The US dollar fell on Monday against the yen, and hit four-year lows against the euro amid market optimism about reaching US trade deals, which could prompt the Federal Reserve to cut interest rates.

The dollar continued to perform poorly against sterling, approaching four-year lows, while hitting a decade low against the Swiss franc as the White House approaches a deal with China.

Investors interpreted Fed Chair Jerome Powell’s last week Congressional testimony as leaning cautious, after saying that rate cuts are likely if inflation doesn’t rise this summer in response to tariffs.

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in July stood at 20%.

The odds of such a cut in September stood at a much better 93%.

Currently, markets await a spate of important US data this week, including the crucial payrolls report on Friday, which would impact market’s expectations for upcoming Fed moves. 

Trump’s Statements Pressure the Dollar

The dollar was pressured once more by renewed attacks by President Donald Trump against Powell, urging him to resign before the end of his term in May.

Trump also said he wants main interest rates down to 1% from the current 4.25-4.5%, adding he plans to replace Powell with someone much more interested in monetary easing.

Investors are also analyzing Trump’s new massive tax cut and spending bill, currently in the Senate, which is estimated to add $3.3 trillion to government debt in 10 years.

Otherwise, the dollar index is heading for its biggest 6-month decline since the early seventies.

It has settled near 97.193, close to over three-year lows. 

Performance of Major Rivals

The dollar fell 0.4% against yen to 144.11

The euro settled at 1.1723, near September 2021 highs

Sterling inched down 0.1% to $1.3701, still near October 2021 highs

The Swiss franc settled near January 2015 highs at 0.7978.

The US Treasury Secretary Scott Bessent said Friday that Washington and Beijing solved their dispute about rare-earth minerals shipments to the US.

He expects the US to finish multiple trade deals by early September, expressing flexibility about the final deadline on tariffs set by Trump on July 9.

As for other currencies: the yuan rose 0.1% against the dollar to 7.163 on trade deal news, while the Canadian dollar relinquished earlier gains and steadied by the end of the session. 

Gold prices rose in European trade on Monday away from recent five-week lows as the dollar fell against major rivals.

The Price

Gold prices rose 0.7% today to $3296 an ounce, with May 29 lows at $3247.

On Friday, gold lost 1.6%, the second loss in a row as US-China trade tensions receded.

The precious metal lost 2.8% last week, the second weekly loss in a row as haven demand tumbled.

US Dollar

The dollar index fell 0.3% on Monday, sharpening losses for the sixth straight session and hitting a three-year lows at 96.97 against a basket of major rivals.

A weaker dollar makes the greenback-denominated gold futures cheaper to holders of other currencies.

The decline comes as investors grow more optimistic about future US trade deals, which could prompt Fed rate cuts this year.

Washington and Beijing are on the cusp of a tariffs agreement, while Canada scrapped a digital tax that caused an angry response by Trump.

US Rates

Investors interpreted Fed Chair Jerome Powell’s last week Congressional testimony as leaning cautious, after saying that rate cuts are likely if inflation doesn’t rise this summer in response to tariffs.

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in July stood at 20%.

The odds of such a cut in September stood at a much better 93%.

SPDR

Gold holdings at the SPDR Gold Trust rose 1.43 tons on Friday to a total of 954.82 tons.

The yen rallied in Asian trade on Monday against a basket of major rivals, moving against the dollar in a positive zone and approaching multi-week highs as the greenback continues to weaken.

The odds of a Japanese interest rate hike in July dropped following the Bank of Japan’s latest meeting, as traders now await more clues on inflation, wages, and unemployment in the world’s third largest economy.

The Price

The USD/JPY price fell 0.55% today to 143.80, with a session-high at 144.62.

The yen lost 0.2% on Friday against the greenback on profit-taking away from a two-week high at 143.75.

The yen rose 1% last week against the dollar, the second weekly profit in three weeks.

US Dollar

The US dollar index fell 0.2% on Monday on track for the sixth loss in a row, about to plumb three-year lows at 96.99 against a basket of major rivals.

The decline comes as investors grow more optimistic about future US trade deals, which could prompt Fed rate cuts this year.

Washington and Beijing are on the cusp of a tariffs agreement, while Canada scrapped a digital tax that caused an angry response by Trump.

Investors interpreted Fed Chair Jerome Powell’s last week Congressional testimony as leaning cautious, after saying that rate cuts are likely if inflation doesn’t rise this summer in response to tariffs.

Japanese Rates

The odds of a Bank of Japan’s 0.25% interest rate hike in July is still below 40%.

Now investors await more clues from Japan this week to form a more accurate prediction. 

US stock indices rose on Friday as investors continue to shrug off recent trade developments and inflationary data. 

US Trade Secretary Howard Lutnick confirmed in statements to Bloomberg that a general framework for a trade deal with China has been reached, with the US expecting deals with 10 major trade partners soon.

US President Donald Trump said he’s terminating trade talks with Canada after it imposed a digital services tax on US tech corporations.

Trump described Canada as a country difficult to deal with on trade, and considered the new Canadian tax and attack on the US.

As for data, US personal consumption expenditure was up 2.7% y/y in May, above estimates of 2.6%.

At the close, Dow Jones rose 1%, or 432 points to 43819 points, with a weekly profit of 3.8%. 

S&P 500 rose 0.5%, or 32 points to 6173 points, with a weekly profit of 3.4%.

NASDAQ added 0.5%, or 105 points to 20,273 points, with a weekly profit of 4.25%.