By Adam Rasgon
On Thursday, the dollar experienced a slight decline during a volatile trading session, prompted by remarks from U.S. President Donald Trump advocating for reduced interest rates while offering no details regarding tariffs. Investors are also anticipating a series of policy announcements from central banks worldwide.
The dollar is down over 1% this week, primarily due to a significant drop on Monday when Trump’s anticipated tariff announcements did not occur following his inauguration. The dollar has only fluctuated moderately in the days since.
The greenback oscillated between gains and losses during the day as Trump urged world leaders to reduce interest rates in a speech delivered at the World Economic Forum in Davos, Switzerland. He warned that tariffs would be imposed if products were manufactured outside the U.S.
Despite his frequent references to tariffs, Trump did not provide any specifics regarding the duties he plans to implement.
“Without any concrete information, we can expect continued volatility until we receive a clear answer,” stated David Eng, Investment Adviser at Sonora Wealth Group in Vancouver.
“It appears the markets are more focused on the potential for rate cuts and any stronger indicators suggesting that further cuts may be on the horizon.”
Investors are looking forward to a variety of policy decisions from global central banks in the upcoming week, with the Bank of Japan expected to raise interest rates by the end of its two-day meeting on Friday.
Decisions from the U.S. Federal Reserve and European Central Bank (ECB) are planned for next Wednesday and Thursday, respectively.
Markets are anticipating nearly a 96% likelihood that the ECB will cut rates in its upcoming meeting, bolstered by recent statements from the central bank’s policymakers suggesting a reduction is probable.
The dollar index, which gauges the greenback against a collection of currencies including the yen and euro, fell 0.19% to 108.06, while the euro rose 0.14% to $1.0422.
On Monday, the dollar plunged 1.2%, experiencing its largest single-day decline since November 2023, as Trump’s initial day in office was marked by several executive orders but no tariff announcements.
Earlier this month, the dollar reached a peak of 110.17, its highest level in over two years, buoyed by a robust U.S. economy and expectations for extensive U.S. tariffs that could impact the currencies of other nations.
Data released on Thursday indicated a slight increase in new applications for U.S. unemployment benefits last week, suggesting that strong job growth continued through January.
This week, Trump mentioned that his administration is considering a 10% tariff on goods imported from China starting February 1, following earlier statements indicating that Mexico and Canada could face levies of approximately 25% by that same date. He also indicated that duties on European imports are forthcoming, though no specifics were provided.
On Monday, Trump signed a trade memorandum directing federal agencies to review various trade issues by April 1, a date many market participants view as crucial for clarifying tariff plans.
The British pound rose by 0.31% to $1.2354. The Mexican peso appreciated by 0.92% against the dollar to reach 20.329.
The Canadian dollar gained 0.16% to C$1.435 per dollar. Canada’s central bank is widely expected to announce a rate cut at its monetary policy meeting next week after inflation data this week came in below the 2% target.
The Japanese yen appreciated by 0.33% against the dollar to 155.99. The dollar rose 0.06% to 7.282 against the offshore Chinese yuan.
On Thursday, China revealed plans to direct hundreds of billions of yuan in investments from state-owned insurers into the stock market.
