsmaker)
