US Dollar Index drops below 99.00 due to tariff threats, ISM Manufacturing PMI awaited

• US Dollar Index loses ground due to risk-off tone after fresh tariff threats from President Donald Trump.
• Trump accused China of breaching tariffs truce, while China's Ministry responded, that it had complied with the agreement.
• Trump plans to increase import tariffs on steel and aluminum to 50% from 25%.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is depreciating by more than 0.50% and trading near 98.80 during the European hours on Monday. Traders seek fresh cues from the release of the US ISM Manufacturing Purchasing Managers' Index (PMI) for May, which is due later in the North American session.

US President Donald Trump, on Friday, accused China of breaching a truce on tariffs reached earlier this month. Washington and Beijing agreed to temporarily lower tit-for-tat tariffs in a meeting in Geneva. Trump said that China had "totally violated its agreement with us". US Trade Representative Jamieson Greer also said that China had failed to remove non-tariff barriers as agreed. In response, a spokesperson from China's Ministry of Commerce said on Monday that China had complied with the agreement by cancelling or suspending relevant tariff and non-tariff measures aimed at US "reciprocal tariffs."

The Greenback faces challenges due to growing concerns regarding slow growth and renewed inflation in the United States (US). US President Donald Trump said at a rally in Pennsylvania on Friday that he planned to double import tariffs on steel and aluminum to build up pressure on global steel producers and intensify the trade war. "We are going to be imposing a 25% increase. We're going to bring it from 25% to 50% - the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States," he said, per Reuters.

On Thursday, the US Court of Appeals for the Federal Circuit in Washington temporarily put a hold on a federal's court ruling and allowing President Trump's tariffs to take effect. On Wednesday, a three-judge panel at the Court of International Trade in Manhattan halted Trump from imposing "Liberation Day" tariffs from taking effect. The federal court found that Trump exceeded his authority in imposing broad import tariffs and declared the executive orders issued on April 2 unlawful.

House Republicans passed a Trump's "Big Beautiful Bill," a multitrillion-dollar tax and spending package, which could increase the US fiscal deficit, along with the risk of bond yields staying higher for longer. This scenario raises concerns over US economy and prompts traders to sell American assets under "Sell America" trend. Policy experts anticipate for Senate changes as GOP lawmakers aim to finalize the "big bill" by the July 4.