The US dollar is still on the back foot in general as risk appetite improves marginally. This decline comes alongside the Trump administration’s recent shift regarding its own tariff threats, which has raised concerns among investors. As worries about a new trade war continue to drag down expectations, economic signals are still a mixed bag, leaving economists hopeful but wary.
Raphael Bostic, President of the Federal Reserve Bank of Atlanta, highlighted the challenges ahead in achieving the Fed’s inflation target of 2%. In remarks that underlined the serious work that still lies ahead for the new central bank, he suggested that the Fed is not done tightening monetary policy. Bostic projected an economic growth rate of over 1% for the year, but acknowledged that the Fed is unable to make bold moves in any direction due to the current economic climate.
The US dollar’s recent volatility on currency markets has been exacerbated by falling US yields. Normally, lower yields drive gold prices higher. After reaching a record closing high of just under $3,250 earlier today, the precious metal started to feel fresh selling pressure. On Monday, gold struggled around the $3,200 level, illustrating safe haven demand and volatility in crypto markets.
The euro-dollar exchange rate showed more extreme volatility on Monday too. The EUR/USD pair bounced back and forth between the 1.1400 and 1.1300 levels and then traded in the middle of that range. This recent rollercoaster of a change underscores the continuing volatility in financial markets. It further contributes to the larger trend of a falling dollar.
Investor sentiment has been lukewarm at best as concerns over trade war has kept the anxiety levels high. With the moving goalposts of the Trump administration’s tariff negotiations adding to these fears, uncertainty has reached new heights. While some analysts remain hopeful for stabilization, others caution that unresolved trade issues could hinder economic growth and contribute to further volatility.