Dollar Slips as US-Vietnam Deal Spurs Tariff Optimism, Markets Eye Payroll Data

The U.S. dollar dipped slightly on Thursday following a trade agreement between the U.S. and Vietnam, boosting hopes for more deals ahead of the critical July 9 tariff deadline. Meanwhile, investors are turning their focus to June’s U.S. jobs report for signs of the Federal Reserve’s next move on interest rates.

The ADP private payrolls report released Wednesday showed a decline for the first time in over two years, prompting traders to adjust their rate cut expectations. According to the CME FedWatch tool, the probability of a Fed rate cut in July rose to 25%, up from 20% the day before.

Sterling recovered modestly after a steep drop the previous session, as U.K. Prime Minister Keir Starmer reaffirmed support for Finance Minister Rachel Reeves. The pound had fallen nearly 1% after concerns resurfaced over Britain’s fiscal outlook, following a parliamentary setback on welfare reforms.

In currency markets, the pound edged up to $1.3647, the euro held steady at $1.1806, and the yen firmed to 143.56 per dollar. The U.S. dollar index remained weak at 96.701, tracking a 0.5% weekly decline and hovering near 3.5-year lows.

President Donald Trump’s announcement of a new trade deal with Vietnam included a 20% tariff on Vietnamese goods and a steep 40% tariff on trans-shipments, sending a signal of global supply chain restructuring. Analysts warn of potential retaliation from China and further disruptions ahead.

Adding to fiscal concerns, the House Republicans are facing resistance on Trump’s massive tax-cut and spending bill, projected to add $3.3 trillion to the national debt. Global bond markets are increasingly jittery as government deficits rise in the U.S. and beyond.