This latest development stood in sharp contrast to the apparent softening of Trump’s trade stance in recent weeks, which had included a series of tactical retreats from earlier hardline positions. He had backed off sweeping tariff threats following a sharp sell-off in equity markets, toned down criticism of Fed Chair Jerome Powell, and touted trade deals with Canada and Mexico that were later viewed as largely symbolic. Traders rely heavily on technical indicators like moving averages, oscillators, and Fibonacci retracements to identify potential turning points in currency prices. The U.S. Federal Reserve (Fed) sets interest rates, influencing the dollar’s value. Higher interest rates attract foreign capital, strengthening the USD whilst lower interest rates make the dollar less attractive, leading to depreciation. Fed policies like quantitative easing (QE) weaken the dollar, while quantitative tightening (QT) strengthens it.
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The prospect of higher rates in the US makes the dollar more attractive as it means investors will make more money on their cash in dollars compared to other currencies. Over the last few months especially, there’s been a lot of focus in the world of Currency Trading upon the state of the US Dollar. No matter what your opinion is of the Greenback, it is still, without question, regarded as the world’s primary reserve currency and holds its weight of recognition across the board. That’s bad news for the Federal Reserve where policymakers have been attempting to tame inflation by cooling the economy through painful interest rate hikes. That could potentially lead to a disastrous downgrade to America’s credit rating and could send the dollar spiraling as investors start to sell off their US assets and move their money to safer currencies. “China’s weakness not only has weighed on the yuan, but other key currencies in the region, as well as those major trading partners, including the euro,” Alex Cohen, senior FX strategist at Bank of America Global Research, told CNN.
He has called Mr Powell «a major loser» and has publicly called for his «termination». The very idea that it might lose its status as the world’s reserve currency has been unthinkable. The dollar is also the main currency used in international trade, with around half of world trade invoices done in US dollars, says Jane Foley. But the dollar index, which measures its strength against a set of currencies, has fallen to its lowest level for three years.
Speculative traders remained bearish on the dollar but trimmed their positioning to $12.4 billion in the week ending May 20 from $16.5 billion in a week prior, according to CFTC prtrend data reported Friday. Apple is the worst-performing Magnificent Seven stock this year, and its 2025 drop of 22% stands in stark contrast to the 0.5% decline of the Nasdaq 100 Index, the report said. The stock has broken under key moving averages, but isn’t yet at the level that would indicate oversold conditions, based on its 14-day relative strength index. The CBOE Apple VIX, which tracks a market estimate of future volatility for the stock, jumped more than 30% last week.
In the meantime, political developments will also be key in 2025 as Donald Trump resumes his time in office. The Financial Times thinks this could initially bolster the USD due to anticipated fiscal stimulus and tax policies. However, factors such as rising fiscal deficits, high tariffs, and unpredictable foreign policies may lead to a subsequent weakening of the dollar during his term. Nevertheless, it appears recent events have resulted in a “sell the dollar” moment. As trade tensions mount and the world de-couples, looking at the composition of the MSCI All Countries World Index can provide some insight.
Winemakers finding Trump’s tariffs hard to swallow
For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away. Position trading is ideal for those with a focus on fundamental analysis, including economic trends, central bank policies, and geopolitical how to calculate volatility events. This strategy involves holding positions for extended periods such as months or even years to capitalize on macroeconomic factors driving currency prices. While the outlook for the US Dollar remains fragile, as investors struggle to predict how bilateral deals between the US and its trading partners will shape the economic outlook. The US dollar has been rising in recent months as more resilient economic data in the US has led markets to price in more restrictive monetary policy from the Federal Reserve. The uncertainty about Trump’s tariff policies has also increased safe-haven demand towards the dollar.
The third-largest U.S. lender added that while the transaction is financially immaterial to the company, it is expected to result in a modest regulatory capital benefit at closing. On the economic front, US Durable Goods Orders data for April has come in significantly weak. The Census Bureau reported that cost of orders received by manufacturers for durable goods declined by 6.3% after a significant increase of 7.6% in March. “I’m sure that inflation will decrease further in the US, but the speed of this development will be lower than it would be with a strong dollar,” he said.
Indian markets poised for boost as RBI cuts and global flows align: Ajay Bagga, Market Expert
A strong dollar can hurt international company performance for U.S.-based investors. It can also negatively impact U.S. companies with significant international exposure and U.S. exports by making goods more expensive abroad. Exceptionalism’ narrative in 2025, investors should carefully assess its potential impact on their portfolios. how to read forex charts The views expressed in this publication do not necessarily reflect the views of LGT Wealth Management US Limited as a whole or any part thereof. Information about potential tax benefits is based on our understanding of current tax law and practice and may be subject to change.
