The U.S. dollar experienced a decline on Tuesday because markets anticipated rising trade tensions before the August 1 deadline that could lead to new tariffs implementation. The greenback dropped 0.7% to reach 146.36 yen after Monday’s decline while the dollar index decreased 0.3% to 97.545.
The market remains uncertain because investors doubt whether Washington will proceed with tariffs against countries that have not finalized trade agreements. Treasury Secretary Scott Bessent stated that President Trump holds the authority to extend deadlines while the administration focuses on achieving quality outcomes in trade negotiations.
The euro reached $1.1725 while the pound maintained its value at $1.3493. EU diplomats revealed they are considering extensive retaliatory measures if trade negotiations with the U.S. collapse since the bloc faces potential 30% tariffs.
The market observes central bank activities because the European Central Bank holds its meeting this week while the Federal Reserve faces political challenges to its independence. The Fed Chair Jerome Powell received criticism from Trump regarding rate policy but Bessent indicated there are no current plans for action. The Federal Reserve will maintain its interest rates at current levels until 2026 unless there is a significant change in inflation rates.
