The U.S. dollar edged lower on Friday, giving back some of the gains from the prior session as markets shifted their focus to the looming July 9 deadline for U.S. trade agreements.
As of 04:15 ET (08:15 GMT), the Dollar Index—which measures the greenback against six major currencies—was down 0.2% at 96.605, putting it on track for a modest weekly decline, despite a 0.4% rise on Thursday.
U.S. markets remained closed Friday in observance of the Independence Day holiday.
Dollar Dips Amid Trade Uncertainty
The dollar had rallied on Thursday after stronger-than-expected U.S. employment data pushed back expectations for Federal Reserve rate cuts. However, those gains were short-lived as investor attention turned to ongoing trade negotiations between the U.S. and multiple global partners. With broad tariffs set to take effect on July 9, the market is growing anxious.
So far, the U.S. has only finalized three trade agreements, and President Donald Trump heightened trade tensions further on Thursday by stating that tariff letters would be sent out Friday, outlining specific rates for various countries. This marks a departure from his earlier commitment to crafting individual deals.
“Markets appear to be preparing for more volatility related to tariffs,” said ING analysts, pointing to heightened EUR/USD option market volatility expected over the next three weeks.
Meanwhile, the Republican-controlled House of Representatives narrowly passed Trump’s massive tax-and-spending bill, projected to add $3.4 trillion to the already $36.2 trillion national debt. Trump is expected to sign the bill into law Friday.
Euro Heads for Weekly Gain
In Europe, the euro edged up 0.1% to 1.1774, putting it on track for a 0.5% gain this week.
Earlier on Friday, data showed German industrial orders fell 1.4% in May, a much steeper drop than expected. This adds to concerns over the region’s manufacturing sector.
While the European Central Bank cut interest rates for the eighth time this year in June, policymakers have hinted they may pause rate changes at the upcoming meeting.
“We’re beginning to hear the ECB voice more concern over the euro’s strength,” ING noted. “There’s a sense that a quick move above 1.20 in EUR/USD could be problematic.”
Pound Struggles, Yen Rebounds
GBP/USD gained 0.1% to 1.3664, but the British pound remained down for the week, pressured by worries about UK fiscal policy following the government’s decision to reverse course on welfare reforms.
In Asia, the Japanese yen recovered, with USD/JPY falling 0.4% to 144.36, after stronger-than-expected May household spending data pointed to sustained inflationary pressure. That said, the yen had suffered sharp losses overnight on Thursday.
The Chinese yuan (USD/CNY) edged 0.1% lower to 7.1644, despite Beijing announcing new stimulus measures, including initiatives to address the country’s declining birth rate.
Though the U.S. lifted some chip export restrictions to China this week—signaling a potential thaw in trade relations—the move did little to support the yuan, as mixed economic data and uncertainty around China’s growth outlook persisted.
China also announced on Friday it is reviewing export licenses for domestic rare earth producers, acknowledging the U.S. policy shift on semiconductor exports.
