The US dollar fell on Monday, remaining near multi-year lows against major currencies as traders awaited any trade-related developments ahead of the Wednesday deadline set by President Donald Trump to begin enforcing new tariffs.

Most of the United States' trade partners are expected to face significant tariff increases once the 90-day "Liberation Day" deadline expires. Trump stated on Sunday that the new tariffs would take effect starting August 1.

The president added that his administration is close to finalizing several trade deals in the coming days and would announce later on Monday a list of around 12 countries that will receive letters detailing the new elevated tariffs.

Trump also threatened an additional 10% tariff on countries he said "align themselves with the anti-American policies of the BRICS group."

So far, only the United Kingdom, China, and Vietnam have reached trade agreements with the Trump administration. Talks with Japan and the European Union have progressed slowly, raising market concerns that Tokyo and Brussels may fail to finalize agreements before the deadline.

Impact on Risk-Sensitive Currencies

The uncertainty surrounding the new tariffs particularly affected risk-sensitive currencies like the Australian and New Zealand dollars, as investors awaited upcoming monetary policy decisions from both countries in the next two days.

James Neviton, chief FX trader at Convera, wrote in a client note: “Market volatility seems inevitable once the deadline officially ends and the new tariff levels are announced.”

He added: “However, the impact may be more muted this time. Unlike previous announcements that surprised markets, the current proposals have been largely anticipated. Markets are also pricing in the possibility of another deadline extension.”

Currency option data suggests markets do not expect a major return of volatility ahead of the deadline, reflecting investor expectations for a potential extension.

Currency and Market Performance

The U.S. dollar held steady against the Swiss franc at 0.7959, near its July 1 low of 0.7869 — the lowest since January 2015.

The euro fell 0.3% to $1.1750.

The dollar rose 0.38% against the Japanese yen to 145.15 yen, recovering earlier losses.

The U.S. dollar index, which measures the currency against six major peers, rose 0.26% to 97.223, but remained near last week’s three-and-a-half-year low of 96.373.

This year’s decline in the dollar reflects a broader investor reassessment of its safe-haven status, especially amid rising concerns that the U.S. may not be immune to a global economic slowdown as once believed.

The British pound fell 0.3% to $1.36, still near its July 1 peak of $1.3787 — the strongest level since October 2021.

The Australian dollar dropped 0.7% to $0.6507, continuing its retreat from an eight-month high of $0.6590.

The Reserve Bank of Australia is expected to cut interest rates by a quarter-point on Tuesday amid easing inflation and uncertain economic prospects.

Tony Sycamore, a market analyst at IG, wrote in a note: “These factors, along with ongoing tariff and trade concerns, have erased any hesitation the RBA might have had about a tight labor market.”

He added that the RBA's forward guidance is likely to “lean dovish,” leaving room for further rate cuts later this year.

The Reserve Bank of New Zealand is expected to keep rates unchanged on Wednesday, although most economists anticipate one additional quarter-point cut later in 2025.

The New Zealand dollar fell 0.7% to $0.6008.

Meanwhile, the U.S. dollar gained 0.4% against the Canadian dollar to reach 1.366 CAD and rose to 18.67 pesos against the Mexican peso.

Gold prices fell in the European market on Monday, heading for their second loss in the last three sessions and hitting their lowest level in a week, as the metal approached a drop below \$3,300 per ounce due to strong performance by the U.S. dollar in the foreign exchange market.

U.S. President Donald Trump indicated progress in multiple trade agreements and announced an extension of tariff exemptions for several countries, easing fears of a potential recession in the U.S. economy.

The Price

Gold prices fell by 1.1% to $3,300.76 per ounce — the lowest in a week — down from the opening price of $3,337.22, after hitting an intraday high of $3,342.70.

On Friday, gold prices rose by about 0.35%, supported by thin liquidity due to the U.S. Independence Day holiday.

Last week, gold prices posted a 1.9% gain — their first weekly increase in the past three weeks — thanks to renewed buying at lower levels.

U.S. Dollar

The U.S. Dollar Index jumped about 0.5% on Monday to 97.43, its highest level in two weeks, reflecting broad gains by the greenback against a basket of major and minor currencies.

As is well-known, rising levels of the U.S. dollar tend to make dollar-priced gold bullion less attractive to buyers using other currencies.

President Donald Trump stated on Sunday that the United States is close to finalizing several trade deals in the coming days and will notify other countries of higher tariff rates by July 9, with the new tariffs taking effect on August 1.

Trump had initially announced in April a base tariff rate of 10% on most countries, with additional duties reaching up to 50%. He later postponed the effective date for all tariffs — except the 10% base — until July 9, giving most affected countries a three-week grace period.

U.S. Interest Rates

Labor market data released last week showed that the U.S. economy added 147,000 new jobs in June, exceeding expectations of 111,000. The unemployment rate fell to 4.1% from 4.2% in May, while forecasts had pointed to a rise to 4.3%.

Following the data, the CME Group’s FedWatch tool showed that the probability of a 25-basis-point rate cut in the July meeting dropped from 25% to 5%, while the likelihood of keeping rates unchanged rose from 75% to 95%.

