Reuters: Dollar edges higher as markets weigh trade tensions
In the latest episode, Trump vowed to respond to the European Union's threat to impose counter tariffs on 26 billion euros ($28 billion) worth of U.S. goods next month, following his implementation of blanket tariffs on steel and aluminium imports, continuing recent tariff-related turbulence.
Earlier this week, data showed a lower-than-expected increase in U.S. consumer prices at 0.2%, compared to forecasts of 0.3%, providing temporary relief to market sentiment after the dollar's recent slide amid falling U.S. yields and reassessment of economic strength.
"Obviously the overarching theme has been around the trade war and the back-and-forth on tariffs, not just with North American partners but also other countries, particularly Europe and China," said Amarjit Sahota, executive director at Klarity FX in San Francisco.
"We were also going to get an inflation update, which we did, and inflation is still pretty sticky, though it came lighter than expected. I think it was a little bit of a relief for the marketplace, improving sentiment. But sentiment is on a very short leash and can change quickly based on headline risks."
The dollar strengthened 0.37% to 148.31 against the Japanese yen. Against the Swiss franc, the dollar weakened 0.07% to 0.882 after early gains. The euro eased to $1.0889 after reaching a five-month high of $1.0947 earlier this week, following recent strength due to Germany's fiscal expansion and Europe's broader infrastructure push.
Markets continue to price in potential Federal Reserve rate cuts by year-end, driven by softer US data and tariff impact on the US economy. Meanwhile, the Bank of Canada reduced its key policy rate by 25 basis points to 2.75%, highlighting concerns over ongoing trade tensions and economic impacts as traders look ahead to upcoming Core PPI data from the U.S.
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