Jun 12, 2025
The dollar declines due to trade uncertainty, while the pound suffers from economic weakness.
The U.S. dollar slightly declined on Thursday due to renewed trade anxieties, while the British pound fell following reports of a sharp contraction in the U.K. economy in April.
At 04:30 ET (08:30 GMT), the Dollar Index, which measures the dollar against a basket of six currencies, fell 0.3% to 98.280, after dipping to its lowest point since April 22.
Details on the trade framework were lacking, causing the dollar to retreat after President Trump announced on Wednesday that a trade agreement with China is "done," pending approval from him and President Xi Jinping. Markets appeared cautious, with analysts noting the announcement lacked specific details, leaving room for potential future tensions between the two largest economies.
Trump mentioned that the U.S. will send letters to many countries in the coming weeks outlining trade deal terms, indicating these nations will need to choose to "take it or leave it."
In April, Trump delayed implementing extensive tariffs to give negotiators more time, but the 90-day pause ends on July 8. Analysts at ING warned that this creates a risk of increased tariffs on July 9, which is viewed as negative for the dollar.
Additionally, the possibility of an early rate cut by the Federal Reserve, following mild consumer inflation data, is also pressuring the dollar. Another inflation report is expected later in the session, with economists predicting a 0.2% month-over-month rise in the producer price index for May, after a 0.5% drop in the previous month.
The U.K. economy contracted in April, with GDP shrinking by 0.3% from March, marking the largest monthly decline since October 2023. ING noted that this weaker GDP, along with earlier soft wage data, provides the Bank of England with a valid reason to consider rate cuts. The central bank meets next week after having reduced interest rates by 25 basis points to 4.25% in May.
The EUR/USD rose 0.4% to 1.1530, supported by hawkish comments from the European Central Bank. Last week, the ECB lowered rates as anticipated but suggested a pause in its easing cycle since inflation had returned to its 2% target.
Today, various ECB officials are scheduled to speak, possibly discussing the need for further rate cuts in September. Current price data and the ECB's wage tracker suggest there is room for a cut, and markets are almost pricing in a reduction for December, according to ING.
In Asia, USD/JPY fell 0.5% to 145.92, while USD/CNY decreased 0.1% to 7.1825, as President Trump took a more conciliatory approach, highlighting progress in U.S.-China trade talks.
At 04:30 ET (08:30 GMT), the Dollar Index, which measures the dollar against a basket of six currencies, fell 0.3% to 98.280, after dipping to its lowest point since April 22.
Details on the trade framework were lacking, causing the dollar to retreat after President Trump announced on Wednesday that a trade agreement with China is "done," pending approval from him and President Xi Jinping. Markets appeared cautious, with analysts noting the announcement lacked specific details, leaving room for potential future tensions between the two largest economies.
Trump mentioned that the U.S. will send letters to many countries in the coming weeks outlining trade deal terms, indicating these nations will need to choose to "take it or leave it."
In April, Trump delayed implementing extensive tariffs to give negotiators more time, but the 90-day pause ends on July 8. Analysts at ING warned that this creates a risk of increased tariffs on July 9, which is viewed as negative for the dollar.
Additionally, the possibility of an early rate cut by the Federal Reserve, following mild consumer inflation data, is also pressuring the dollar. Another inflation report is expected later in the session, with economists predicting a 0.2% month-over-month rise in the producer price index for May, after a 0.5% drop in the previous month.
The U.K. economy contracted in April, with GDP shrinking by 0.3% from March, marking the largest monthly decline since October 2023. ING noted that this weaker GDP, along with earlier soft wage data, provides the Bank of England with a valid reason to consider rate cuts. The central bank meets next week after having reduced interest rates by 25 basis points to 4.25% in May.
The EUR/USD rose 0.4% to 1.1530, supported by hawkish comments from the European Central Bank. Last week, the ECB lowered rates as anticipated but suggested a pause in its easing cycle since inflation had returned to its 2% target.
Today, various ECB officials are scheduled to speak, possibly discussing the need for further rate cuts in September. Current price data and the ECB's wage tracker suggest there is room for a cut, and markets are almost pricing in a reduction for December, according to ING.
In Asia, USD/JPY fell 0.5% to 145.92, while USD/CNY decreased 0.1% to 7.1825, as President Trump took a more conciliatory approach, highlighting progress in U.S.-China trade talks.