Gold fails to gather directional momentum and stays in a consolidation phase above $3,300 midweek. The uncertainty surrounding the US trade relations and elevated geopolitical tensions help XAU/USD keep its footing as market focus shifts to FOMC Minutes. Some of the angst has come as the Senate considers Trump’s tax bill, which includes a debt ceiling increase the Treasury needs to avoid a default that could happen as soon as August or September. The version of the bill passed by the House of Representatives is expected to add hundreds of billions of dollars to the federal deficit each year. The white-hot labor market in the US added more than 500,000 jobs in January, blowing analysts’ expectations out of the water and bringing the unemployment rate to its lowest level since May of 1969.
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The best time to trade USD is around 8am ET (UTC –5) to 12pm ET (UTC –5). Before entering your first forex trade, having a well-defined forex trading strategy is crucial. A strategic approach not only helps streamline your decision-making process but also minimizes the impact of emotional biases. Higher U.S. Treasury yields attract foreign investment, strengthening the USD.If investors anticipate lower yields then the dollar may weaken. The U.S. Federal Reserve (Fed) implemented a series of interest rate hikes totalling 425 basis points (bps) in 2022, raising the federal funds rate from 0.25% in March to 4.50% in December.
The US Senate voted on Wednesday to overturn a Biden administration retirement investment rule that allows managers of retirement funds to consider the impact of climate change and other ESG factors when picking investments. Industrial production in Germany fell for the third-straight month in July, official data also showed Thursday, adding to a cocktail of woes for Europe’s largest economy. After five straight months of declines, consumer confidence rebounded in May as President Trump peeled back his most aggressive stances on tariffs.
Consumers could trim spending in the months ahead amid macroeconomic uncertainty and evolving White House policy, according to Barclays, as per a CNBC report. US markets surged today with all major indices closing sharply higher, even as select tech giants saw notable declines. The rally was supported in part by a dip in Treasury yields, with the 10-year note falling 1.53% to 4.44%, helping ease concerns over borrowing costs. Falling yields provided a tailwind for equities, particularly in rate-sensitive sectors.
- The ICE U.S. Dollar Index, which measures the greenback against a basket of foreign currencies, fell as low as 97.92 on Monday.
- Falling yields provided a tailwind for equities, particularly in rate-sensitive sectors.
- To the extent permitted by law, in no event shall Capital.com (or any affiliate or employee) have any liability for any loss arising from the use of the information provided.
- Other factors, such as safe-haven inflows or outflows, can also influence the value of the US dollar.
- “The outlook could include cuts or holding steady,” Powell said, highlighting the Fed’s more flexible approach as trade tensions and global risks weigh on the domestic outlook.
A trade deficit (importing more than exporting) can weaken the dollar over time as it sells its own currency to buy the foreign currency needed to buy foreign goods. This increases the supply of the domestic currency in the forex market, potentially lowering its value. Conversely, a trade surplus (exporting more) strengthens the USD.The fact that oil is traded in US dollars tends to support long-term demand. High inflation reduces the dollar’s purchasing power but may lead to rate hikes, which can support the currency. Strong GDP growth makes the U.S. economy more attractive to investors, boosting the dollar.
China is one of Nvidia’s biggest markets, and investors are closely watching the company’s commentary during its upcoming earnings report on Wednesday about how the ban will impact future sales. The Dow Jones Industrial Average jumped 740 points, or roughly 1.8%, while the S&P 500 climbed 2.05%, ending a four-day losing streak for both indexes. The Nasdaq Composite rose 2.47%, driven by strong gains in technology stocks, including Tesla. Trump said Sunday he would postpone the tariff deadline to July 9, following a request from European Commission President Ursula von der Leyen. The delay comes after Trump proposed the steep import tax last week, originally set to take effect on June 1.
- The US accounts for 70% of the world’s stock market and only 21% of the world’s GDP, while Asia accounts for about 13% of the world’s stock market and around 40% of global GDP.
- Inflation overall has recently been pushed up by climbing gas prices and stubbornly elevated housing costs.
- A record-breaking domestic box office over Memorial Day weekend sent shares of movie theater companies higher on Tuesday.
- And again, geopolitical risks need to disappear from the map, but everything indicates that between now and the US elections, geopolitical risks will remain.
Trump’s attacks on Fed chief Jerome Powell for not cutting interest rates also appear to have added pressure to the greenback. But the calculus has shifted in recent months as the details of his tariffs have emerged – often followed by pauses or, in the case of China, extensions – leaving much uncertainty surrounding the impact they will have. The losses on Friday continued even after Treasury Secretary Scott Bessent said on Bloomberg Television’s Wall Street Week with David Westin that the US could strike several large trade deals in the next couple of weeks.
US Stock Market Live: Investors with $7 Trillion cash on the sidelines await Nvidia, says report
It serves as a gross measure of market activity, indicating the pace at which the nation’s economy is growing or contracting. Generally, a high reading or better-than-expected number is considered positive for the Dollar Index, while a low reading is seen as negative. Kroger (KR), Costco (COST) and Anheuser-Busch (BUD) all report earnings on Thursday. Economists are expecting 195,000 Americans to have filed for unemployment, which is higher than the seasonally adjusted 192,000 who applied two weeks ago.