Dollar May Decline Today with Trump Confirming Tariffs are Moving Ahead
- Feb 25
- 3 min read
GBP : Pound stabilises against the Dollar
In Tuesday's European session, the value of the pound sterling (GBP) somewhat increased to around 1.2635 versus the US dollar (USD). Following a robust recovery from the 10-week low it recorded on Monday, the US Dollar Index (DXY), which measures the value of the greenback relative to six major currencies, trades mutedly and slips lower to near 106.60 as the GBP/USD pair pushes higher. Following US President Donald Trump's announcement that tariffs on its North American counterparts will go forward as planned, the greenback saw a significant recovery in the second half of Monday, driven by fresh concerns about a global trade war. Trump and French President Emmanuel Macron had a joint press conference at the White House before Trump declared, "The tariffs are proceeding on time, on schedule."
EUR : ECB has a limited influence in salary negotiations
Chancellor-in-waiting Friedrich Merz is reportedly in talks with the SPD for a swift agreement on EUR 200 billion in defense spending, following his comments on Europe's need for greater independence from the US. However, markets are unlikely to view defense spending as a driver of Eurozone economic growth, limiting its potential impact on the Euro. As expected, the Euro's post-election rally in Germany was short-lived, as key downside risks to the currency persisted and markets had not factored in a political risk premium prior to the vote.
The Euro area negotiated salary statistics for Q4 2024 will be made public by the ECB today. The index increased 5.4% year over year in Q3, mostly as a result of one-time payments that the ECB mostly ignored. Although it might take some time for negotiated wages to slow down, other indicators, like the Indeed wage growth tracker, which dropped to 2.5% in January, point to easing pressures. The central bank's target is approximately 3%. Regardless of today's report, the ECB is likely to stick to its dovish approach, which might limit any Euro advances. Despite some US dollar weakness today, EUR/USD may test $1.0500; however, the overall outlook is still pessimistic, with a potential return to $1.0300 in the near future.
USD : Dollar may decline today
President Trump's declaration that tariffs on Canada and Mexico are still in place gave the dollar more support in late European trading, which helped it start the week on a stronger note. Monday, March 3, is the new deadline for the 25% duties, which were first postponed by one month in early February in order to avoid a possible trade dispute under the USMCA. To bolster his negotiation position, Trump can continue to press tariffs to the very end, as he did in February. Although it is still the baseline expectation that these tariffs would not be enacted, markets presently give this scenario a very low chance. However, as the week goes on, the danger can be taken more seriously by FX markets.
A lot of attention will be paid to today's Conference Board consumer confidence report in terms of data. After the U.S. election, the index peaked in November but fell in December and January. The market is expected to react when the price hits 100, and consensus predicts another drop to 102.5 from 104.1. In addition, after Monday's poorer regional Fed activity readings from Chicago and Dallas, today will see the release of the Richmond Fed index.
The primary upside risk for the USD today would be more hawkish remarks made by Trump or other American authorities regarding tariffs. In addition, the dollar may weaken if consumer confidence data shows a decline, especially since the market tends to minimize tariff threats. Concerns about slowing consumption might be bolstered by a lower figure, which would cause the Fed to dovishly adjust its projections.
