Dollar Slips Amid Tariff Uncertainty, Euro Gains on German PMI Data

The U.S. dollar edged lower on Monday, retreating from recent highs as uncertainty over President Trump’s upcoming tariff policies weighed on market sentiment. Meanwhile, the euro rebounded following solid German economic data.

At 05:10 ET (09:10 GMT), the U.S. Dollar Index (DXY) traded 0.1% lower at 103.640, after reaching a three-week high on Friday. Last week, the index rose 0.4%, marking its first weekly gain this month.

Dollar Under Pressure as Markets Await Tariff Clarity

• Concerns persist that Trump’s trade policies could slow U.S. economic growth and fuel inflationary pressures.
• The next round of tariffs is due April 2, but reports from Bloomberg and WSJ suggest that Trump may take a more selective approach, imposing reciprocal levies only on certain countries rather than industry-wide tariffs.
• This uncertainty has led to a slight pullback in the dollar, though the market remains cautious ahead of the official announcement.

Euro Rises on Strong German Business Activity

• EUR/USD: +0.2% to 1.0839, rebounding from a three-week low on Friday.
• The HCOB German Flash Composite PMI rose to 50.9 in March (from 50.4 in February), signaling the fastest business expansion in 10 months.
• Manufacturing production in Germany increased for the first time in nearly two years, supporting euro strength.
• France’s private sector activity, however, remained in contraction for the seventh consecutive month, tempering overall eurozone optimism.

Other Currency Movements

• GBP/USD: +0.3% to 1.2953, ahead of U.K. economic data, following the Bank of England’s decision to keep interest rates unchanged last week.
• USD/TRY: +1.5% to 37.947, with the Turkish lira weakening after Istanbul Mayor Ekrem Imamoglu, a key rival to President Erdogan, was jailed on corruption charges. Imamoglu has denied the allegations and called for nationwide protests.
• USD/JPY:+0.2% to 149.60, after Japan’s manufacturing PMI fell to 48.3, marking the fastest contraction in a year.
  • Bank of Japan Governor Kazuo Ueda reaffirmed the central bank’s commitment to rate hikes if inflation nears its 2% target.
• USD/CNY: +0.1% to 7.2539, as China remains cautious amid Trump’s expected selective tariff strategy.

Market Outlook

The dollar’s short-term movement will likely be driven by tariff policy developments and key U.S. economic data this week, including:

• Purchasing Managers’ Index (PMI) reports
• Personal Consumption Expenditures (PCE) price index
• Revised Q4 GDP data

With uncertainty surrounding Trump’s trade policies, currency markets are expected to remain volatile in the days ahead.