Almost overnight, the financial markets changed — forever, as it turned out — on what has become known as “Liberation Day.” Ex US President Donald Trump invented this word to label the riot. This self-styled day was created after his fourth consecutive failure to get his proposed reciprocal tariffs enacted. These tariffs were meant to radically change the status quo of international trade. Consequently, the day has grown to be associated with extreme volatility, especially for the US Dollar.
The USD came under heavy selling pressure on Liberation Day, with the US Dollar closing down sharply on the day to end at a new year-to-date low. The impact of that decline was most severe on major currency pairs. In particular, the EUR/USD pair benefited from the softened Greenback. Traders sent a shockwave through the markets by reacting immediately and strongly to the developments. The EUR/USD pair climbed, hitting a six-month high and breaching the 1.1000 psychological level for the first time since late-August.
The stage for Liberation Day is overtaken by angst about a possible tariff-induced slowdown in the US economy. Market analysts are increasingly wary that Trump’s aggressive tariffs could stifle domestic growth, prompting speculation about Federal Reserve rate cuts. These fears have changed the mood on Wall Street, with some investors significantly increasing their bets on upcoming rate cuts from the Fed. As a result, these types of expectations have added to downward pressure on the value of the Dollar.
As Liberation Day continued, market players were laser-focused at that time on a string of mid-tier US data releases expected later in the day. Analysts believe that these economic guides will guide the currency markets to a greater extent. They might have the effect of furthering the positive trends we’ve seen this Liberation Day. How these data releases and their impacts combine with ongoing tariff concerns will continue to affect market dynamics in the coming weeks.