Dollar retreats as Trump’s tariff threats weigh on greenback

The dollar extended losses as Trump’s latest tariff announcements overshadowed any safe-haven flows, with markets focusing on potential EU retaliation.

The USD index remained under pressure following Trump’s threat of a 50% tariff on the EU from June 1, as traders positioned for escalating trade tensions.

On Sunday, Trump agreed to extend the deadline until July 9 after a phone call with Commission President Ursula von der Leyen.

The NZD and AUD were the standout performers against the greenback, with both currencies benefiting from the broader dollar weakness despite stabilizing risk sentiment.

USD/JPY found some stability around 142.80 as safe-haven demand provided modest support, though the broader Trump 2.0 policy uncertainty continued to drive structural USD hedging adjustments.

This week, RBNZ is expected to cut 25bp following RBA’s lead. 

NY Fed’s Perli supports a standing repo facility

According to Roberto Perli, manager of the New York Fed’s System Open Market Account, the market for repurchase agreements is under pressure as a result of the Fed’s efforts to shrink its balance sheet.

According to Bloomberg, Perli stated that the Fed’s Standing Repo Facility would become increasingly crucial for rate control as the Fed’s balance sheet continues to shrink and bank reserves move from abundant to sufficient levels, which will likely result in an increase in upward pressure on money market rates.  

Looking at APAC FX, USD/SGD price action is still weak and under pressure.

However, USD buyers may look to take advantage since it is 0.45% higher than September 2024 lows of 1.2789.

The next key resistance of 21-day EMA 1.2986 remains key hurdle level to go through for the pair.

Focus on inflation and growth data

The economic calendar features several key inflation releases across major economies. Notable reports include French CPI on Tuesday, Australian CPI on Wednesday, and preliminary German CPI figures on Friday. These readings will be closely watched for signs of persistent price pressures that could influence central bank policy outlooks.

The week brings a mix of growth-related data, including US GDP on Thursday, which is expected to confirm a 0.3% annualized contraction in Q1. Canadian monthly GDP for March and the quarterly annualized figure for Q1 will be released on Friday, offering insights into the health of the Canadian economy.

Wednesday sees the release of US consumer confidence data for May, which is expected to tick up slightly to 87. On Friday, US personal income and spending figures for April will shed light on the state of the American consumer. Any significant deviations from expectations could impact market sentiment.

The Reserve Bank of New Zealand’s rate decision on Wednesday stands out as a key event risk for the New Zealand dollar. Markets expect a 25bps cut to 3.25%, so any deviation from this expectation could trigger significant volatility in NZD crosses. The central bank’s forward guidance will also be closely scrutinized for clues on the future rate path.

With the US and UK markets closed on Monday for holidays, trading volumes may be lighter than usual to start the week. This could lead to some choppy price action, especially for USD and GBP currency crosses. Liquidity should improve as the week progresses and participation increases.

Antipodeans near top end of the range

Table: seven-day rolling currency trends and trading ranges  

Key global risk events

Calendar: 26 – 30 May

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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.