USD eases amid latest tariff reprieve - Scotiabank

President Trump rescinded his threat of 50% tariffs on EU imports over the weekend, delaying the decision until July 9th, the original end date of his last delay on reciprocal tariffs announced early in April, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD eases in quiet trade as President Trump days threat of 50% EU tariffs

"Risk sentiment has picked up a little in response, with European stock and US equity futures firmer. Chinese markets were lower on the day, however, as local EV stocks tumbled. The Chinese authorities sanctioned a firmer CNY via the PBoC fixing earlier, suggesting more gains are likely in the near term as the USD slips and regional peers appreciate. The USD is generally softer but off early lows. NZD is the top-performing major currency while the JPY and KRW sit at the foot of the overnight performance table."

"Although President Trump has stepped back again from the precipice of aggressive tariff action, the rather capricious appearance of policymaking may undermine global investors' confidence in US markets at a time when the erosion of free trade, concerns over fiscal policy and the administration's relations with the Fed are already proving challenging for investor sentiment. The Bloomberg dollar index is at its lowest level since December 2023. In a Bloomberg interview on the terminal Friday, Treasury Sec. Bessent suggested the situation reflected other currencies strengthening rather than USD weakening."

"Well. That's a debatable position (gold?) but it does suggest little concern in the administration about the sliding USD trend and if the Treasury secretary is not unhappy with it, that could be seen as tacit endorsement of the move. The DXY may stabilize intraday, given low turnover is likely today due to the US Memorial Day holiday, but the soft weekly close Friday suggests the April/May consolidation has broken down bearishly for the index and more losses are likely moving forward. DXY support is 97.90/00 ahead of a drop to 95 or so."