Forex Report: U.S. Dollar Slides Near Three-Year Low as Trade Policy Turmoil Weighs on Confidence

The U.S. dollar continued to drift lower on Tuesday, hovering close to its recent three-year low, as investor sentiment remains rattled by the Trump administration’s inconsistent and evolving trade policies.

As of 04:45 ET (08:45 GMT):

• The Dollar Index (DXY) fell slightly to 99.395, just shy of last week’s low
• The index is down over 4% in April, on track for its biggest monthly decline since November 2022

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Trump’s Tariff Flip-Flops Erode Dollar Appeal

The greenback has come under sustained pressure as Washington’s trade agenda grows more unpredictable:

• On Monday, President Donald Trump floated tariff exemptions on foreign vehicle imports, particularly for Canada and Mexico
• The administration also recently excluded smartphones and laptops from the sweeping 25% reciprocal tariffs on Chinese goods

These policy shifts have eased some short-term trade fears, but the broader uncertainty and lack of a cohesive strategy are leading investors to question the resilience of the U.S. economy—traditionally a pillar of dollar strength.

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Euro Eyes $1.15 as ECB Decision Looms

The euro continued its ascent, with EUR/USD up 0.1% to 1.1361, just below last week’s three-year high of 1.1474.

• The single currency is benefiting from dollar weakness and growing confidence in eurozone stability, despite lingering trade headwinds
• Attention now turns to Thursday’s European Central Bank meeting, where policymakers are widely expected to cut rates by 25 basis points, lowering the deposit rate to 2.25%

A dovish ECB stance could limit further euro gains, but if the central bank delivers a measured, trade-sensitive message, the euro may still test the $1.15 barrier.

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Pound Rises on Strong Wage Data

GBP/USD climbed 0.4% to 1.3230, boosted by robust U.K. wage growth figures:

• Unemployment held steady at 4.4% in February
• Regular pay growth (ex-bonuses) rose to 5.9% year-on-year, above the 5.8% seen in January

These figures give the Bank of England something to consider ahead of its May meeting, where a 25 basis point rate cut is still expected as the U.K. economy faces collateral damage from the global trade war.

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Aussie Dollar Gains on Cautious RBA Stance

In Asia-Pacific:

• AUD/USD rose 0.6% to 0.6354 after minutes from the Reserve Bank of Australia’s April meeting showed that policymakers chose to hold rates steady, citing a need to observe global trade developments
• This tone was interpreted as less dovish than expected, giving the Aussie a boost

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Yen Stays Strong, Yuan Edges Lower

• USD/JPY dipped slightly to 142.92, with the Japanese yen still near six-month highs on safe-haven demand
• USD/CNY inched 0.1% higher to 7.3152, as U.S.-China trade tensions linger, and Beijing braces for potential new sectoral tariffs from Washington

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Outlook: Dollar to Stay on the Defensive

With no clear end to the tariff drama, and recession risks rising, the U.S. dollar could remain under pressure, especially if:

• The Federal Reserve signals openness to rate cuts
• The ECB and BoE deliver moderate, data-dependent easing
• China or other trade partners retaliate, extending uncertainty

Markets will be watching for:

• Further tariff announcements from Trump, particularly on pharmaceuticals and semiconductors
• Fed commentary this week, especially Chair Jerome Powell’s speech on Wednesday
• Economic indicators that clarify whether recession fears are materializing

For now, volatility remains high, and the dollar’s path of least resistance may be lower—unless Washington reintroduces clarity and credibility to its economic playbook.