The U.S. dollar dropped on Monday as markets contemplated the outlook for President Donald Trump’s levies and the potential to deteriorate growth and ignite inflation. The U.S. dollar index, which measures the currency against six major peers, is currently trading at 99.15 (a 0.11% drop) at the time of publication.
The greenback has been fluctuating for weeks following Trump’s heightened trade war, dropping when an increase in tensions sparks concerns of a potential U.S. recession. The dollar started the week lower after Trump mentioned late on Friday that he plans to double tariffs on imported steel and aluminum to 50% from Wednesday.
Trump’s heightened trade war causes the U.S. dollar to fluctuate
Before Trump took office, the dollar was climbing. It's been on a steady decline since Feb 19th when Trump first announced his tariff plan. The technical analysis shows that every time he opens his mouth, the price drops. This is USDJPY, just today. The dip is steady since… pic.twitter.com/elInPDQ8k7
— Anti-Catturd (@AntiCatturd) June 2, 2025
The dollar dropped 0.3% to 143.57 yen at the time of publication, giving some of its more than 1% gains from last week. The euro jumped 0.2% to $1.1372, and sterling gained 0.3% to $1.3489. The Australian dollar also added 0.3% to $0.6454, while the dollar dropped 0.2% on the Canadian dollar to 1.3727.
S&P 500 futures dropped 0.4% and Nasdaq futures lost 0.5%. The S&P 500 increased by 6.2% in May, while the Nasdaq added 9.6%, hoping the final import levies would be lower than the initial high levels.
“The greenback remains near the lower end of its post-2022 range and considerably weaker than interest rate differentials would imply. Sentiment around the greenback remains negative, and it continues to look vulnerable to further bad news on the fiscal and trade policy fronts.”
-Jonas Goltermann, Deputy Chief Markets Economist at Capital Economics.
The U.S. dollar has had weekly drops of 3% against major peers in the days after the April 2 Liberation Day tariffs and 1.9% two weeks ago, when Trump threatened 50% tariffs on Europe. The President changed course last week and pushed his deadline on the bloc from June 1 to July 9 following talks with the EU’s President Ursula von der Leyen.
The greenback rose 0.3% last week after the talks with the European Union resumed, and a U.S. trade court blocked Trump’s levies because he overstepped his authority. An appeals court later reinstated the tariffs a day later as it considered the case, and Trump’s administration said it had other avenues to implement the duties if it lost in court.
Trump’s tariffs face rejection from U.S. court and Senate
I just reintroduced H.R. 899, a one sentence bill to TERMINATE the federal department of education and return power back to teachers and parents.
This is it, the entire bill: pic.twitter.com/2dLYVE9Iwn
— Thomas Massie (@RepThomasMassie) January 31, 2025
Bruce Kasman, chief economist at JPMorgan, argued that the court ruling would implicate the path ahead in trade policy. He also believes an ample set of provisions remains available to the administration to deliver its desired results.
Kasman revealed a commitment to maintaining a minimum U.S. tariff rate of at least 10% and imposing further sector tariff increases. He noted that an increase in ASEAN to discourage transshipment looks likely, and the bias for higher tariffs on U.S.-EU trade persists.
The greenback has also faced fiscal concerns in recent weeks in the wake of a broad selloff theme that has seen dollar assets from stocks to Treasury bonds plummeting. The worries gained interest this week as the Senate began considering Trump’s sweeping tax cut and spending bill, adding an estimated $3.8 trillion to the federal government’s $36.2 trillion debt over the next decade.
Many senators are considering major revisions to the bill, and Trump said he welcomes changes. Barclays analysts also believe that the fate of section 899 of the bill could be crucial. They said in a research report that S899 would give the U.S. free rein to tax companies.
The analysts also believe that investors from countries deemed to have unfair foreign taxes could be considered a tax on U.S. capital accounts when investor nervousness towards U.S. assets has grown. The bank added that actively reducing foreigners’ total return on their U.S. investments would dent inflow and weigh the dollar.
KEY Difference Wire: the secret tool crypto projects use to get guaranteed media coverage