Despite the slight increase recorded by the U.S. dollar on Wednesday, it is still on track to post its worst monthly performance in over two years, with the Dollar Index down 4.6% this month. This decline is attributed to the uncertainty caused by the Trump administration’s volatile trade policies, in addition to weak economic data showing a decline in the labor market and consumer confidence. Markets remain under constant pressure from the potential impacts of tariffs on U.S. growth.
Although moves by the White House to soften the impact of auto tariffs have helped the dollar recover slightly, concerns remain about the effect of these tariffs on economic growth, which could raise inflation and unemployment. The upcoming GDP report for the first quarter suggests the weakest growth since Q2 2022, which could further pressure the U.S. currency.
The euro has posted strong gains in April, up over 5% so far, and is on track to achieve its best monthly performance since November 2022. Despite some slight pullbacks, the European currency continues to gain momentum due to better-than-expected economic data in Germany and France, strengthening expectations that the European Central Bank may cut interest rates further in June.
The Japanese yen is set to achieve monthly gains exceeding 5% this month, supported by the ongoing weakness in the dollar, as well as buying activity following March’s losses. The market is now focused on the Bank of Japan’s meeting on Thursday, where analysts expect the bank to keep its monetary policy unchanged, which could further strengthen demand for the yen.
The Chinese yuan showed limited movement today, with the USD/CNY pair holding steady at 7.2683. Data from China’s Purchasing Managers’ Index (PMI) revealed a larger-than-expected contraction in manufacturing activity, reflecting the ongoing impact of the U.S.-China trade war. While some private PMI data showed resilience in manufacturing, the sharp decline in China’s exports and the increase in U.S. tariffs indicate significant challenges for the Chinese economy.
The Australian dollar performed well in the Asian market after stronger-than-expected consumer inflation data for Q1. This data raised questions about the timing of further interest rate cuts by the Reserve Bank of Australia, reflecting uncertainty in future monetary policy. On the other hand, most other Asian currencies benefited from the weakness of the U.S. dollar, posting strong gains in April.
