The US dollar rose slightly against the euro last Friday, marking its first weekly rise this month. The main reason was that investors took profits from the recent euro rally before the US retaliatory tariffs took effect on April 2, which boosted the dollar.
The euro fell 0.3% against the dollar to $1.08223 and dropped 0.6% last week, marking its first weekly decline since February 28th. Despite the German upper house passing reforms to borrowing rules and approving a €500 billion fund plan for infrastructure renovation and economic revitalization, the euro still weakened.
The dollar has been under pressure this year, mainly due to investor concerns that the Trump administration's trade policies might hit US economic growth. However, the Federal Reserve's indication last week of no rush to cut interest rates provided some breathing room for the dollar.
George Vessey, a chief foreign exchange and macro strategist at Convera, analyzed, "The euro-dollar pair indeed saw a significant rebound this quarter, so we saw some profit-taking before the tariffs take effect on April 2." He added, "Despite the German parliament approving a constitutional amendment for a debt brake last week, the market's tepid reaction to fiscal good news might be because optimism about fiscal policy is nearing its peak."
Last week, after assessing the economic impact of Trump's tariffs on global trade partners, the Federal Reserve, the Bank of England, and the Bank of Japan decided to keep interest rates unchanged. The Federal Reserve hinted at two rate cuts later this year, consistent with expectations three months ago. Fed Chairman Powell stated, "We are not in a hurry to act," emphasizing the challenges faced by the Fed in countering Trump's tariff policy and its potential impact on the US economy.
Chicago Fed President Goolsbee said last Friday that the Fed has not yet determined whether the tariff policy will lead to persistent inflation. The tariffs on intermediate products, retaliatory measures by other countries, and other economic factors will influence whether the Fed needs to take corresponding measures.
The US dollar rose 0.3% against the yen to 149.21 yen. Last Wednesday, the Bank of Japan decided to maintain interest rates and warned that increased uncertainty in the global economy, due to higher US tariffs, will affect the economic outlook.
The pound fell 0.3% to $1.293, due to the Bank of England warning of uncertainties facing the global and domestic economies, suggesting that further rate cuts are not inevitable.
