The U.S. dollar firmed on Thursday, recovering from an 11-week low, as uncertainty around President Donald Trump’s shifting tariff messages stoked market caution. The euro steadied after retreating from a one-month high, with traders cautious about the potential impact of Trump’s vague proposal for 25% tariffs on European cars and other goods.
The euro fell 0.06% to $1.0479, as investors waited for developments in Germany’s coalition government formation following the conservatives’ recent election win.
Trump also indicated that 25% tariffs on Mexican and Canadian goods could be delayed to April 2, as opposed to the previously scheduled March 4 deadline. However, a White House official clarified that the levies on these countries were still set to be implemented “as of this moment,” pending review of their actions to secure borders and address issues like the flow of migrants and opioids into the U.S.
These mixed and contradictory tariff signals created confusion, keeping major currencies largely in their recent ranges. The Canadian dollar was pressured near a two-week low against the greenback, while the Mexican peso remained around 20.408 to the dollar.
The Dollar Index—which measures the U.S. dollar against a basket of other major currencies—rose 0.10% to 106.56, inching further away from a two-month low of 106.12 touched on Monday.
Market Reaction to Trump’s Mixed Tariff Messaging
Despite the dollar’s firmness, market participants seemed to brush off Trump’s fluctuating tariff comments. Analysts noted that while the president’s statements can be erratic, only some of his threats materialize, leading traders to take his latest remarks with a grain of salt.
As Matt Simpson, senior market analyst at City Index, noted: “Markets seem to be waiting for a real catalyst with substance, and Trump’s mixed messaging was not one.”
The confusion over tariffs has added to broader concerns about the U.S. economy, which has been showing signs of weakening. U.S. business activity slowed in February, and consumer confidence dropped sharply, raising fears about potential economic growth challenges. As a result, U.S. Treasury yields have fallen, and markets are pricing in the possibility of at least two rate cuts by the Federal Reserve in 2025, even though no changes are expected in the immediate term.
Currency Movements and Global Outlook
Elsewhere, the yen was little changed at 149.17 against the dollar, remaining near its weakest level since early December. The fall in U.S. Treasury yields has provided some support to the yen, while market expectations of interest rate hikes from the Bank of Japan (BOJ) have also driven Japanese yields higher.
Atsushi Mimura, Japan’s top currency diplomat, commented that the recent rise in the yen was in line with positive economic data and that it could justify further interest rate hikes by the BOJ.
In other markets:
- Sterling held steady below its two-month high, hovering around $1.2667.
- The Aussie continued to struggle, down 0.04% to $0.6303, near a two-week low.
- The New Zealand dollar was mostly flat at $0.5696.
Looking Ahead
Market sentiment remains volatile, with investors uncertain about the trajectory of U.S. tariffs and global economic growth. As tariff deadlines approach and the potential for further U.S. interest rate cuts looms, currencies will likely remain in tight ranges, awaiting more concrete developments.
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