Dollar Dips as Trade Talks Loom; AUD, NZD Face Policy Decisions
Market Watchers Eye US Inflation Data Amidst Trade Uncertainty
The U.S. Dollar saw a modest decline against major currency rivals early Monday, as investors brace for crucial U.S. Consumer Price Index (CPI) data due Tuesday. All eyes remain on U.S.-China trade discussions ahead of a significant August 12th deadline for a potential agreement.
Dollar Index Weakens, Trump Hopes for China’s Soybean Orders
The Dollar Index is trending lower, approaching the 98.00 mark after experiencing a roughly 0.4% loss last week. President Donald Trump expressed hope on Truth Social that China would significantly increase its soybean purchases from the U.S., aiming to narrow Beijing’s trade deficit. U.S. stock index futures showed a slight uptick, trading between 0.1% and 0.2% higher. This meeting of economic minds coincides with an upcoming discussion on the Ukraine war between President Donald Trump and Russia’s President Vladimir Putin.
AUD/USD Navigates Range Ahead of RBA Decision
The AUD/USD pair is trading within a tight range above the 0.6500 level, having closed the previous week on a positive note. The Reserve Bank of Australia (RBA) is scheduled to announce its monetary policy decisions during the Asian session on Tuesday. Expectations are high that the RBA will implement a 25 basis point rate cut, bringing the policy rate to 3.6% following its August meeting. For context, the Bank of England recently raised its base rate to 5.25% in an effort to combat inflation, highlighting diverging monetary policy paths globally (Bank of England, 2023).
NZD/USD Under Pressure as Tariffs Remain
New Zealand Prime Minister Christopher Luxon indicated early Monday that the U.S. is unlikely to offer any concessions regarding the 15% tariffs imposed on NZ exports. Consequently, the NZD/USD pair is experiencing mild downward pressure, trading slightly below the 0.5950 mark.
Gold Retreats After Failed Bullish Momentum
Gold prices, which climbed above $3,400 on Friday, have failed to maintain their upward momentum. After a week of gains totaling approximately 1%, the precious metal is on the defensive, trading near $3,360 and registering a daily loss exceeding 1%.
EUR/USD Hovers as German and Eurozone Data Approaches
The EUR/USD currency pair is fluctuating within a confined range around 1.1650 during Monday’s European trading session. Key economic indicators for Germany and the Eurozone, including the August ZEW Survey – Economic Sentiment data, are set to be released on Tuesday.
GBP/USD Holds Steady After BoE’s Hawkish Stance
The GBP/USD pair demonstrated resilience early Monday, trading above the 1.3450 level. This strength follows a more than 1% rise last week, buoyed by the Bank of England’s (BoE) hawkish decision on interest rates.
USD/JPY Lacks Direction Amidst Market Indecision
The USD/JPY pair is struggling to establish a clear direction on Monday, trading within a narrow band just above 147.50.
US Dollar PRICE Last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.56% | -1.30% | 0.21% | -0.10% | -0.60% | -0.55% | 0.23% | |
| EUR | 0.56% | -0.70% | 0.79% | 0.47% | -0.17% | 0.00% | 0.78% | |
| GBP | 1.30% | 0.70% | 1.53% | 1.17% | 0.53% | 0.71% | 1.50% | |
| JPY | -0.21% | -0.79% | -1.53% | -0.32% | -0.97% | -0.78% | 0.18% | |
| CAD | 0.10% | -0.47% | -1.17% | 0.32% | -0.66% | -0.44% | 0.32% | |
| AUD | 0.60% | 0.17% | -0.53% | 0.97% | 0.66% | 0.18% | 0.95% | |
| NZD | 0.55% | -0.01% | -0.71% | 0.78% | 0.44% | -0.18% | 0.77% | |
| CHF | -0.23% | -0.78% | -1.50% | -0.18% | -0.32% | -0.95% | -0.77% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Tariffs FAQs
What are tariffs?
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
How do tariffs differ from taxes?
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
What are the economic arguments for and against tariffs?
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
What is Donald Trump’s stance on tariffs?
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