For the September meeting, rate-cut odds fell from 95% to 70%, while expectations for no change increased from 5% to 30%.

Gold Price Outlook

Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “This short-term exemption (from the U.S.) is causing weakness in gold prices during today’s session.”

Wong added: “I expect another round of price movement around the $3,320 level, then we may reach the resistance level at $3,360 — a short-term barrier.”

SPDR Gold Trust

Holdings at SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — were unchanged on Friday for the second consecutive day, with total holdings remaining at 947.66 metric tons, the lowest level since June 18.

The euro declined in the European market on Monday against a basket of global currencies, resuming losses that had paused briefly on Friday against the U.S. dollar. The currency retreated from its four-year high due to corrective movements and profit-taking.

The U.S. dollar strengthened as the 90-day deadline set by President Donald Trump to impose reciprocal tariffs approaches this Wednesday. So far, only the United Kingdom, China, and Vietnam have agreed to any form of trade deal with the White House.

Recently released key inflation data from Europe has increased uncertainty around the likelihood of a European interest rate cut in July, as markets await further important economic figures from the eurozone.

The Price

The euro fell against the dollar by 0.15% to $1.1763, down from the opening level of $1.1778. It recorded a high of $1.1790.

The euro ended Friday’s session with a gain of over 0.1%, resuming a two-day uptrend that had paused due to profit-taking from its four-year high at $1.1830.

Over the past week, the euro gained 0.45% against the dollar, marking its second consecutive weekly advance.

U.S. Dollar

The U.S. Dollar Index rose by 0.15% on Monday, resuming gains that had briefly paused on Friday. The index is on the verge of reaching its highest level in several weeks, reflecting the dollar’s broad strength against a basket of major and minor currencies.

The dollar’s rise comes amid market anticipation of headline developments on trade, with the Trump administration’s tariff deadline looming.

Most of the United States’ trading partners are expected to face significantly higher tariffs once the 90-day grace period ends on "Liberation Day," this Wednesday. To date, only the United Kingdom, China, and Vietnam have signed any form of trade deal with the White House.

Opinions and Analysis

James Knifton, Head FX Dealer at Convera, said: “Market volatility seems inevitable once the official pause ends and new tariff levels are announced.”

He added: “At the same time, the impact might be less severe this time. Unlike earlier announcements that exceeded expectations, the current proposals are largely anticipated. Furthermore, markets seem to be pricing in a likely extension of the deadline.”

European Interest Rates

The eurozone’s Consumer Price Index rose by 2.0% year-on-year in June, in line with market expectations, after a 1.9% increase in May.

According to Reuters sources, a clear majority at the latest European Central Bank meeting expressed a preference to keep interest rates unchanged in July, with some members even advocating for a longer pause.

Money market pricing for a 25-basis-point ECB rate cut in July currently stands at around 30%.

The Japanese yen declined in the Asian market on Monday at the start of the week’s trading, slipping once again into negative territory against the U.S. dollar and nearing its lowest level in several weeks, as safe-haven demand for the currency slowed.

Meanwhile, the U.S. dollar strengthened as the end of the 90-day tariff deadline announced by President Donald Trump approaches this Wednesday. So far, only the UK, China, and Vietnam have agreed to any form of trade deals with the White House.

Expectations of a rate hike by the Bank of Japan in July have increased following strong economic data released Friday in Tokyo. Investors now await further figures on inflation, wages, and unemployment in the world’s third-largest economy.

The Price

The dollar rose against the yen by 0.35% to ¥144.84, up from the day’s opening at ¥144.37, after hitting a low of ¥144.22.

The yen had gained 0.3% against the dollar at Friday’s close — its first advance in three sessions — following strong spending data out of Japan.

On a weekly basis, the yen posted a 0.1% gain, marking its second straight weekly rise against the dollar.

U.S. Dollar

The U.S. dollar index rose 0.15% on Monday, resuming gains after a brief pause on Friday and nearing its highest level in several weeks. The move reflected broad dollar strength against a basket of major and minor currencies.

The greenback’s rise came amid growing anticipation among traders for major headlines related to trade, as the deadline set by President Trump to enforce reciprocal tariffs nears.

Most of America’s trade partners are expected to face significantly higher tariffs after the 90-day deadline expires on “Liberation Day” this Wednesday. To date, only the UK, China, and Vietnam have signed any form of trade deal with the administration.

Commentary & Analysis

James Kniveton, Senior FX Dealer at Convera, said:“Volatility seems inevitable once the pause officially ends and new tariff levels are announced.”

He added, “However, the impact this time may be less severe. Unlike previous announcements where tariffs exceeded expectations, the current proposals are largely priced in. Additionally, markets seem to be factoring in the possibility of another deadline extension.”

Japanese Interest Rates

Data released Friday in Tokyo showed household spending in Japan rose 4.7% year-over-year in May — the fastest pace since August 2022 — well above market expectations of a 1.3% rise. April spending had seen a 0.1% decline.

Following this data, the odds of the Bank of Japan raising interest rates by 25 basis points at its July meeting increased from 40% to 45%.

Investors are now awaiting further data on inflation, wages, and unemployment to reassess these expectations.