The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, fell further during Asian trading on Thursday, hovering around 98.40. The dollar’s continued weakness follows cooler-than-expected inflation data for May, which has heightened market expectations for a Federal Reserve rate cut in September.
The US Consumer Price Index (CPI) increased 2.4% year-over-year in May—up slightly from 2.3% in April but below the consensus forecast of 2.5%. Core CPI, excluding volatile food and energy costs, rose 2.8% annually, missing estimates of 2.9%.
Trade Deal Progress and Tariff Signals from Washington
Meanwhile, US President Donald Trump declared on Truth Social that a trade deal with China is finalized, pending his and President Xi Jinping’s approval. Trump asserted, “We are getting a total of 55% tariffs, China is getting 10%. Relationship is excellent!” He also indicated a willingness to extend the trade talks deadline if needed but expressed confidence it would not be necessary. Trump plans to announce unilateral tariff rates within two weeks.
In a related development, China has agreed to grant rare-earth export licenses to US automakers and manufacturers, but only for six months, maintaining leverage over critical minerals for future negotiations, according to the Wall Street Journal.
Safe-Haven Demand Rises Amid Middle East Tensions
Geopolitical risks have lent intermittent support to the US Dollar as tensions escalate in the Middle East. The US government has advised some Americans to leave the region amid rising concerns. President Trump reiterated on Wednesday that the US will not allow Iran to acquire a nuclear weapon. Additionally, CBS News reported that US officials believe Israel is fully prepared to launch a military operation targeting Iran.
Outlook
The US Dollar faces downward pressure from subdued inflation data and uncertainty over trade negotiations but may attract safe-haven flows if Middle East tensions worsen. Investors will closely monitor upcoming economic indicators and geopolitical developments for clues on the dollar’s near-term trajectory.
