Dollar marginally higher as Trump’s trade deadline approaches

Investing.com - The U.S. dollar traded slightly higher Monday, starting the new week in a calm fashion ahead of likely trade-induced volatility as the July 9 deadline for U.S. trade deals approaches.

At 04:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, edged 0.1% higher to 96.932, marginally above last week’s over three-year low.

Dollar awaits trade volatility

The U.S. currency has traded in a narrow range Monday as foreign exchange market participants cautiously look forward to Wednesday, which sees the expiry of the 90-day reprieve of the Trump administration’s high ’Liberation Day’ tariffs. 

President Donald Trump said he will name some dozen countries later on Monday that are receiving letters with their new, higher levies, with the new rates set to take effect from August 1.

Most U.S. trade partners are set to see much steeper duties at the end of the 90-day moratorium, although Trump also said his administration is close to finalising several trade deals in the coming days.

So far, only Britain, China and Vietnam have agreed any sort of trade deal with the White House.

“Threats of a resumption of 50% tariff levels could briefly hit the benign risk environment, although with a market already positioned underweight the dollar, the dollar might not have too far to fall,” said analysts at ING, in a note.

Euro slips back from peak 

In Europe, EUR/USD dropped 0.3% to 1.1747, with the single currency slipping back from last week’s peak of 1.1829, the highest since September 2021. 

German industrial production rose more than expected in May thanks to the automotive industry and energy production, according to data released earlier Monday.

Production rose 1.2% over the previous month, ahead of the flat figure expected. 

The European Central Bank cut rates for the eighth time in a year last month, but is likely to wait until September to cut its key policy rate again as officials eye ongoing trade uncertainty and the recent appreciation of the euro, according to analysts at Capital Economics.

European trade officials met with their Trump administration counterparts in Washington last week. But a trade agreement has yet to be reached, with the EU pushing for a deal "in principle" that would include immediate tariff relief for key sectors.

"We think the most likely outcomes are an extension of talks or a quite vague preliminary deal," the Capital Economics analysts predicted.

GBP/USD slipped 0.3% to 1.3607, but remains relatively close to last week’s top of 1.3787, the strongest level since October 2021.

British house prices stagnated month-on-month during June, figures from Halifax showed on Monday, as the mortgage lender revised up May’s reading to show a 0.3% drop rather than a 0.4% drop.

The data underlined the subdued state of Britain’s housing market following an increase in tax on property transactions that took effect in April.

Aussie dollar falls ahead of RBA meeting

In Asia, USD/JPY traded 0.4% higher to 145.18, as markets awaited clearer guidance on U.S. trade deals, with an agreement between Japan and the US. proving difficult to arrange.

USD/CNY edged 0.1% higher to 7.1726, while AUD/USD slumped 0.8% to 0.6504, dropping further from last week’s near-eight-month high of $0.6590.

The Reserve Bank of Australia is widely expected to cut the cash rate by another quarter point on Tuesday amid a cooling in inflation and an uncertain growth outlook.