FX.co ★ Dollar Weakens as Trade Progress Boosts Other Currencies

The US dollar index edged down to approach 97 on Thursday, marking a near three-week low. This decline was influenced by advancements in trade negotiations with major partners, which bolstered competing currencies. Reports have emerged that the United States and the European Union are inching closer to an agreement, focusing on implementing a 15% baseline tariff on EU goods, along with potential exemptions. Earlier this week, Japan consented to a similar 15% tariff on its exports to the US, a reduction from the 25% previously threatened by President Donald Trump. Moreover, Treasury Secretary Scott Bessent suggested that the existing tariff ceasefire with China is likely to extend beyond its scheduled August 12 expiration, enhancing market confidence. These developments have contributed to a broad ascent in the euro, yen, and various risk-sensitive assets, exerting downward pressure on the dollar. In terms of policy, the Federal Reserve is expected to adopt a cautious approach concerning further rate cuts, due to concerns that Trump's tariffs could potentially fuel inflation.