Dollar Weakens on Fed Rate Cut Bets and Trump’s Softer Tariff Stance

The U.S. dollar slipped on Thursday amid renewed expectations of Federal Reserve rate cuts and signs that President Donald Trump may take a softer approach on tariffs. Trump said he was open to extending the July 8 deadline for completing trade negotiations, while Treasury Secretary Scott Bessent hinted that extensions could be granted to nations negotiating in good faith.

This dovish shift weighed on the dollar, pushing the euro to a seven-week high of $1.1525. The dollar also fell 0.43% against the yen to 143.98 and dropped 0.34% against the Swiss franc to 0.81725. Against a basket of major currencies, the greenback declined to 98.327, its lowest level since April 22.

Markets were further influenced by weaker-than-expected U.S. inflation data, which boosted expectations of a Fed rate cut as early as September. Investors are now eyeing Thursday’s producer price index for additional clues on inflation.

Meanwhile, sterling rose 0.38% to $1.3588, the Australian dollar edged up 0.05% to $0.6506, and the New Zealand dollar climbed 0.1% to $0.6033. The offshore yuan strengthened slightly to 7.1953 after the U.S. and China reached a tentative trade truce following talks in London, though details remain unclear.

The euro gained broadly, rising to 165.88 yen after touching 166.42, its highest since October. It also hit a one-month high of 84.88 pence and extended gains against the Aussie. Analysts credit the euro’s strength to the European Central Bank’s recent signals that it may pause its rate-cutting cycle after hitting the 2% inflation target, contrasting with potential Fed easing ahead.

The euro has climbed nearly 11% year-to-date, buoyed by capital inflows into European markets and dollar weakness.